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 government spending might promote greater equity in an economy.
[10]
Marks should be allocated according to the paper 1 markbands for May 2013 forward, part A.
Answers may include:
- definitions of government spending, equity
- Lorenz curve diagram showing a Lorenz curve shifting closer to the line of perfect income equality because of government spending to promote equity (or a subsidy diagram or an AD/AS diagram showing increasing AD and real GDP and therefore implying increased employment)
- explanation of the linkages between government spending (eg on merit and public goods, transfer payments and subsidies), taxation and equity
- examples of actual government spending measures (eg healthcare services, education, sanitation, water supplies, public parks, public transportation, old age pensions, unemployment benefits, child allowances) that have promoted equity.
Surprisingly, many candidates focused completely on government spending and its effect on gross domestic product (and the economy at large) while ignoring the “equity” component of the question. Since there are different possible valid interpretations of the meaning of equity, a very specific and particular definition of the term was not expected. However, candidates were expected to provide some working definition at the beginning of their answers and to use this definition consistently to answer the question. With that being said, there were some interpretations of the meaning of equity which were considered unacceptable in the context of the IB economics syllabus. For example, some candidates made references to equity in the sense of “owner’s equity” in a business and this particular interpretation of the meaning of equity led those candidates astray. Quite a few candidates considered “government spending to promote equity” in the economy to be the same as “government subsidies to help small firms (without economies of scale) compete with larger firms (with considerable economies of scale)”, and this approach was also deemed unacceptable.
