Question 23M.1.HL.TZ2.2
| Date | May 2023 | Marks available | [Maximum mark: 25] | Reference code | 23M.1.HL.TZ2.2 |
| Level | HL | Paper | 1 | Time zone | TZ2 |
| Command term | Discuss, Explain | Question number | 2 | Adapted from | N/A |
Explain two economic costs of high unemployment.
[10]
Refer to Paper 1 markbands for May 2022 forward, available under the "My tests" tab > supplemental materials.
Answers may include:
- Terminology: unemployment.
- Explanation: of any two economic costs such as a loss of real output; higher spending and lower tax revenues for the government with the possibility of a larger budget deficit/ a smaller budget surplus; a more unequal distribution of income; costs to the government of dealing with social problems caused by unemployment; unemployed people may have difficulty finding work in the future; specific problems related to the type of unemployment, eg structural or cyclical.
- Diagram: any relevant diagram related to the particular cost being explained, eg use of a PPC diagram or an AD/AS diagram.
A maximum of [6] may be awarded if only one cost is explained.
Assessment Criteria
Part (a) 10 marks
This was by far the most popular question on the paper. There were many good responses and this is obviously an area of the syllabus for which candidates were well prepared. Candidates were usually able to identify two economic costs associated with unemployment. Weaker responses identified non economic costs. Some candidates wrote a lot about unemployment in general without adequately addressing the question.
Using real-world examples, discuss the view that low unemployment can only be achieved at the expense of higher inflation.
[15]
Refer to Paper 1 markbands for May 2022 forward, available under the "My tests" tab > supplemental materials.
Answers may include:
- Terminology: unemployment, inflation.
- Explanation: of the view in terms of higher AD as unemployment falls and thus higher demand inflation and/or in terms of the short-run Phillips curve relationship.
- Diagram: use of an AD/AS diagram, a short-run Phillips curve diagram and/or a long-run Phillips curve diagram
- Synthesis (discuss): a challenge to the view in terms of the importance of the type of unemployment being tackled, eg structural or cyclical, and the way in which it is tackled, eg through the use of demand-side or supply-side policies; Monetarist/new classical perspectives versus Keynesian perspectives; the possibility of higher inflation and higher unemployment; the possibility of no negative stable relationship between unemployment and inflation using the long-run Phillips curve; consideration of the importance of technological progress; consideration of the word “only”.
- Examples: real-world examples of situations where low unemployment may or may not have coincided with higher inflation; use of empirical evidence.
N.B. It should be noted that definitions, theory and examples that have already been given in part (a), and then referred to in part (b), should be rewarded.
Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.
Assessment Criteria
Part (b) 15 marks
There were many very well-developed responses to this question. The degree to which better responses applied meaningful real-world examples in the synthesis they developed was pleasing. Good responses discussed the long and short run Phillips curve to good effect. They looked at how unemployment and inflation may or may not be negatively correlated using appropriate macroeconomic theory assisted by aggregate demand and aggregate supply diagrams. Frequently candidates annotated their diagrams with the data they cited in their real-world examples, which is good practice. Candidates generally responded to this question to a high standard.