Economics Paper1 SL

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Economics
Standard level
Paper 1
Wednesday 26 October 2022 (afternoon)
1 hour 15 minutes
Instructions to candidates
y Do not turn over this examination paper until instructed to do so.
y You are not permitted access to a calculator for this paper.
y Answer one question.
y Use fully labelled diagrams where appropriate.
y The maximum mark for this examination paper is [25 marks].
8822 – 5106
2 pages © International Baccalaureate Organization 2022
– 2 – 8822 – 5106
Answer one question.
1. (a) Explain two forms of government intervention in markets. [10]
(b) Using real-world examples, discuss the view that governments should intervene
if markets fail to provide public goods. [15]
2. (a) Explain two goals of fiscal policy. [10]
(b) Using real-world examples, evaluate the use of fiscal policy to close a
deflationary/recessionary gap. [15]
3. (a) Explain two factors that might cause an appreciation of a currency. [10]
(b) Using real-world examples, discuss the consequences for an economy of an

appreciation of its currency. [15]

N22/3/ECONO/SP1/ENG/TZ0/XX/M
Markscheme
November 2022
Economics
Standard level
Paper 1
11 pages
–2– N22/3/ECONO/SP1/ENG/TZ0/XX/M
criminal offense.
license/.
Use the question-specific markscheme together with the markbands. Award up to the maximum
marks as indicated.
1. (a) Explain two forms of government intervention in markets. [10]
Answers may include:

• Terminology: government intervention, markets.
• Theory: explanation of any two of the following forms of government
intervention: price ceilings (maximum prices), price floors (minimum prices),
indirect taxes, subsidies, direct provision of services, command and control
regulation and/or legislation. An import tariff intervention and related diagram
is equally rewarded.
• Diagram: showing how governments intervene in markets (price ceilings, price
floors, indirect taxes and/or subsidies).
A maximum of [6] should be awarded if only one form of government intervention

is explained.
Assessment Criteria
Marks Level descriptor
0 • The work does not reach a standard described by the descriptors below.
1–2 • The response indicates little understanding of the specific demands of the question.
• Economic theory is stated but it is not relevant.
• Economic terms are stated but they are not relevant.
3–4 • The response indicates some understanding of the specific demands of the question.
• Relevant economic theory is described.
• Some relevant economic terms are included.
5–6 • The response indicates understanding of the specific demands of the question,
but these demands are only partially addressed.
• Relevant economic theory is partly explained.
• Some relevant economic terms are used appropriately.
• Where appropriate, relevant diagram(s) are included.
7–8 • The specific demands of the question are understood and addressed.
• Relevant economic theory is explained.
• Relevant economic terms are used mostly appropriately.
• Where appropriate, relevant diagram(s) are included and explained.
• Relevant economic theory is fully explained.
• Relevant economic terms are used appropriately throughout the response.
• Where appropriate, relevant diagram(s) are included and fully explained.
(b) Using real-world examples, discuss the view that governments should intervene if
markets fail to provide public goods. [15]

• Terminology: public goods, market failure.
• Theory: explanation of the two characteristics of public goods (non-rivalrous,
non-excludable), the free rider problem, why the market fails and how
governments can intervene by directly providing public goods or by contracting
out to the private sector.
• Diagram: not needed for this question.
• Synthesis (discuss): which public goods should be provided, how much should
be provided, benefits derived from government provision vs. private sector
provision, costs of provision.
• Example(s): real-world examples of where governments have intervened or
have not intervened in response to public goods.
N.B. It should be noted that theory and diagrams that have already been given in
part (a), and then referred to in part (b), should be rewarded.
Examiners should be aware that candidates may take a different approach which,
if appropriate, should be rewarded.
Assessment Criteria
• The response contains no evidence of synthesis or evaluation.
• A real-world example(s) is identified but it is irrelevant.
• The response contains evidence of superficial synthesis or evaluation.
• A relevant real-world example(s) is identified.
• The response contains evidence of appropriate synthesis or evaluation but
lacks balance.
• A relevant real-world example(s) is identified and partly developed in the context of
the question.
• The response contains evidence of appropriate synthesis or evaluation that is
mostly balanced.
• A relevant real-world example(s) is identified and developed in the context of
the question.
• Relevant economic theory is fully explained
• The response contains evidence of effective and balanced synthesis or evaluation.
• A relevant real-world example(s) is identified and fully developed to support
the argument.
2. (a) Explain two goals of fiscal policy. [10]

• Terminology: fiscal policy.
• Theory: explanation of any two of the following goals: low and stable inflation,
low unemployment, increase short run economic growth, promote a stable
economic environment for long-term growth, reduce business cycle
fluctuations, equitable distribution of income and/or external balance.
• Diagram: Appropriate diagram(s) to show attainment of the two goals chosen.
A maximum of [6] should be awarded if only one goal of fiscal policy is explained.
Candidates who explain and diagram the supply-side effects of fiscal policy
should also be fully rewarded.
The goals of fiscal policy can be explained either through why it is used (eg
stable inflation) or how it is used (eg cutting tax). Both approaches should be
equally rewarded.
Assessment Criteria
(b) Using real-world examples, evaluate the use of fiscal policy to close a
deflationary/recessionary gap. [15]

