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2.2 Aggregate Demand and Aggregate Supply (questions)

IB Past Paper Questions on macroeconomics

May 2014 TZ1

3. (a) Using two AD/AS diagrams, explain cost-push and demand-pull inflation. [10 marks]

    (b) “The rate of inflation can be most effectively reduced through the use of monetary policy.” To what extent do             you agree with this statement? [15 marks]

4. (a) Explain two factors which might cause economic growth. [10 marks]

    (b) Evaluate the view that the benefits of economic growth will always outweigh the costs. [15 marks]

May 2014 TZ2

3. (a) Explain how the aggregate demand curve can be shifted by a reduction in interest rates. [10 marks]

    (b) Evaluate the effectiveness of monetary policy to increase aggregate demand during a recession. [15 marks]

4. (a) Explain two factors which might cause economic growth. [10 marks]

    (b) Evaluate the view that the benefits of economic growth will always outweigh the costs. [15 marks]

Nov 2013

3. (a) Explain how changes in the size of the circular flow depend on the relative size of injections and leakages.
    [10 marks]

    (b) Evaluate the use of national income statistics for making comparisons of the standard of living over time.

         [15 marks]

4. (a) Explain why measuring the rate of inflation using a consumer price index (CPI) may not be accurate. [10 marks]

    (b) Evaluate two government policies to reduce inflation. [15 marks]

May 2013 TZ1

3. (a) Explain why the market system may not result in an equitable distribution of income. [10 marks]

    (b) Evaluate government policies to promote equity in terms of their effects on efficiency in the allocation of             resources. [15 marks]

4. (a) Explain how labour market reforms may be used to promote economic growth. [10 marks]

    (b) “Market-oriented supply-side policies will always be more effective in promoting economic growth than                 demand-side policies.” To what extent do you agree with this statement? [15 marks]

May 2013 TZ2

3. (a) Using a diagram, describe how expansionary monetary policy might be used to close a deflationary (recessionary)         gap. [10 marks]

    (b) Discuss why, in contrast to the monetarist/new classical model, an economy can remain stuck in a deflationary     (recessionary) gap according to the Keynesian model. [15 marks]

4. (a) Explain how labour market reforms may be used to promote economic growth. [10 marks]

    (b) “Market-oriented supply-side policies will always be more effective in promoting economic growth than                 demand-side policies.” To what extent do you agree with this statement? [15 marks]

Nov 2012

2. (a) Explain how a government could bring about a more equal distribution of income. [10 marks]

    (b) Evaluate the effectiveness of government policies designed to reduce inequalities in income. [15 marks]

May 2012 TZ1

2. (a) Explain why governments may view deflation as a threat. [10 marks]

    (b) Evaluate the view that a low and stable rate of inflation is beneficial for an economy. [15 marks]

May 2012 TZ2

2. (a) Explain why governments may pursue the macroeconomic goals of low inflation and low unemployment.
    [10 marks]

    (b) Evaluate the extent to which the use of expansionary demand-side policies may lead to conflicts between the         various goals of macroeconomic policy. [15 marks]

Nov 2011

2. (a) Explain what the multiplier is and, using a numerical example, demonstrate how it can be calculated. [10 marks]

    (b) Evaluate whether real Gross Domestic Product (GDP) can be increased by the use of demand-side policies.
    [15 marks]

May 2011 TZ1

2. During the global financial crisis of 2008–2009, there was a fall in consumer spending in many countries.

    (a) Explain the factors which might be responsible for causing consumer spending to fall. [10 marks]

    (b) Evaluate the possible consequences of falling consumer spending for a country’s macroeconomic performance.         [15 marks]

May 2011 TZ2

2. (a) Explain two policies a government might use to redistribute income. [10 marks]

    (b) “Measures to promote greater income equality should be a key feature of government economic policy.” Evaluate     this proposition. [15 marks]

Nov 2010

2. (a) Explain how supply-side improvements to an economy may be achieved through the use of taxes and government     spending. [10 marks]

    (b) Evaluate the use of supply-side policies to reduce unemployment. [15 marks]

May 2010 TZ1

2. (a) Explain why a country may wish to reduce its rate of inflation. [10 marks]

    (b) Evaluate the likely impact on the economy of relying on higher interest rates to reduce the rate of inflation.
    [15 marks]

May 2010 TZ2

2. (a) Explain why a country may wish to reduce its unemployment rate. [10 marks]

    (b) Evaluate the likely effects on the economy of relying on demand-side policies to reduce the unemployment rate.     [15 marks]

Nov 2009

2. (a) Explain how the rate of inflation might be measured and the factors which might make accurate measurement         difficult. [10 marks]

    (b) Evaluate the extent to which an individual government can influence the rate of inflation in its economy.
    [15 marks]

May 2009

2. (a) Explain the possible causes of a rise in the rate of inflation in an economy. [10 marks]

    (b) Evaluate the possible impact on economic performance that may result from a government decision to bring             inflation under control. [15 marks]

Nov 2008

3. (a) Explain the difference between progressive taxation and regressive taxation. [10 marks]

    (b) Evaluate the possible effects of a decrease in direct taxation on a country’s inflation rate, unemployment rate         and balance of payments. [15 marks]

May 2008

2. (a) “The effect of a decrease in aggregate demand on output and the price level depends on the shape of the             aggregate supply curve.” Explain this statement. [10 marks]

    (b) Evaluate the likely effects of a falling rate of inflation on the performance of an economy. [15 marks]

Nov 2007

2. (a) Using one or more diagrams, explain the difference between the equilibrium level of national income and the full employment level of national income. [10 marks]

(b) Evaluate the policies a government may use to increase the full employment level of national income. [15 marks]

May 2007

2. (a) Explain why a government might find it difficult to maintain a low rate of inflation as the economy approaches full employment. [10 marks]

(b) Evaluate the proposition that the priority in economic management should be the maintenance of low unemployment. [15 marks]

 For example:

  • Short-answer questions - a series of short-answer questions to help you check your understanding of the topic
  • Case studies - questions based around a variety of information
  • Long answer - questions requiring an extended/essay type response
  • Data response - responding to data or topical economics news articles





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