Question 23M.1.HL.TZ2.b
| Date | May 2023 | Marks available | [Maximum mark: 15] | Reference code | 23M.1.HL.TZ2.b |
| Level | HL | Paper | 1 | Time zone | TZ2 |
| Command term | Discuss | Question number | b | Adapted from | N/A |
Using real-world examples, discuss the view that low unemployment can only be achieved at the expense of higher inflation.
[15]
Refer to Paper 1 markbands for May 2022 forward, available under the "My tests" tab > supplemental materials.
Answers may include:
- Terminology: unemployment, inflation.
- Explanation: of the view in terms of higher AD as unemployment falls and thus higher demand inflation and/or in terms of the short-run Phillips curve relationship.
- Diagram: use of an AD/AS diagram, a short-run Phillips curve diagram and/or a long-run Phillips curve diagram
- Synthesis (discuss): a challenge to the view in terms of the importance of the type of unemployment being tackled, eg structural or cyclical, and the way in which it is tackled, eg through the use of demand-side or supply-side policies; Monetarist/new classical perspectives versus Keynesian perspectives; the possibility of higher inflation and higher unemployment; the possibility of no negative stable relationship between unemployment and inflation using the long-run Phillips curve; consideration of the importance of technological progress; consideration of the word “only”.
- Examples: real-world examples of situations where low unemployment may or may not have coincided with higher inflation; use of empirical evidence.
N.B. It should be noted that definitions, theory and examples that have already been given in part (a), and then referred to in part (b), should be rewarded.
Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.
Assessment Criteria
Part (b) 15 marks
There were many very well-developed responses to this question. The degree to which better responses applied meaningful real-world examples in the synthesis they developed was pleasing. Good responses discussed the long and short run Phillips curve to good effect. They looked at how unemployment and inflation may or may not be negatively correlated using appropriate macroeconomic theory assisted by aggregate demand and aggregate supply diagrams. Frequently candidates annotated their diagrams with the data they cited in their real-world examples, which is good practice. Candidates generally responded to this question to a high standard.