• Terminology: fiscal policy, deflationary/recessionary gap.
• Theory: explanation of how expansionary fiscal policy will increase AD moving
the economy closer to its full employment level, closing a
deflationary/recessionary gap.
• Diagram: AD/AS diagram to illustrate expansionary fiscal policy to close a
deflationary/recessionary gap.
• Synthesis (evaluate): effectiveness depends on the shape of the aggregate
supply curve and where the economy is operating; potential strengths of fiscal
policy such as targeting of specific sectors and effectiveness in a deep
recession; potential constraints on fiscal policy such as political pressures,
time lags and sustainable debt; possible conflicts with other macroeconomic
objectives, monetary and/or supply-side policies might be considered as
alternatives, but the emphasis of the response should be on fiscal policy.
• Example(s): real-world examples of where governments have attempted to
close a deflationary/recessionary gap using fiscal policy.
Assessment Criteria
lacks balance.
the question.
mostly balanced.
the question.
the argument.
3. (a) Explain two factors that might cause an appreciation of a currency. [10]

• Terminology: appreciation.
• Theory: explanation of any two of the following factors: foreign demand for
exports, domestic demand for imports, inward foreign direct investment,
inward portfolio investment, remittances, speculation, relative inflation rates,
relative interest rates, relative growth rates and central bank intervention.
• Diagram: exchange rate diagram showing appreciation of a currency.
A maximum of [6] should be awarded if only one cause of an appreciation is explained.
Where students just answer with an increase in demand or a decrease in supply without
explaining the underlying causes of these changes then a maximum of [6] is rewarded.
Assessment Criteria
– 10 – N22/3/ECONO/SP1/ENG/TZ0/XX/M
(b) Using real-world examples, discuss the consequences for an economy of an

appreciation of its currency. [15]

• Terminology: appreciation.
• Theory: explanation of consequences such as changes in the inflation rate,
economic growth, unemployment, the current account balance (exports and
imports) and/or living standards.
• Diagram: AD/AS to show potential consequences of an appreciation on the
economy.
• Synthesis (discuss): the positive or negative impact of the appreciation on
inflation, unemployment, economic growth, the current account balance
(exports and imports) and living standards, the effect on different sectors of
the economy and the importance of the magnitude of the appreciation.
• Example(s): real-world examples of countries that have experienced an
appreciation of the currency or that have tried to avoid an appreciation.
Assessment Criteria
lacks balance.
the question.
mostly balanced.
the question.
the argument.
criminal offense.
license/.
Economics
Standard level
Paper 1
Monday 9 May 2022 (afternoon)
1 hour 15 minutes
y You are not permitted access to a calculator for this paper.
y Answer one question.
y Use fully labelled diagrams where appropriate.
2222 – 5106
–2– 2222 – 5106
Answer one question.
1. (a) Governments intervene in markets to support firms and to promote equity.

Explain one policy that could be used to support firms and one policy that
could be used to promote equity. [10]
(b) Using real-world examples, evaluate the effects for stakeholders of a government
imposing an indirect tax on a particular good. [15]
2. (a) Explain how the use of supply-side policies might encourage greater domestic
competition and improve the international competitiveness of a country. [10]
(b) Using real-world examples, evaluate the view that the use of interventionist
supply-side policies is the most effective way of reducing a country’s rate
of unemployment. [15]
3. (a) Explain how political and social factors can act as barriers to economic growth
and economic development. [10]
(b) Using real-world examples, discuss the significance of economic barriers for a
country’s economic growth and economic development. [15]

M22/3/ECONO/SP1/ENG/TZ0/XX/M
Markscheme
May 2022
Economics
Standard level
Paper 1
11 pages
–2– M22/3/ECONO/SP1/ENG/TZ0/XX/M
criminal offense.
license/.
Use the question-specific markscheme together with the markbands. Award up to the
maximum marks as indicated.
1. (a) Governments intervene in markets to support firms and to promote equity.

Explain one policy that could be used to support firms and one policy that could
be used to promote equity. [10]

• Terminology: government intervention, market, equity
• Explanation: of any one policy to support firms, such as a subsidy, a minimum
price (price floor) or trade protection and any one policy to promote equity,
such as a maximum price (price ceiling), direct government provision of
services or subsidy, progressive taxation (labour market)
• Diagram: any relevant diagram illustrating the particular policy being
explained.
A maximum of [6] should be awarded if only one policy/objective is addressed.
Assessment Criteria
Part (a) 10 marks
(b) Using real-world examples, evaluate the effects for stakeholders of a government
imposing an indirect tax on a particular good. [15]

• Terminology: indirect tax, stakeholders
• Explanation: that the tax will shift the supply curve to the left/upwards,
increase the price and reduce the quantity demanded/supplied; explanation of
the possible consequences for consumers, producers, workers, the
government and society as a whole
• Diagram: a demand and supply diagram showing the impact of a shift of the
supply curve to the left increasing price and reducing quantity
demanded/supplied
• Synthesis (evaluate): the importance of PED and PES, the impact on resource
allocation and allocative efficiency, whether the tax is specific or ad valorem,
the regressive nature of indirect tax and the extent of the increase in taxation
• Examples: use of real-world examples to show instances of indirect taxes
being imposed on goods.
A maximum of [9] should be awarded if only one stakeholder is mentioned.
N.B. It should be noted that definitions, theory and examples that have already
been given in part (a), and then referred to in part (b), should be rewarded.
Assessment Criteria
Part (b) 15 marks
lacks balance.
the question.
mostly balanced.
the question.
the argument.
2. (a) Explain how the use of supply-side policies might encourage greater domestic
competition and improve the international competitiveness of a country. [10]

• Terminology: supply-side policies, international competitiveness, competition
• Explanation: of how the use of market-based supply-side policies such as
privatization, deregulation, trade liberalization and anti-monopoly legislation
and interventionist supply-side policies such as government spending on
education and training, R&D and infrastructure might encourage greater
competition; an explanation that international competitiveness may be
improved as a result of the LRAS increasing and lowering the rate of
inflation/the price level, hence making exports relatively cheaper
• Diagram: an AD/AS diagram showing a rightward shift of LRAS.
A maximum of [6] should be awarded if only one of the two goals in the question
item is addressed.
Assessment Criteria
Part (a) 10 marks
• Relevant theory is described.
(b) Using real-world examples, evaluate the view that the use of interventionist
supply-side policies is the most effective way of reducing a country’s rate of
unemployment. [15]

