Question 23M.3.HL.TZ0.viii
| Date | May 2023 | Marks available | [Maximum mark: 4] | Reference code | 23M.3.HL.TZ0.viii |
| Level | HL | Paper | 3 | Time zone | TZ0 |
| Command term | Explain | Question number | viii | Adapted from | N/A |
Using an AD/AS diagram and information from Table 2, explain how the change in the official value of the naira between 2018 and 2020 might have influenced the rate of inflation for Nigeria.
[4]
Candidates might explain that the depreciating naira results in an increase in the cost of imported inputs and therefore, a fall in (short-run) aggregate supply, resulting in (cost-push) inflation. This alternative approach should be fully rewarded.
If the student assumes that the naira has appreciated (revalued), an accurate diagram (with AD shifting left or SRAS shifting right) and explanation may be stamped ECF and awarded a maximum of [2].
Candidates who incorrectly label diagrams can be awarded with a maximum of [3].
For AD/AS, the vertical axis may be Average (General) Price Level, APL or Price level. The horizontal axis may be real output, real national output, real income, real national income, real GDP or real Y. A title is not necessary. LRAS may be shown in any appropriate position. Aggregate supply may be labelled SRAS or AS.
If AD shifts and SRAS is omitted, but LRAS is present, then the diagram may be rewarded.
The majority of responses were able to explain that a weaker currency would make exports more competitive and imports more expensive, leading to an increase in net exports and thus an increase in AD OR would increase the cost of imported inputs and thus decrease SRAS. Some candidates inferred from Table 2 that the naira had become stronger, leading to a decrease in net exports. In such cases no marks were awarded for the diagram but error carried forward (ECF) was applied and candidates could earn up to 2 marks for an accurate explanation based on the incorrect inference.
