Question 20N.3.HL.TZ0.2
| Date | November 2020 | Marks available | [Maximum mark: 25] | Reference code | 20N.3.HL.TZ0.2 |
| Level | HL | Paper | 3 | Time zone | TZ0 |
| Command term | Calculate, Determine, Explain, Identify, Label, Outline, Plot, State | Question number | 2 | Adapted from | N/A |
Table 1 provides information required for the calculation of a consumer price index (CPI). It shows a typical basket of goods purchased by the citizens of Country Alpha and the prices of these goods for two consecutive years. Assume 2015 is the base year, when the cost of the typical basket was $45.00.
Calculate the cost of the typical basket in 2016.
[2]
5 × 2.5 + 10 × 1.5 + 2 × 10
Any valid working is sufficient for [1].
= $47.50
An answer of $47.50 or 47.50 without workings is sufficient for [1].
For full marks to be awarded, the response must provide valid working and include correct units.
The majority of candidates performed the calculation correctly.
The cost of the typical basket was $50 in 2017. Calculate the consumer price index (CPI) for 2017.
[1]
50/45 × 100 = 111.11 No units (eg $) permitted.
NB workings are not required.
Several errors were in evidence here. Candidates assumed that 2016 was the base year (even though 2015 is stated clearly as the base year) and calculated accordingly. Rounding errors were common, with candidates neglecting the requirement to express answers accurately or to 2dp.
The consumer price index for 2014 was 101.23. Calculate the rate of inflation between 2014 and 2015 (the base year).
[1]
(100 − 101.23)/101.23 × 100 = −1.22 %
NB workings are not required.
−1.22 %
An answer of −1.22 % or −1.22 or deflation of 1.22 % is sufficient for [1].
Relatively few candidates were able to calculate the rate of inflation correctly. Most students appeared to assume that 2013 was the base year - possibly because they are not used to reading tables which show deflation.
Explain two reasons why the calculation of the inflation rate may not be accurate.
[4]
There were many good responses which explained the biases which might render the calculated inflation rate inaccurate. Weaker responses stated but did not explain these factors or implied that the data collection might be inaccurate. Additionally, weaker responses stated that "many people buy in parallel/black markets" or referred to price volatility as a reason for inaccuracy.
Outline how monetary policy is used to lower the inflation rate in an economy.
[2]
Candidates were mostly able to explain contractionary monetary policy, although a small minority focused on expansion. For full marks, reference to consumer spending and/or investment spending was required, and this was not included by some candidates.
Table 2 provides selected economic data for Country A.
In 2019, nominal GDP was $102 874.55 million. Using data from Table 2, identify whether Country A experienced inflation or deflation or disinflation in 2019.
[1]
deflation OR inflation is sufficient for [1].
NB There has been deflation since the base year. In 2019, however, the presence of deflation can only be confirmed if the percentage change in nominal GDP is below 0.72 %.
Both inflation and deflation were allowed here as the data did not preclude either result. However, the data did not indicate disinflation. The great majority of candidates earned the mark.
Using data from Table 2, state the reason why there is a difference between the real GDP growth rate and the real GDP per capita growth rate between 2015 and 2019.
[1]
because the population has been growing is sufficient for [1].
The data shows that the per capita growth rate is always less than the GDP growth rate, which shows that the population is actually increasing every year. The question was not answered well, with many candidates merely defining the real GDP per capita growth rate or describing the implications of an unequal distribution of income.
An economist forecasts that the real GDP growth rate in 2020 will be 3.41 %. Using the data in Table 2, calculate the forecast for real GDP ($ million) in 2020.
[2]
103 785.98 × 1.0341
Any valid working is sufficient for [1].
= $ 107 325.08 million OR $107.33 billion
An answer of 107 325.08 without workings is sufficient for [1].
NB Since ($ million) is in the question, units are not required.
Apart from some carelessness in the use of units ($ million) and rounding to 2dp, the question was answered well.
An economist advises the government of Country A to spend $207 million on a new infrastructure project. She estimates that as a result, nominal GDP would increase by $828 million, ceteris paribus.
Calculate the estimated value of the multiplier used by the economist.
[2]
828/207
Any valid working is sufficient for [1].
= 4
An answer of 4 without workings is sufficient for [1].
For full marks to be awarded, the response must provide valid working with NO units.
Well-answered.
Calculate the estimated value of the multiplier used by the economist.
[1]
0.75 is sufficient for [1].
OFR applies.
Well-answered, although some candidates were careless and applied the formula incorrectly (eg MUL T = 1/MPC) the majority of responses were correct.
A worker in Country J can produce either 12 kilograms (kg) of rice or 4 kg of wheat per hour. A worker in Country H can produce either 14 kg of rice or 7 kg of wheat per hour.
Plot and label the production possibility curves for Country J and for Country H, assuming constant opportunity costs, on Figure 4.
[2]
[1] for one correctly drawn production possibility curve
[2] for two correctly drawn production possibility curves
A response with missing or incorrect labels may be awarded a maximum of [1].
Kgs are not required on the axes.
A small minority of candidates ignored the assumption of constant opportunity costs (and drew concave PPCs). However, the vast majority of candidates earned full marks.
Using the data and the concept of opportunity costs to support your answer, determine which good Country H should specialize in. You must give a reason for your choice.
[2]
Although the majority of candidates were able to identify that Country H should specialize in wheat, weaker students mistakenly compared Country H's opportunity cost of producing wheat with its opportunity cost of producing rice, which is simply the reciprocal and thus meaningless.
Explain two gains from trade that arise when Country J and Country H specialize according to comparative advantage.
[4]
Many candidates did not recognise the most important outcome of specializing according to comparative advantage, namely that global output is higher and as a result both countries, even those with an absolute disadvantage in both goods, are able to consume outside their PPCs. Candidates tended to describe general gains from trade without any focus on the importance of comparative advantage.