• Terminology: interventionist supply-side policies, unemployment
• Explanation: of the view in terms of the successful implementation of
interventionist supply-side policies increasing the productive capacity of the
economy, increasing the demand for labour in the long run and thus lowering
the level of unemployment; such policies are also likely to increase AD
• Diagram: an AD/AS diagram to show LRAS being shifted to the right and/or
AD shifting right
• Synthesis (evaluate): the supply-side policy applied depends on the type of
unemployment, the limitations of using interventionist supply-side policy in
reducing unemployment; interventionist policies compared with market-based
supply-side policies; the potential benefits of alternative policies such as
monetary and fiscal policies; consideration of “most effective”; overall
assessment
• Examples: real-world examples of where governments have attempted to
reduce unemployment using interventionist supply-side policies and/or other
policies.
N.B. It should be noted that definitions, theory and examples that have already
As the question requires an evaluation of the “most effective way”, a maximum of

[12] should be awarded where no other policies are considered, as the question
wouldn’t be fully addressed. For [13] or more the synthesis and evaluation must
be effective and balanced and there must at least be some mention of alternative
policies.
Assessment Criteria
Part (b) 15 marks
• Economic theory is stated but it is not relevant
lacks balance.
the question.
mostly balanced.
the question.
the argument.
3. (a) Explain how political and social factors can act as barriers to economic growth
and economic development. [10]

• Terminology: political and social barriers, economic growth, economic
development
• Explanation: of any possible political/social barriers, which may inhibit growth
and development, such as gender inequality, lack of governance, corruption,
unequal political power and status, weak institutional framework involving the
legal system, ineffective taxation structures, the banking system and property
rights
• Diagram: use of an AD/AS diagram to illustrate economic growth, or a PPC or
poverty cycle diagram.
A maximum of [6] should be awarded if only economic growth or economic

development in the question item is addressed.
Assessment Criteria
Part (a) 10 marks
– 10 – M22/3/ECONO/SP1/ENG/TZ0/XX/M
(b) Using real-world examples, discuss the significance of economic barriers for a
country’s economic growth and economic development. [15]

• Terminology: economic barriers, economic growth, economic development
• Explanation: of how economic barriers such as increasing economic
inequality, lack of access to infrastructure and appropriate technology, low
levels of human capital, overdependence on primary sector, lack of access to
international markets, informal economy, capital flight, indebtedness,
geography, eg being landlocked and climate/disease may constrain growth
and development
• Diagram: use of any relevant diagram such as PPC, poverty cycle, AD/AS
• Synthesis (discuss): the degree to which the various economic barriers act as
a barrier to growth and development; the relative importance of economic
barriers as compared to political/social barriers; overall assessment
• Examples: real-world examples of countries that have experienced economic
barriers to growth and development.
Examiners should be flexible in the interpretation of the difference between

economic and political/social barriers.
N.B. It should be noted that definitions, theory, and examples that have already
A maximum of [9] should be awarded if only economic growth or economic

development in the question item is addressed.
Assessment Criteria
Part (b) 15 marks
• Economic theory is stated but it is not relevant
lacks balance.
the question.
mostly balanced.
the question.
the argument.
criminal offense.
license/.
Economics
Standard level
Paper 1
Wednesday 27 October 2021 (afternoon)
1 hour 30 minutes
y You are not permitted access to any calculator for this paper.
y Section A: a nswer one question.
y Section B: a nswer one question.
y Use fully labelled diagrams and references to examples where appropriate.
8821 – 5110
–2– 8821 – 5110
Section A
Answer one question from this section.
Microeconomics
1. (a) Explain how a decrease in income might affect the demand for normal goods and
the demand for inferior goods. [10]
(b) Discuss the significance of income elasticity of demand for producers of primary
products and producers of manufactured goods when incomes are rising. [15]
2. (a) Explain the impact on consumers, producers and the government of a price floor
being introduced in an agricultural market. [10]
(b) Evaluate the view that a price ceiling is an ineffective policy to protect
low-income consumers. [15]
Section B
Macroeconomics
3. (a) Explain how in the Keynesian AD/AS model an economy can be in equilibrium while
producing below the full employment level of output. [10]
(b) Evaluate the view that fiscal policy is the best way to reduce unemployment. [15]
4. (a) Explain how economic growth might reduce the level of absolute poverty in a country. [10]
(b) Evaluate the view that progressive income tax is the best way to increase equity in
an economy. [15]

Markscheme
November 2021
Economics
Standard level
Paper 1
11 pages
criminal offense.
license/.
marks as indicated.
Section A
Microeconomics
1. (a) Explain how a decrease in income might affect the demand for normal goods and
the demand for inferior goods. [10]

