Question 19M.1.SL.TZ2.b
| Date | May 2019 | Marks available | [Maximum mark: 15] | Reference code | 19M.1.SL.TZ2.b |
| Level | SL | Paper | 1 | Time zone | TZ2 |
| Command term | Discuss | Question number | b | Adapted from | N/A |
Discuss the view that economies will always return to the full employment level of output in the long run.
[15]
Marks should be allocated according to the paper 1 markbands for May 2013 forward, part B.
Answers may include:
- definition of full employment, full employment level of output
- diagrams to show the two different views of the economy
- explanation of the monetarist/new classical view that the economy will always return to the full employment level of output in the long run
- examples of situations where economies either have or have not returned to full employment in the long run
- synthesis and evaluation (discuss).
Discussion may include: consideration of the Keynesian view that an economy can remain stuck in a deflationary gap, consideration of the role of government, consideration of the word “always”.
There were a mixed set of responses to this question. Effective answers involved students showing a good understanding of the theory involved by explaining how an economy might return to full employment in the long run using the Monetarist/Neo Classical model where short-run aggregate supply changes when the economy is in either an inflationary or deflationary gap situation. This was supported with clear aggregate demand and supply diagrams. Some candidates who did not have a sound grasp of this theory really struggled to answer the question. The highest achieving responses went on to evaluate the view that economies always return to full employment by, for example, putting forward the Keynesian view that an economy can get stuck in a deflationary situation because wages do not adjust downwards. Well-developed real-world examples allowed students to access the very highest marks.
