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Question 19N.1.SL.TZ0.3a

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Date November 2019 Marks available [Maximum mark: 10] Reference code 19N.1.SL.TZ0.3a
Level SL Paper 1 Time zone TZ0
Command term Explain Question number a Adapted from N/A
a.
[Maximum mark: 10]
19N.1.SL.TZ0.3a
(a)

Explain why a reduction in interest rates might lead to an increase in aggregate demand.

[10]

Markscheme

Marks should be allocated according to the paper 1 markbands for May 2013 forward, part A.

Answers may include:

  • definitions of aggregate demand, interest rates
  • diagram to show how a reduction in interest rates increases aggregate demand
  • explanation that a reduction in interest rates increases consumption and investment, leading to an increase in aggregate demand
  • examples of how a reduction in interest rates increases aggregate demand in practice and/or of countries where reduced interest rates have increased aggregate demand.

Syllabus sections