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Syllabus

Section name
First exams 2022
Unit 1: Introduction to economics
1.1 What is economics?
1.1.1 Economics as a social science
1.1.2 The problem of choice
1.1.3 The production possibilities curve model (PPC)
1.1.4 Modelling the economy
1.2 How do economists approach the world?
1.2.1 Economic methodology
1.2.2 Economic thought
Unit 2: Microeconomics
2.1 Demand
2.1.1 The law of demand—relationship between price and quantity demanded
2.1.2 Demand curve
2.1.3 Relationship between an individual consumer’s demand and market demand
2.1.4 Non-price determinants of demand
2.1.5 Movements along the demand curve and shifts of the demand curve
2.2 Supply
2.2.1 The law of supply—relationship between price and quantity supplied
2.2.2 Supply curve
2.2.3 Relationship between an individual producer’s supply and market supply
2.2.4 Non-price determinants of supply
2.2.5 Movements along and shifts of the supply curve
2.3 Competitive market equilibrium
2.3.1 Demand and supply curves forming a market equilibrium
2.3.2 Shifts in demand and supply
2.3.3 Functions of the price mechanism
2.3.4 Consumer and producer surplus
2.3.5 Social/community surplus
2.3.6 Allocative efficiency at the competitive market equilibrium
2.4 Critique of the maximizing behaviour of consumers and producers (HL only)
2.4.1 Rational consumer choice
2.4.2 Behavioural economics in action
2.4.3 Business objectives
2.5 Elasticity of demand
2.5.1 Concept of elasticity
2.5.2 Price elasticity of demand (PED)
2.5.3 Income elasticity of demand (YED)
2.6 Elasticity of supply
2.6.1 Price elasticity of supply (PES)
2.7 Role of government in microeconomics
2.7.1 Reasons for government intervention in markets
2.7.2 Main forms of government intervention in markets
2.7.3. Consequences of government intervention
2.8 Market failure—externalities and common pool or common access resources
2.8.1 Socially optimum output
2.8.2 Government intervention
2.8.3 Strengths and limitations of government policies to correct externalities and Strengths and limitations of government intervention
