Question 19M.1.SL.TZ1.3a
| Date | May 2019 | Marks available | [Maximum mark: 10] | Reference code | 19M.1.SL.TZ1.3a |
| Level | SL | Paper | 1 | Time zone | TZ1 |
| Command term | Explain | Question number | a | Adapted from | N/A |
Explain how aggregate demand in an economy might be affected by a rise in the exchange rate and a decrease in the income of major trading partners.
[10]
Marks should be allocated according to the paper 1 markbands for May 2013 forward, part A.
Answers may include:
- definition of aggregate demand (AD), exchange rate
- diagram to show AD shifting to the left
- explanation of the linkages between a rise in the exchange rate and a decrease in the income of major trading partners on a country’s AD
- examples of economies which have experienced a rise in the exchange rate and/or a decrease in the income of major trading partners.
NB if only one factor of the two factors mentioned above are considered, a maximum of Level 2 should be awarded.
Most candidates seemed to be familiar with AD/AS analysis and could use a diagram with relative ease. Most understood how a rise in the exchange rate caused exports to be more expensive, but few related it to an increase in the demand for imports, both of which would decrease AD. Few candidates were able to provide specific examples of economies that had experienced the situations mentioned in the question.
