Explain how an economic recession can lead to an increase in absolute poverty.

Evaluate the view that government policies to promote equity will always have a negative effect on efficiency.

Answers may include:

• definitions of economic recession, absolute poverty
• diagram to show a fall in AD
• explanation that a recession can lead to a fall in GDP, an increase in unemployment and falling incomes leading to a rise in absolute poverty
• examples of how a recession has increased absolute poverty.

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

Answers may include:

• definitions of equity and efficiency
• diagrams to show the government policies used to improve equity
• explanation of how the government policies used to promote equity might have a negative effect on economic efficiency
• examples of where governments have used policies to promote equity and reduced efficiency
• synthesis or evaluation.

Evaluation may include: The advantages of government policies used to promote efficiency. For example, government expenditure on health and education might improve the efficiency of the labour force and reducing tax on low income households might improve their incentive to work.

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