• definitions of demand, normal good, inferior good
• diagram(s) to show a how a decrease in income affects the demand for a
normal good and an inferior good
• explanation of how a decrease in income reduces the demand for normal
goods and increases the demand for inferior goods
• examples of normal goods and inferior goods.
A maximum of [6] should be awarded if a candidate has only covered normal

goods OR inferior goods.
Assessment Criteria
Part (a) 10 marks
Level Marks
The work does not meet a standard described by the
0 0
descriptors below.
There is little understanding of the specific demands of the
1 1–3
question.
Relevant economic terms are not defined.
There is very little knowledge of relevant economic theory.
There are significant errors.
There is some understanding of the specific demands of the
2 4–6
question.
Some relevant economic terms are defined.
There is some knowledge of relevant economic theory.
There are some errors.
3 There is understanding of the specific demands of the question. 7–8
Relevant economic terms are defined.
Relevant economic theory is explained and applied.
Where appropriate, diagrams are included and applied.
Where appropriate, examples are used.
There are few errors.
There is clear understanding of the specific demands of the
4 9–10
question.
Relevant economic terms are clearly defined.
Relevant economic theory is clearly explained and applied.
Where appropriate, diagrams are included and applied effectively.
Where appropriate, examples are used effectively.
There are no significant errors.
(b) Discuss the significance of income elasticity of demand for producers of primary
products and producers of manufactured goods when incomes are rising. [15]

• definitions of primary products, manufactured goods, income elasticity of
demand
• diagrams to show how the demand for primary products and for manufactured
goods is affected by a rise in incomes
• explanation of the impact on producers of how primary products tend to have
a low YED because they are necessities (with few or no substitutes) for their
buyers and demand for them changes less than proportionally when incomes
change; explanation of the impact on producers of how manufactured goods
tend to have a high YED because they can be luxury goods and demand for
them increases more than proportionally when incomes increase
• examples of primary products with a low YED and manufactured goods with a
high YED
• synthesis or evaluation (discuss).
Discussion may include: consideration of primary products that have a high YED
and/or manufactured goods that have a low or negative YED, the YED of a good
depends on the income level in the economy, the problems of measuring YED
because other factors affecting the demand for primary products and
manufactured goods apart from income are changing at the same time.
A maximum of [9] should be awarded if a candidate has only covered producers

of primary products OR manufactured goods.
Assessment Criteria
Part (b) 15 marks
Level Marks
0 0
descriptors below.
1 1–5
question.
2 6–9
question.
There is an attempt at synthesis or evaluation.
4 13–15
question.
There is evidence of appropriate synthesis or evaluation.
2. (a) Explain the impact on consumers, producers and the government of a price floor
being introduced in an agricultural market. [10]

• definition of price floor
• diagram to show the impact of a price floor on an agricultural market
• explanation of how a price floor leads to a higher price and lower quantity
demanded from consumers, and a higher price to producers increases
quantity supplied because it increases revenues and an opportunity cost to
governments because of the expense of buying surplus production
• examples of agricultural markets.
A maximum of [6] should be awarded if a candidate has only considered one

stakeholder. A maximum of [8] should be awarded if a candidate has only
considered two stakeholders. All three stakeholders are needed to reach level 4.
Assessment Criteria
Part (a) 10 marks
Level Marks
0 0
descriptors below.
1 1–3
question.
2 4–6
question.
4 9–10
question.
(b) Evaluate the view that a price ceiling is an ineffective policy to protect
low-income consumers. [15]

• definition of price ceiling
• diagram to show the impact of a price ceiling on the market for a necessity
good
• explanation of how a price ceiling leads to excess demand/shortage for a
necessity good and leads to problems like queues, parallel markets and
corruption
• examples of the use of price ceilings
• synthesis or evaluation.
Evaluation may include: the benefits a price ceiling might bring to low-income
consumers if the ceiling is managed through an effective alternative rationing
system and how some consumers will gain significantly through a price ceiling
even if others lose.
Assessment Criteria
Part (b) 15 marks
Level Marks
0 0
descriptors below.
1 1–5
question.
2 6–9
question.
4 13–15
question.
Section B
Macroeconomics
3. (a) Explain how in the Keynesian AD/AS model an economy can be in equilibrium
while producing below the full employment level of output. [10]

• definitions of equilibrium, full employment level of output
• diagram to show the Keynesian model of an economy at equilibrium income
below the full employment level of output
• explanation of how an economy can be in equilibrium income below full
employment when AD falls, leading to a deflationary gap when wage and price
rigidity keep the economy below the full employment level of output
• examples of when economies have experienced equilibrium income below the
full employment level of output.
Assessment Criteria
Part (a) 10 marks
Level Marks
0 0
descriptors below.
1 1–3
question.
2 4–6
question.
4 9–10
question.
(b) Evaluate the view that fiscal policy is the best way to reduce unemployment. [15]

• definitions of fiscal policy, unemployment
• diagram to show how fiscal policy leads to a fall in unemployment
• explanation of how expansionary fiscal policy leads to a rise in AD and real
GDP, leading to a fall in unemployment as more workers are needed in
production
• examples of where fiscal policy has been used to reduce unemployment
Evaluation may include: consideration of the problems of using fiscal policy to

reduce unemployment such as; budget deficit, inflation and it is not as effective at
reducing unemployment that is not demand-deficient (structural, frictional). There
could also be coverage of alternative policies such as monetary and supply side.
A maximum of [12] should be awarded if a candidate has not considered an

alternative policy.
Assessment Criteria
Part (b) 15 marks
Level Marks
0 0
descriptors below.
1 1–5
question.
2 6–9
question.
4 13–15
question.
4. (a) Explain how economic growth might reduce the level of absolute poverty in
a country. [10]

• definitions of economic growth, absolute poverty
• diagram to show how economic growth leads to a rise in income which could
reduce poverty
• explanation of how economic growth might lead to a rise in household income,
which reduces absolute poverty
• examples of countries where economic growth has reduced absolute poverty.
NB Where a money value is given for absolute poverty there is flexibility on the
value. Anything around $2 a day is acceptable.
Assessment Criteria
Part (a) 10 marks
Level Marks
0 0
descriptors below.
1 1–3
question.
2 4–6
question.
4 9–10
question.
(b) Evaluate the view that progressive income tax is the best way to increase equity
in an economy. [15]

