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Date November 2016 Marks available 10 Reference code 16N.1.HL.TZ0.3
Level Higher level Paper Paper 1 Time zone Time zone 0
Command term Explain Question number 3 Adapted from N/A

Question

Explain how expansionary monetary policy might lead to a rise in inflation.

[10]
a.

Discuss the view that the most significant impact of high inflation in a country is a loss of export competitiveness.

[15]
b.

Markscheme

Answers may include:

Marks should be allocated according to the Paper 1 markbands for May 2013 forward, part A.

a.

Answers may include:

Evaluation may include: other factors that could have caused a fall in a country’s export competitiveness, other consequences of inflation that could be more significant like redistribution of income, uncertainty leading to lower investment and the impact changes in the exchange rate could have on a country’s export competitiveness.

Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.

Opinions or conclusions should be presented clearly and should be supported by appropriate examples.

Marks should be allocated according to the Paper 1 markbands for May 2013 forward, part B.

b.

Examiners report

This was the least popular of the two Section B questions. The use of diagrams in this question was generally good. However, the labels used were not always precise. It is better to indicate that the horizontal axes refers to the spending and output of the whole economy, many candidates just record quantity. Valid real-world examples were rare and, where they were offered they tended not to be adequately developed. In general candidates were aware of what monetary policy was and of the links its use might have to inflation.

a.

Candidates were generally able to explain the impact of inflation on export competitiveness. However, it proved more challenging to decide whether it was the most significant impact. High achieving responses considered other impacts of a high rate of inflation and then considered which would likely be the more significant. Examples help to tackle a question like this, so considering countries that are more export dependent or less export dependent might serve as appropriate cases in point.

b.

Syllabus sections

Last exams 2021 » Section 2: Macroeconomics » 2.5 Monetary policy » The role of monetary policy » Monetary policy and short-term demand management
Last exams 2021 » Section 2: Macroeconomics » 2.5 Monetary policy » The role of monetary policy
Last exams 2021 » Section 2: Macroeconomics » 2.5 Monetary policy
Last exams 2021 » Section 2: Macroeconomics

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