Question 21N.1.SL.TZ0.b
| Date | November 2021 | Marks available | [Maximum mark: 15] | Reference code | 21N.1.SL.TZ0.b |
| Level | SL | Paper | 1 | Time zone | TZ0 |
| Command term | Evaluate | Question number | b | Adapted from | N/A |
Evaluate the view that fiscal policy is the best way to reduce unemployment.
[15]
Marks should be allocated according to the paper 1 markbands for May 2013 forward, part B.
Answers may include:
- definitions of fiscal policy, unemployment
- diagram to show how fiscal policy leads to a fall in unemployment
- explanation of how expansionary fiscal policy leads to a rise in AD and real GDP, leading to a fall in unemployment as more workers are needed in production
- examples of where fiscal policy has been used to reduce unemployment
- synthesis or evaluation.
Evaluation may include: consideration of the problems of using fiscal policy to reduce unemployment such as; budget deficit, inflation and it is not as effective at reducing unemployment that is not demand-deficient (structural, frictional). There could also be coverage of alternative policies such as monetary and supply side.
A maximum of [12] should be awarded if a candidate has not considered an alternative policy.
There were some very good answers to this question. The best responses focused on how expansionary fiscal policy reduces demand deficient unemployment as aggregate demand increases when tax is reduced, and government expenditure is increased. Good responses would go on to evaluate the use of fiscal policy by discussing issues such as increasing inflation, the cost of financing the policy, and fiscal policy is not particularly effective at reducing frictional and structural unemployment. The highest-level responses would use effective real-world examples to support the points being made.