• definitions of progressive income tax, equity
• diagram to show the impact of progressive income tax on equity
• explanation of how progressive income tax increases equity by taxing high-
income people at a higher rate, which provides more funds for public services
that can increase equity, such as education and healthcare
• examples of progressive taxation to increase equity
Evaluation may include: consideration of the problems of applying progressive

taxation if high-income people avoid paying or people do not expand their
businesses and how this can reduce opportunities for people of low incomes.
Answers might also include consideration of alternative policies to increase equity
such as increased transfer payments and improvements to the functioning of the
labour market.
A maximum of [12] should be awarded if a candidate has not considered an

alternative policy.
Assessment Criteria
Part (b) 15 marks
Level Marks
0 0
descriptors below.
1 1–5
question.
2 6–9
question.
4 13–15
question.
criminal offense.
license/.
Economics
Standard level
Paper 1
Friday 7 May 2021 (afternoon)
1 hour 30 minutes
2221 – 5111
–2– 2221 – 5111
Section A
Microeconomics
1. (a) Explain how the price mechanism reallocates resources when there is a decrease in
the supply of a good. [10]
(b) Evaluate the view that the threat to sustainability, caused by economic activity requiring
the use of fossil fuels, is best addressed through the use of carbon taxes. [15]
2. (a) Explain two reasons why a government might impose indirect taxes. [10]
(b) Discuss the view that price floors are more effective than subsidies in providing
assistance to producers in the agricultural sector. [15]
Section B
Macroeconomics
3. (a) Explain how the size of the circular flow of income in an economy is likely to be affected
by a decrease in the rate of interest. [10]
(b) Evaluate the effectiveness of fiscal policy as a means of achieving long-term

economic growth. [15]
4. (a) Explain how aggregate demand is likely to be affected by an increase in the wealth
of consumers and an increase in business confidence. [10]
(b) Evaluate the effectiveness of monetary policy in reducing an economy’s

rate of unemployment. [15]

Markscheme
May 2021
Economics
Standard level
Paper 1
11 pages
criminal offense.
license/.
Section A
Microeconomics
1. (a) Explain how the price mechanism reallocates resources when there is a
decrease in the supply of a good. [10]

 definitions of price mechanism, resources, supply
 diagram to show how a decrease in supply leads to a reallocation of resources
 explanation of how a decrease in supply shifts the supply curve left, creates
excess demand at the original price, incentivizes producers to increase price,
provides signals and incentives to consumers to change their consumption
patterns, switches demand to less expensive goods and causes a reallocation
of resources
 examples of goods where a decrease in supply has affected the allocation of
resources.
Assessment Criteria
Part (a) 10 marks
Level Marks
0 The work does not meet a standard described by the 0
descriptors below.
1 There is little understanding of the specific demands of the 1–3
question.
2 There is some understanding of the specific demands of the 4–6
question.
4 There is clear understanding of the specific demands of the 9–10
question.
(b) Evaluate the view that the threat to sustainability, caused by economic activity
requiring the use of fossil fuels, is best addressed through the use of carbon
taxes. [15]

 definitions of sustainability, carbon taxes
 diagram to illustrate the use of carbon taxes, showing a shift of the supply
curve to the left, reflecting the value of the negative externality (or any other
relevant diagram)
 explanation that the use of fossil fuels generates negative externalities in
production and/or consumption and therefore poses a threat to sustainability,
and that this can be addressed through carbon taxes, which make the polluter
pay
 examples of the use of carbon taxes and fossil fuels
 synthesis or evaluation.
Evaluation may include: possible advantages and disadvantages of the use of

carbon taxes, consideration of other available policy options such as cap and
trade schemes and funding for clean technologies, assessment of “best”.
A maximum of [12] should be awarded if there is not at least some reference to

other policies.
Assessment Criteria
Part (b) 15 marks
Level Marks
descriptors below.
question.
question.
question.
2. (a) Explain two reasons why a government might impose indirect taxes. [10]

 definition of indirect taxes
 diagram to illustrate the imposition of an indirect tax, with the supply curve
shifting left, price increasing and quantity demanded decreasing
 explanation that indirect taxes may be imposed to raise tax revenue, to
discourage the consumption of demerit goods, to correct negative externalities
in production, trade protection, to redistribute income, eg excise taxes on
luxury goods
 examples of goods on which indirect taxes are imposed.
A maximum of [6] should be awarded if only one reason is explained.
Assessment Criteria
Part (a) 10 marks
Level Marks
descriptors below.
question.
question.
question.
(b) Discuss the view that price floors are more effective than subsidies in providing
assistance to producers in the agricultural sector. [15]

 definitions of price floors, subsidies
 diagrams to illustrate the use of a price floor and a subsidy
 explanation of how price floors and subsidies can both provide assistance to
producers in the agricultural sector
 examples of the use of price floors and/or subsidies in practice
 synthesis or evaluation (discuss).
Discussion may include: the possible consequences of price floors, eg surpluses,

inefficient allocation of resources and welfare impacts; the possible
consequences of subsidies, eg on consumers, producers or the government;
consideration of “more effective”.
A maximum of [12] should be awarded if there is evaluation but no consideration

of “more effective”.
Assessment Criteria
Part (b) 15 marks
Level Marks
descriptors below.
question.
question.
question.
Section B
Macroeconomics
3. (a) Explain how the size of the circular flow of income in an economy is likely to be
affected by a decrease in the rate of interest. [10]

