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Date May 2019 Marks available 10 Reference code 19M.1.HL.TZ2.3
Level Higher level Paper Paper 1 Time zone Time zone 2
Command term Explain Question number 3 Adapted from N/A

Question

Explain how an increase in unemployment might lead to a loss of gross domestic product (GDP) and a budget deficit.

[10]
a.

Discuss the view that there will always be a trade-off between the unemployment rate and the inflation rate.

[15]
b.

Markscheme

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

Answers may include:

a.

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

Answers may include:

Discussion may include: the view that there is no trade-off in the long-run (the long-run Phillips curve), the importance of supply-side improvements to the economy in achieving lower unemployment and inflation, criticisms of the statistical Phillips curve relationship, and discussion of the word “always”.

b.

Examiners report

Although there were many very good responses to this question there was a significant minority who confused a budget deficit with a trade deficit. However, good responses were able to produce very precise and well explained argumentsin which the links were clearly explained. Good real-life examples were also used by higher achieving responses here.

a.

In this part candidates often tended to describe the inverse relationship illustrated by the short-run Phillips curve rather than consider the trade-off referred to by the question and explain what that meant. Good responses embarked on a sophisticated review of relevant theory. Frequently Neoclassical and Keynesian concepts and perspectives were utilized to support responses. There was potentially a lot of theory that could be used and not all candidates achieved an appropriate balance of theory and synthesis.

b.

Syllabus sections

Last exams 2021 » Section 2: Macroeconomics » 2.3 Macroeconomic objectives » Low unemployment » Consequences of unemployment
Last exams 2021 » Section 2: Macroeconomics » 2.4 Fiscal policy » The government budget » The budget outcome
Last exams 2021 » Section 2: Macroeconomics » 2.4 Fiscal policy » The government budget
Last exams 2021 » Section 2: Macroeconomics » 2.3 Macroeconomic objectives » Low unemployment
First exams 2022 » Unit 3: Macroeconomics » 3.3 Macroeconomic objectives » 3.3.2 Low unemployment
First exams 2022 » Unit 3: Macroeconomics » 3.3 Macroeconomic objectives » 3.3.5 Sustainable level of government (national) debt
Last exams 2021 » Section 2: Macroeconomics » 2.3 Macroeconomic objectives
Last exams 2021 » Section 2: Macroeconomics » 2.4 Fiscal policy
First exams 2022 » Unit 3: Macroeconomics » 3.3 Macroeconomic objectives
Last exams 2021 » Section 2: Macroeconomics
First exams 2022 » Unit 3: Macroeconomics
First exams 2022
Last exams 2021

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