Question 21M.1.SL.TZ2.3b
| Date | May 2021 | Marks available | [Maximum mark: 15] | Reference code | 21M.1.SL.TZ2.3b |
| Level | SL | Paper | 1 | Time zone | TZ2 |
| Command term | Evaluate | Question number | b | Adapted from | N/A |
Evaluate the effectiveness of interventionist supply-side policies in reducing the level of unemployment in an economy.
[15]
Marks should be allocated according to the paper 1 markbands for May 2013 forward, part B.
Answers may include:
- definitions of unemployment, interventionist supply-side policies
- diagram showing LRAS shifting right and/or supply of labour increasing in a labour market diagram; candidates may also show AD shifting right as a short-term effect of supply-side policies
- explanation that interventionist supply-side policies increase the quantity and quality of factors of production and thus increase the productive capacity of the economy and can be targeted at particular sectors of the economy; this may help to reduce structural unemployment in the long term and also contribute to the reduction of demand-deficient unemployment in the short term through the impact on AD
- examples of interventionist supply-side policies helping to reduce unemployment in practice
- synthesis or evaluation.
Evaluation may include: the importance of the type of unemployment (e.g. demand-deficient unemployment may be more directly reduced through expansionary monetary and fiscal policies); consideration of the effectiveness of supply-side policies (e.g. in terms of time lags, the ability to create employment, the impact on the government’s budget deficit, opportunity cost); government investment in new technologies (e.g. robotics/artificial intelligence) may lead to displacement of labour.
This question also produced some effective responses, with candidates showing a good understanding of the way interventionist supply-side policies can reduce unemployment. The strongest answers considered how state-provided education and training, employment subsidies and government-financed employment exchanges can reduce different types of unemployment. The answers were illustrated by showing an increase in the long-run aggregate supply curve, along with real-world examples of the use of interventionist supply-side policies. Large numbers of students evaluated their answers by considering the costs and relative effectiveness of the interventionist supply-side approach. The best responses also discussed the relative merits of alternative policy options such as monetary and fiscal policy, along with a market-based supply-side approach.