 definitions of circular flow of income, rate of interest
 diagram of the circular flow of income, showing a decrease in saving and an
increase in investment or use of an AD/AS diagram to explain the impact of
the decrease in the rate of interest on the circular flow of income
 explanation that a decrease in the rate of interest is likely to reduce saving,
and increase business investment; hence a decrease in a leakage and an
increase in an injection will exert an upward impact on income and output and
increase the size of the circular flow of income
 examples of changes in the rate of interest affecting the circular flow of income
in practice, such as the reduction of interest rates to near 0% in many
countries at present.
Assessment Criteria
Part (a) 10 marks
Level Marks
descriptors below.
question.
question.
question.
(b) Evaluate the effectiveness of fiscal policy as a means of achieving long-term


 definitions of long-term economic growth, fiscal policy
 diagram to show LRAS and/or the production possibility curve shifting to the
right/outwards
 explanation of how fiscal policy can promote long-term economic growth
through government spending on infrastructure, technology, R&D and human
capital, tax reductions/incentives for firms to invest
 examples of the use of fiscal policy to promote long-term economic growth
Evaluation may include: the various advantages and disadvantages of fiscal

policy, including both the demand- and supply-side effects on the economy,
consideration of alternative (supply-side and monetary) policies.
Assessment Criteria
Part (b) 15 marks
Level Marks
descriptors below.
question.
question.
question.
4. (a) Explain how aggregate demand is likely to be affected by an increase in the

wealth of consumers and an increase in business confidence. [10]

 definitions of aggregate demand, wealth, business confidence
 diagram to show the AD curve shifting to the right
 explanation that an increase in the wealth of consumers may have a positive
wealth effect whereby consumption increases as consumers feel richer and
are more willing to spend, or can borrow more on the basis of their greater
wealth; that an increase in business confidence in relation to being more
optimistic about future sales and profits is likely to increase investment; and
that the increase in C and I will increase AD
 examples of an increase in consumers’ wealth and/or business confidence
increasing AD in practice.
Award a maximum of [6] if only wealth or only business confidence is addressed.
Assessment Criteria
Part (a) 10 marks
Level Marks
descriptors below.
question.
question.
question.
(b) Evaluate the effectiveness of monetary policy in reducing an economy’s rate of

unemployment. [15]
 definitions of monetary policy, rate of unemployment
 diagram to show AD shifting to the right as a result of expansionary monetary
policy
 explanation of how expansionary monetary policy may help to reduce cyclical
(demand-deficient) unemployment in terms of the mechanisms by which lower
interest rates increase AD via the effect on consumption, investment and/or
net exports
 examples of expansionary monetary policy being used in practice
Evaluation may include: the implications of monetary policy in terms of the ability
to implement changes in interest rates relatively quickly and incrementally, the
limited political constraints, the possible conflicts with other objectives of
economic policy, time lags, the independence of the central bank, the
ineffectiveness of monetary policy in relation to structural unemployment / the
natural rate of unemployment, its possible ineffectiveness during a recession, the
possibility that alternative policies (eg supply-side policy) may be more effective.
Assessment Criteria
Part (b) 15 marks
Level Marks
descriptors below.
question.
question.
question.
criminal offense.
license/.
Economics
Standard level
Paper 1
Friday 7 May 2021 (afternoon)
1 hour 30 minutes
2221 – 5112
–2– 2221 – 5112
Section A
Microeconomics
1. (a) Explain why the price elasticity of demand for primary commodities is often relatively
low while the price elasticity of demand for manufactured goods is often relatively high. [10]
(b) Discuss the importance of price elasticity of demand and cross price elasticity of
demand for a firm’s decision making. [15]
2. (a) Explain the concept of positive externalities of consumption. [10]
(b) Discuss the view that tradable permits are more effective than taxes in
reducing pollution. [15]
Section B
Macroeconomics
3. (a) Explain why cyclical (demand-deficient) unemployment may occur in an economy. [10]
(b) Evaluate the effectiveness of interventionist supply-side policies in reducing the level of
unemployment in an economy. [15]
4. (a) Explain how expansionary monetary policy could be used to close a deflationary
(recessionary) gap. [10]
(b) Evaluate the effectiveness of monetary policy in reducing an economy’s rate of inflation. [15]

Markscheme
May 2021
Economics
Standard level
Paper 1
11 pages
criminal offense.
license/.
Section A
Microeconomics
1. (a) Explain why the price elasticity of demand for primary commodities is often
relatively low while the price elasticity of demand for manufactured goods is often
relatively high. [10]

 definitions of PED, primary commodities, manufactured goods
 diagram(s) to show low (inelastic) demand for primary commodities and high
(elastic) demand for manufactured goods
 explanation of low PED for primary commodities and high PED for
manufactured goods in terms of the number and closeness of substitutes,
degree of necessity and proportion of income spent on the good
 examples of primary commodities with a relatively low PED and manufactured
goods with a relatively high PED.
Assessment Criteria
Part (a) 10 marks
Level Marks
descriptors below.
question.
question.
question.
(b) Discuss the importance of price elasticity of demand and cross price elasticity of
demand for a firm’s decision making. [15]

 definitions of PED and XED
 diagram(s) to illustrate PED and XED
 explanation of the importance of PED estimates in terms of the impact on total
revenue of price changes and the importance of XED estimates in terms of
changes in the price of substitutes and complements
 examples in practice of the importance of PED for business revenue when
price changes and the importance of XED when there are changes in the price
of substitutes or complements
Discussion may include: the difficulty of obtaining reliable estimates in reality due
to imperfect information, past data not necessarily being a guide to the future, the
unreliability of consumer survey techniques, the problem of estimating variables
that are not constant and the impact of factors other than the price of the good
and the price of other goods.
Award a maximum of [9] if only PED or only XED is addressed.
Assessment Criteria
Part (b) 15 marks
Level Marks
descriptors below.
question.
question.
question.
2. (a) Explain the concept of positive externalities of consumption. [10]

