Practise IB Economics SL 3.2.6 by explaining macroeconomic equilibrium through aggregate demand and supply using marked exam evidence.
Explain how in the Keynesian AD/AS model an economy can be in equilibrium while producing below the full employment level of output.
Answers may include:
- definitions of equilibrium, full employment level of output
- diagram to show the Keynesian model of an economy at equilibrium income below the full employment level of output
- explanation of how an economy can be in equilibrium income below full employment when AD falls, leading to a deflationary gap when wage and price rigidity keep the economy below the full employment level of output
- examples of when economies have experienced equilibrium income below the full employment level of output.
Assessment Criteria
Part (a) 10 marks
Level 0 (0 marks): The work does not meet a standard described by the descriptors below.
Level 1 (1-3 marks): There is little understanding of the specific demands of the question. Relevant economic terms are not defined. There is very little knowledge of relevant economic theory. There are significant errors.
Level 2 (4-6 marks): There is some understanding of the specific demands of the question. Some relevant economic terms are defined. There is some knowledge of relevant economic theory. There are some errors.
Level 3 (7-8 marks): There is understanding of the specific demands of the question. Relevant economic terms are defined. Relevant economic theory is explained and applied. Where appropriate, diagrams are included and applied. Where appropriate, examples are used. There are few errors.
Level 4 (9-10 marks): There is clear understanding of the specific demands of the question. Relevant economic terms are clearly defined. Relevant economic theory is clearly explained and applied. Where appropriate, diagrams are included and applied effectively. Where appropriate, examples are used effectively. There are no significant errors.