Question 18M.1.HL.TZ1.3
| Date | May 2018 | Marks available | [Maximum mark: 25] | Reference code | 18M.1.HL.TZ1.3 |
| Level | HL | Paper | 1 | Time zone | TZ1 |
| Command term | Examine, Explain | Question number | 3 | Adapted from | N/A |
Explain the possible impact of an increase in wealth and consumer confidence on aggregate demand.
[10]
Answers may include:
- definitions of wealth, consumer confidence, aggregate demand (AD)
- diagram(s) to show AD shifting to the right
- explanation of the possible impact of an increase in wealth and consumer confidence on AD
- examples of increases in wealth and consumer confidence.
Marks should be allocated according to the Paper 1 markbands for May 2013 forward, part A.
Examine why, in contrast to the monetarist/new classical model, the economy will not automatically return to the full employment level of output in the Keynesian model.
[15]
Answers may include:
- definitions of full employment level of output, Keynesian model, monetarist/new classical model
- diagram(s) to show equilibrium in the two models
- explanation of the mechanisms through which an economy may remain stuck in a deflationary gap in the Keynesian system but will always return to full employment equilibrium in the monetarist/new classical model in the long run
- examples of the two models applying in practice
- synthesis or evaluation (examine).
Evaluation may include: the importance of the type of unemployment, the degree to which both models represent extreme theoretical ends of a spectrum, the degree to which reality deviates from the models, the difficulty of establishing what is full employment, policy implications.
Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.
Opinions or conclusions should be presented clearly and should be supported by appropriate examples.
Marks should be allocated according to the Paper 1 markbands for May 2013 forward, part B.