 definitions of externalities, positive externalities of consumption
 diagram to illustrate positive externalities of consumption
 explanation of positive externalities of consumption in terms of MSB being
greater than MPB
 examples of positive externalities of consumption in practice.
Assessment Criteria
Part (a) 10 marks
Level Marks
descriptors below.
question.
question.
question.
(b) Discuss the view that tradable permits are more effective than taxes in reducing
pollution. [15]

 definitions of tradable permits, taxes
 supply and demand diagram(s) to show the use of tradable permits, and/or
supply shifting left due to taxes, to tackle pollution
 explanation that both methods represent market-based policies, tradable
permits working via set allowances to pollute with implications for profits for
over- or under-shooting, and taxes working via the effect on supply, price and
quantity
 examples of the use of taxes and/or tradable permits in practice
Discussion may include: The advantage of tradeable permits over taxation is they
create an incentive for firms to develop systems to reduce pollution and taxes just
penalize all producers in a market and add to costs and the final selling price to
households. The weakness of tradeable permits is the system is complicated to set
up and administer and taxes are easier for a government to use.
Award a maximum of [9] if only tradeable permits or only tax is addressed.
Assessment Criteria
Part (b) 15 marks
Level Marks
descriptors below.
question.
question.
question.
Section B
Macroeconomics
3. (a) Explain why cyclical (demand-deficient) unemployment may occur in an

economy. [10]

 definition of unemployment, cyclical (demand-deficient) unemployment
 diagram to show cyclical (demand-deficient) unemployment
 explanation of how cyclical (demand-deficient) unemployment is caused by a
fall in AD, which may arise from a fall in any or all of the components of AD
(C  I  G  X  M)
 examples of cyclical (demand-deficient) unemployment occurring in practice.
Assessment Criteria
Part (a) 10 marks
Level Marks
descriptors below.
question.
question.
question.
(b) Evaluate the effectiveness of interventionist supply-side policies in reducing the

level of unemployment in an economy. [15]

 definitions of unemployment, interventionist supply-side policies
 diagram showing LRAS shifting right and/or supply of labour increasing in a
labour market diagram; candidates may also show AD shifting right as a
short-term effect of supply-side policies
 explanation that interventionist supply-side policies increase the quantity and
quality of factors of production and thus increase the productive capacity of
the economy and can be targeted at particular sectors of the economy; this
may help to reduce structural unemployment in the long term and also
contribute to the reduction of demand-deficient unemployment in the short
term through the impact on AD
 examples of interventionist supply-side policies helping to reduce
unemployment in practice
Evaluation may include: the importance of the type of unemployment (eg

demand-deficient unemployment may be more directly reduced through
expansionary monetary and fiscal policies); consideration of the effectiveness of
supply-side policies (eg in terms of time lags, the ability to create employment,
the impact on the government’s budget deficit, opportunity cost); government
investment in new technologies (eg robotics/artificial intelligence) may lead to
displacement of labour.
Assessment Criteria
Part (b) 15 marks
Level Marks
descriptors below.
question.
question.
question.
4. (a) Explain how expansionary monetary policy could be used to close a deflationary
(recessionary) gap. [10]

 definitions of monetary policy, expansionary monetary policy, deflationary gap
 diagrams to show a deflationary gap and how it would be closed by a shift of AD to the
right and/or increasing money supply that leads to decrease in the interest rates
 explanation that by increasing the money supply/decreasing the interest rate the central
bank stimulates consumption, investment and/or net export, leading to an increase in AD
and return of the real GDP to its potential level
 examples of countries that have used expansionary monetary policy to close a
deflationary gap.
Assessment Criteria
Part (a) 10 marks
Level Marks
descriptors below.
question.
question.
question.
(b) Evaluate the effectiveness of monetary policy in reducing an economy’s rate of

inflation. [15]

 definitions of monetary policy, inflation
 diagram to show AD shifting left as a result of contractionary monetary policy
 explanation of how contractionary monetary policy may help to reduce
demand-pull inflation in terms of the mechanisms by which higher interest
rates reduce AD via the effect on consumption, investment and/or net exports
 examples of contractionary monetary policy being used in practice or
examples of inflation targeting
Evaluation may include: the implications of monetary policy in terms of the ability
to implement changes in interest rates relatively quickly through the banking
system, the possible conflicts with other objectives of economic policy, such as
growth / unemployment, time lags, the independence of the central bank; the
ineffectiveness of monetary policy in relation to cost-push inflation; the possibility
that alternative policies (eg supply-side policies) may be more effective.
Assessment Criteria
Part (b) 15 marks
Level Marks
descriptors below.
question.
question.
question.
No part of this product may be reproduced in any form or by any electronic or
mechanical means, including information storage and retrieval systems, without written
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Additionally, the license tied with this product prohibits commercial use of any selected
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de apoyo académico o ayuda para el estudio, colegios preparatorios, desarrolladores
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y estará sujeto al otorgamiento previo de una licencia escrita por parte del IB. En este
enlace encontrará más información sobre cómo solicitar una licencia:
Economics
Standard level
Paper 1
Thursday 12 November 2020 (afternoon)
1 hour 30 minutes
8820 – 5110
–2– 8820 – 5110
Section A
Microeconomics
1. (a) Explain how production that causes pollution leads to market failure. [10]
(b) Discuss whether government regulation is the most effective way to deal with
negative externalities of consumption. [15]
2. (a) Explain the impact of a price floor on market outcomes. [10]
(b) Discuss the consequences for different stakeholders when the government imposes
a price ceiling on a market. [15]
Section B
Macroeconomics
3. (a) Explain how a decrease in business confidence can affect the real GDP of an
economy that is producing below the full employment level of output. [10]
(b) Evaluate the view that a decrease in aggregate demand would always be deflationary. [15]
4. (a) Explain how government expenditures are used to promote equity in the distribution
of income. [10]
(b) Evaluate the impact on efficiency in the allocation of resources when the government
uses taxation to promote equity. [15]