2.8.4 Importance of international cooperation
2.9 Market failure—public goods
2.9.1 Public goods
2.9.2 Government intervention in response to public goods
2.10 Market failure—asymmetric information (HL only)
2.10.1 Asymmetric information
2.10.2 Responses to asymmetric information
2.11 Market failure—market power (HL only)
2.11.1 Perfect competition–many firms, free entry, homogeneous products
2.11.2 Monopoly—single or dominant firm, high barriers to entry, no close substitutes
2.11.3 Imperfect competition: Oligopoly; Monopolistic competition
2.11.4 Rational producer behaviour—profit maximization
2.11.5 Degrees of market power
2.11.6 Monopoly
2.11.7 Oligopoly
2.11.8 Monopolistic competition
2.11.9 Advantages of large firms having significant market power
2.11.10 Risks in markets dominated by one or a few very large firms
2.11.11 Government intervention in response to abuse of significant market power
2.12 The market’s inability to achieve equity (HL only)
2.12.1 Free markets may cause inequalities in income and wealth.
Unit 3: Macroeconomics
3.1 Measuring economic activity and illustrating its variations
3.1.1 National income accounting as a measure of economic activity
3.1.2 Three measurements of national income with reference to the circular flow.
3.1.3 Nominal] Gross domestic product (GDP) as a measure of national output
3.1.4 [Nominal] Gross national income (GNI) as a measure of national output
3.1.5 Real GDP and real GNI
3.1.6 Real GDP/GNI (per capita/ at purchasing power parity)
3.1.7 Business cycle: short term and long term trend.
3.1.8 Appropriateness of using GDP or GNI statistics to measure economic well-being
3.1.9 Alternative measures of well-being
3.2 Variations in economic activity—aggregate demand and aggregate supply
3.2.1 Aggregate demand (AD)
3.2.2 Components of AD: Consumption, Investment, government spending and net exports.
3.2.3 Determinants of AD components
3.2.4 Shifts of the AD curve caused by changes in determinants
3.2.5 Short-run aggregate supply (SRAS) curve and determinants of the SRAS curve
3.2.6 Shifts of the SRAS curve
3.2.7 Alternative views of aggregate supply (AS)
3.2.8 Shifts of the AS curve (monetarist/new classical LRAS and Keynesian AS)
3.2.9 Implications of the monetarist/new classical and Keynesian models
3.3 Macroeconomic objectives
3.3.1 Economic growth
3.3.2 Low unemployment
3.3.3 Low and stable rate of inflation
3.3.4 Relative costs of unemployment versus inflation
3.3.5 Sustainable level of government (national) debt
3.3.6 Potential conflict between macroeconomic objectives
3.4 Economics of inequality and poverty
3.4.1 Relationship between equality and equity
3.4.2 The meaning of economic inequality
3.4.3 Meaning of poverty
3.4.4 Measuring poverty
3.4.5 Difficulties in measuring poverty
3.4.6 Causes of economic inequality and poverty
3.4.7 The impact of income and wealth inequality
3.4.8 The role of taxation in reducing poverty, income and wealth inequalities
3.4.9 Further policies to reduce poverty, income and wealth inequality
3.5 Demand management (demand side policies)—monetary policy
3.5.1 Monetary policy
3.5.2 Goals of monetary policy
3.5.3 The process of money creation by commercial banks
3.5.4 Tools of monetary policy
3.5.5 Demand and supply of money—determination of equilibrium interest rates
3.5.6 Real versus nominal interest rates
3.5.7 Monetary policies to close deflationary/recessionary and inflationary gaps
3.5.8 Effectiveness of monetary policy
3.6 Demand management—fiscal policy
3.6.1 Fiscal policy
3.6.2 Goals of fiscal policy
3.6.3 Fiscal policies to close deflationary/recessionary and inflationary gaps
3.6.4 Keynesian multiplier
3.6.5 Effectiveness of fiscal policy
3.7 Supply-side policies
3.7.1 Goals of supply-side policies
3.7.2 Market-based policies
3.7.3 Interventionist policies
3.7.4 Demand-side effects of supply-side policies
3.7.5 Supply-side effects of fiscal policies
3.7.6 Effectiveness of supply-side policies
Unit 4: The global economy
4.1 Benefits of international trade
4.1.1 Benefits of international trade
4.1.2 Absolute and comparative advantage
4.1.3 Limitations of the theory of comparative advantage
4.2 Types of trade protection
4.2.1 Tariffs
4.2.2 Quota
4.2.3 Subsidy/export subsidy
4.2.4 Administrative barriers
4.3 Arguments for and against trade control/protection
4.3.1 Arguments for trade protection/advantages of trade protection
4.3.2 Arguments against trade protection/disadvantages of trade protection
4.3.3 Free trade versus trade protection
4.4 Economic integration
4.4.1 Preferential trade agreements
4.4.2 Trading blocs
4.4.3 Advantages and disadvantages of trading blocs
4.4.4 Monetary union
4.4.5 Advantages and disadvantages of monetary union
4.4.6 The World Trade Organization (WTO)
4.5 Exchange rates
4.5.1 Floating exchange rates
4.5.2 Changes in demand and supply for a currency—factors
4.5.3 Consequences of changes in the exchange rate on economic indicators
4.5.4 Fixed exchange rate
4.5.5 Managed exchange rates
4.5.6 Fixed versus floating exchange rate systems
4.6 Balance of payments
4.6.1 Balance of payments
4.6.2 Components of the balance of payments
4.6.3 Interdependence between the accounts
4.6.4 Relationship between the current account and the exchange rate
