Question 21M.1.SL.TZ1.b
| Date | May 2021 | Marks available | [Maximum mark: 15] | Reference code | 21M.1.SL.TZ1.b |
| Level | SL | Paper | 1 | Time zone | TZ1 |
| Command term | Evaluate | Question number | b | Adapted from | N/A |
Evaluate the effectiveness of fiscal policy as a means of achieving long-term economic growth.
[15]
Marks should be allocated according to the paper 1 markbands for May 2013 forward, part B.
Answers may include:
- definitions of long-term economic growth, fiscal policy
- diagram to show LRAS and/or the production possibility curve shifting to the right/outwards
- explanation of how fiscal policy can promote long-term economic growth through government spending on infrastructure, technology, R&D and human capital, tax reductions/incentives for firms to invest
- examples of the use of fiscal policy to promote long-term economic growth
- synthesis or evaluation.
Evaluation may include: the various advantages and disadvantages of fiscal policy, including both the demand- and supply-side effects on the economy, consideration of alternative (supply-side and monetary) policies.
Although some candidates confused fiscal policy with monetary policy, many displayed a good understanding of what fiscal policy is and how expansionary fiscal policy is achieved. However, few candidates were able to explain what long-term economic growth is in comparison to short-term economic growth and to specifically explain how it might be achieved. Thus, typically, answers tended to be more general nature in relation to fiscal policy and economic growth, with diagrams showing how AD shifts rightwards, causing SR economic growth, without the shift rightwards of LRAS on account of the supply-side effects of fiscal policy. Many could evaluate fiscal policy in general, but not specifically as it relates to increasing long-term economic growth. A few candidates did compare fiscal policy to supply-side policies but often failed to recognise that certain aspects of fiscal policy are in effect supply-side policies.
