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Date May 2017 Marks available 10 Reference code 17M.1.SL.TZ1.03
Level Standard level Paper Paper 1 Time zone Time zone 1
Command term Explain Question number 03 Adapted from N/A

Question

Explain how aggregate demand might be affected by an increase in interest rates.

[10]
a.

Discuss whether the use of fiscal policy is the most effective way to bring an economy out of a recession.

[15]
b.

Markscheme

Answers may include:

Award a maximum of level 2 if the response fails to link the increase in interest rates to at least two components of AD.

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

a.

Answers may include:

Discussion may include: the limitations of fiscal policy like the effect on the government budget, time lags, the difficulty of promoting economic activity in a recession and the significance of the multiplier effect. There may also be reference to alternative policies like monetary and supply-side.

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

b.

Examiners report

[N/A]
a.
[N/A]
b.

Syllabus sections

Last exams 2021 » Section 2: Macroeconomics » 2.2 Aggregate demand and aggregate supply » Aggregate demand (AD) » The determinants of AD or causes of shifts in the AD curve
Last exams 2021 » Section 2: Macroeconomics » 2.2 Aggregate demand and aggregate supply » Aggregate demand (AD)
Last exams 2021 » Section 2: Macroeconomics » 2.2 Aggregate demand and aggregate supply
Last exams 2021 » Section 2: Macroeconomics

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