4.6.5 Relationship between the financial account and the exchange rate
4.6.6 Implications of a persistent current account deficit
4.6.7 Methods to correct a persistent current account deficit
4.6.8 Effectiveness of measures to correct a persistent current account deficit
4.6.9 The Marshall-Lerner condition and the J-curve effect
4.6.10 Implications of a persistent current account surplus
4.7 Sustainable development
4.7.1 The meaning of sustainable development
4.7.2 Sustainable Development Goals
4.7.3 Relationship between sustainability and poverty
4.8 Measuring development
4.8.1 The multidimensional nature of economic development
4.8.2 Single indicators
4.8.3 Composite indicators
4.8.4 Strengths and limitations of approaches to measuring economic development
4.8.5 Possible relationship between economic growth and economic development
4.9 Barriers to economic growth and/or economic development
4.9.1 Poverty traps/poverty cycles
4.9.2 Economic barriers
4.9.3 Political and social barriers
4.9.4 Significance of different barriers to economic growth and/or economic development
4.10 Economic growth and/or economic development strategies
4.10.1 Strategies to promote economic growth and/or economic development
4.10.2 Evaluation of strategies for economic growth and economic development
4.10.3 Intervention versus market-oriented approaches to achieving economic growth and economic development
4.10.4 Progress toward meeting selected Sustainable Development Goals
Last exams 2021
Section 1: Microeconomics
1.1 Competitive markets: Demand and supply
Markets
The nature of markets
Demand
The demand curve
The non-price determinants of demand (factors that change demand or shift the demand curve)
Movements along and shifts of the demand curve
Linear demand functions (equations), demand schedules and graphs
The law of demand
Supply
The law of supply
The supply curve
The non-price determinants of supply (factors that change supply or shift the supply curve)
Movements along and shifts of the supply curve
Linear supply functions, equations and graphs
Market Equilibrium
Calculating and illustrating equilibrium using linear equations
Equilibrium and changes to equilibrium
The role of the price mechanism
Resource allocation
Market efficiency
Consumer surplus
Producer surplus
Allocative efficiency
1.2 Elasticity
Price elasticity of demand (PED)
Applications of price elasticity of demand
Price elasticity of demand and its determinants
Cross price elasticity of demand (XED)
Applications of cross price elasticity of demand
Cross price elasticity of demand and its determinants
Income elasticity of demand (YED)
Applications of income elasticity of demand
Income elasticity of demand and its determinants
Price elasticity of supply (PES)
Applications of price elasticity of supply
Price elasticity of supply and its determinants
1.3 Government intervention
Indirect taxes
Tax incidence and price elasticity of demand and supply
Specific (fixed amount) taxes and ad valorem (percentage) taxes and their impact on markets
Subsidies
Impact on markets
Price controls
Price ceilings (maximum prices): rationale, consequences and examples
Price floors (minimum prices): rationale, consequences and examples
1.4 Market failure
Types of market failure
The meaning of externalities
Negative externalities of production and consumption
Positive externalities of production and consumption
Lack of public goods
Common access resources and the threat to sustainability
Asymmetric information
Abuse of monopoly power
The meaning of market failure
Market failure as a failure to allocate resources efficiently
1.5 Theory of the firm and market structures (HL only)
Revenues
Total revenue, average revenue and marginal revenue
Production and costs
Production in the short run: the law of diminishing returns
Costs of production: economic costs
Costs of production in the short run
Production in the long run: returns to scale
Costs of production in the long run
Profit
Economic profit (sometimes known as abnormal profit) and normal profit (zero economic profit occurring at the breakeven point)
Goals of firms
Alternative goals of firms
Profit maximization
Perfect competition
Assumptions of the Model
Revenue curves
Profit maximization in the short run
Profit maximization in the long run
Shut-down price and break-even price
Efficiency
Monopoly
Assumptions of the Model
Barriers to entry
Revenue curves
Profit maximization
Revenue maximization
Natural monopoly
Monopoly and efficiency
Policies to regulate monopoly power
The advantages and disadvantages of monopoly compared with perfect competition
Monopolistic competition
Assumptions of the Model
Revenue curves
Profit maximization in the short run
Profit maximization in the long run
Non-price competition
Monopolistic competition and efficiency
Monopolistic competition compared with perfect competition and monopoly
Oligopoly

Assumptions of the Model
Game theory
Open/formal collusion
Tacit/informal collusion
Non-collusive oligopoly
Price discrimination
Necessary conditions for the practice of price discrimination
Section 2: Macroeconomics
2.1 The level of overall economic activity
The business cycle
Short-term fluctuations and long-term trend
Economic activity
Measures of economic activity: gross domestic product (GDP), and gross national product (GNP) or gross national income (GNI)
