Question 19M.1.HL.TZ1.a
| Date | May 2019 | Marks available | [Maximum mark: 10] | Reference code | 19M.1.HL.TZ1.a |
| Level | HL | Paper | 1 | Time zone | TZ1 |
| Command term | Explain | Question number | a | Adapted from | N/A |
Explain how a deflationary gap might occur.
[10]
Marks should be allocated according to the paper 1 markbands for May 2013 forward, part A.
Answers may include:
- definition of deflationary gap
- Keynesian or monetarist/new classical diagram to show a macroeconomic equilibrium at a level of real output below the full employment level
- explanation of factors (events) that may depress the aggregate demand and lead to a macroeconomic equilibrium at a level of real output below the full employment level
- examples of countries that have experienced a deflationary gap.
The majority of candidates were able to define deflationary gap and explain how a decrease in aggregate demand would lead to equilibrium at a level of real output below the full employment level of output. The candidates which provided better answers were able to link their answer to the components of aggregate demand but often could not give plausible reasons why any of the components would decrease. In the best answers the candidates were able to give such reasons due to their knowledge of historical episodes where aggregate demand has decreased because of specific events in the economy. Unfortunately, some candidates focused on explaining deflation and their explanations, even though they were correct, were considered only marginally relevant given the specific demands of the question.
