Question 1
Evaluate the view that inflationary pressures in an economy are best reduced using supply-side policies.
Answers may include:
- definition of inflation, inflationary pressures, supply-side policies
- diagram to show the impact of supply-side policies on inflation via the shift of long-run aggregate supply (LRAS) to the right
- explanation of how market based (eg deregulation, anti-monopoly policy, etc) and/or interventionist supply-side policies (eg price controls, subsidies, etc) may reduce inflationary pressures in an economy
- examples of situations where supply-side policies have helped to reduce inflationary pressures
- synthesis and evaluation.
Evaluation may include: the disadvantages of using particular supply-side policies, such as: the impact of market-based polices on equity, not as effective with demand-pull inflation, the impact of interventionist policies on the government budget and the time lags associated with supply-side policies. The advantages of supply-side policies, such as: increased real GDP, increased employment, more effective with cost-push inflation and possible improvement in economic efficiency. Consideration of deflationary monetary and fiscal policies as alternative policies to reduce inflation.
Assessment Criteria
Level 0 (0 marks): The work does not meet a standard described by the descriptors below.
Level 1 (1-5 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 (6-9 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 (10-12 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 is an attempt at synthesis or evaluation. There are few errors.
Level 4 (13-15 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 is evidence of appropriate synthesis or evaluation. There are no significant errors.