The circular flow of income model
2.2 Aggregate demand and aggregate supply
Aggregate supply (AS)
Alternative views of aggregate supply
The meaning of aggregate supply
Shifting the aggregate supply curve over the long term
Aggregate demand (AD)
The components of AD
The AD curve
The determinants of AD or causes of shifts in the AD curve
Equilibrium
Equilibrium in the monetarist/new classical model
Short-run equilibrium
Equilibrium in the Keynesian model
The Keynesian multiplier
The nature of the Keynesian multiplier
2.3 Macroeconomic objectives
Low unemployment
The meaning of unemployment
Consequences of unemployment
Types and causes of unemployment
Low and stable rate of inflation
Consequences of inflation
The meaning of inflation, disinflation and deflation
Consequences of deflation
Types and causes of inflation
Possible relationships between unemployment and inflation
Economic growth
The meaning of economic growth
Causes of economic growth
Consequences of economic growth
Equity in the distribution of income
The meaning of equity in the distribution of income
Indicators of income equality/inequality
Poverty
The role of taxation in promoting equity
Other measures to promote equity
The relationship between equity and efficiency
2.4 Fiscal policy
The government budget
Types of government expenditures
Sources of government revenue
The budget outcome
The role of fiscal policy
The impact of automatic stabilizers
Fiscal policy and short-term demand management
Fiscal policy and its impact on potential output
Evaluation of fiscal policy
2.5 Monetary policy
Interest rates
Interest rate determination and the role of a central bank
The role of monetary policy
Monetary policy and short-term demand management
Monetary policy and inflation targeting
Evaluation of monetary policy
2.6 Supply-side policies
Interventionist supply-side policies
Investment in human capital
Investment in new technology
Investment in infrastructure
Industrial policies
The role of supply-side policies
Supply-side policies and the economy
Market-based supply-side policies
Policies to encourage competition
Labour market reforms
Incentive-related policies
Evaluation of supply-side policies
The strengths and weaknesses of supply-side policies
Section 3: International economics
3.1 International trade
Free trade
Absolute and comparative advantage
The benefits of trade
The World Trade Organization (WTO)
Restrictions on free trade: Trade protection
Arguments for and against trade protection (arguments against and for free trade)
Types of trade protection
3.2 Exchange rates
Government intervention
Fixed exchange rates
Managed exchange rates (managed float)
Evaluation of different exchange rate systems
Freely floating exchange rates
Causes of changes in the exchange rate
Determination of freely floating exchange rates
The effects of exchange rate changes
3.3 The balance of payments
Current account deficits
Implications of a persistent current account deficit
The relationship between the current account and the exchange rate
Methods to correct a persistent current account deficit
The Marshall-Lerner condition and the J-curve effect
Current account surpluses
Implications of a persistent current account surplus
The relationship between the current account and the exchange rate
The structure of the balance of payments
The meaning of the balance of payments
The components of the balance of payments accounts
The relationships between the accounts
3.4 Economic integration
Forms of economic integration
Preferential trade agreements
Trading blocs
Monetary union
3.5 Terms of trade (HL only)
The meaning of the terms of trade
Measurement
Causes of changes in the terms of trade
Consequences of changes in the terms of trade
Section 4: Development economics
4.2 Measuring development
Measurement methods
Single indicators
Composite indicators
4.1 Economic development
The nature of economic growth and economic development
Economic growth and economic development
Common characteristics of economically less developed countries
Diversity among economically less developed nations
International development goals
4.3 The role of domestic factors
Domestic factors and economic development
Domestic factors
4.4 The role of international trade
International trade and economic development
Trade strategies for economic growth and economic development
Trade problems facing many economically less developed countries
4.5 The role of foreign direct investment (FDI)
Foreign direct investment and multinational corporations (MNCs)
Advantages and disadvantages of FDI for economically less developed countries
The meaning of FDI and MNCs
4.6 The roles of foreign aid and multilateral development assistance
Multilateral development assistance
The roles of the International Monetary Fund (IMF) and the World Bank
Foreign aid
Evaluation of foreign aid
Classifications and types of aid
4.7 The role of international debt
Foreign debt
Foreign debt and its consequences
4.8 The balance between markets and intervention
Strengths and weaknesses of market-oriented policies
Strengths
Weaknesses
Strengths and weaknesses of interventionist policies
Strengths
Weaknesses
Market with government intervention

DP Economics Questionbank