Markscheme
November 2020
Economics
Standard level
Paper 1
10 pages

De plus, la licence associée à ce produit interdit toute utilisation commerciale de

tout fichier ou extrait sélectionné dans ce produit. L’utilisation par des tiers, y compris,
sans toutefois s’y limiter, des éditeurs, des professeurs particuliers, des services de
tutorat ou d’aide aux études, des établissements de préparation à l’enseignement
supérieur, des fournisseurs de services de planification des programmes
d’études, des gestionnaires de plateformes pédagogiques en ligne, et des
développeurs d’applications, n’est pas autorisée et est soumise au consentement écrit
préalable de l’IB par l’intermédiaire d’une licence. Pour plus d’informations sur la
procédure à suivre pour demander une licence, rendez-vous à l’adresse suivante :
—lo que incluye, a título enunciativo, editoriales, profesores particulares, servicios
de apoyo académico o ayuda para el estudio, colegios preparatorios, desarrolladores
de aplicaciones y entidades que presten servicios de planificación curricular u
ofrezcan recursos para docentes mediante plataformas digitales— no está permitido
y estará sujeto al otorgamiento previo de una licencia escrita por parte del IB. En este
enlace encontrará más información sobre cómo solicitar una licencia:
marks as indicated.
Section A
Microeconomics
1. (a) Explain how production that causes pollution leads to market failure. [10]

• definition of market failure, negative production externalities
• diagram to show an over-allocation of resources where MSC is greater than MPC
• explanation that pollution causes a negative externality of production and over-production
• examples of where pollution leads to market failure.
NB Where a diagram showing negative externalities of consumption is used, a maximum of

level 2 should be awarded.
Assessment Criteria
Part (a) 10 marks
Level Marks
0 0
descriptors below.
1 1–3
question.
2 4–6
question.
4 9–10
question.
(b) Discuss whether government regulation is the most effective way to deal with
negative externalities of consumption. [15]

• definition of government regulation, negative externalities of consumption
• diagram to show how government regulation reduces the problem of negative
consumption externalities
• explanation that government regulation can reduce the demand for the product, shifting
the MPB curve closer towards the MSB curve and the socially optimum output or
decrease in supply if a government regulation leads to a fall in output
• examples of where government regulations have been used to control negative
externalities of consumption
Discussion may include: the effectiveness of government regulation including the policing of
regulation, consideration of alternative policies like taxation, where the tax revenue raised
can be used to pay for some of the of the consequences of the negative externality.
NB To reach level 4, students need to consider an alternative approach to regulation.
Assessment Criteria
Part (b) 15 marks
Level Marks
0 0
descriptors below.
1 1–5
question.
2 6–9
question.
4 13–15
question.
2. (a) Explain the impact of a price floor on market outcomes. [10]

• definition of price floor
• diagram to show the effect of a price floor
• explanation that a price floor can lead to excess supply in the market, inefficient resource
allocation, government measures to dispose of a surplus and welfare impacts
• examples of a price floor being used.
NB A price floor to reduce consumption of a demerit good can be fully rewarded if the candidate
approaches the question in this way.
Assessment Criteria
Part (a) 10 marks
Level Marks
0 0
descriptors below.
1 1–3
question.
2 4–6
question.
4 9–10
question.
(b) Discuss the consequences for different stakeholders when the government
imposes a price ceiling on a market. [15]

• definitions of stakeholders, price ceiling
• diagram to show the effect of a price ceiling
• explanation of how a price ceiling can affect consumers, producers and the government.
Some consumers will experience a lower price and some will not be able to access the
good, producers will experience a fall in revenues and the government will have the cost
of administering the price ceiling
• examples of where price ceilings have been used
Discussion may include: consideration of how the product will be allocated and
whether those in need are able to access the good after the imposition of a price
ceiling, the effect on the quality of the product, the likelihood of underground (parallel)
markets developing.
Assessment Criteria
Part (b) 15 marks
Level Marks
0 0
descriptors below.
1 1–5
question.
2 6–9
question.
4 13–15
question.
Section B
Macroeconomics
3. (a) Explain how a decrease in business confidence can affect the real GDP of an
economy that is producing below the full employment level of output. [10]

• definitions of real GDP, business confidence, full employment level of output
• diagram to show how a decrease in business confidence will shift AD to the left, resulting
in a decrease in real GDP
• explanation that business confidence is a determinant of investment and a decrease in
confidence will lead to a decrease in AD and a decrease in real GDP
• examples of situations where business confidence has fallen.
Assessment Criteria
Part (a) 10 marks
Level Marks
0 0
descriptors below.
1 1–3
question.
2 4–6
question.
4 9–10
question.
(b) Evaluate the view that a decrease in aggregate demand would always be deflationary. [15]

• definitions of aggregate demand, deflationary
• diagram to show a fall in AD leading to a fall in the average price level in the neo
classical/monetarist model
• explanation that in the neo classical/monetarist model a fall in AD would be deflationary
because a fall in AD leads to a new equilibrium income at a lower average price level and
real GDP
• examples of economies that have experienced a decrease in AD, which is deflationary
Evaluation may include: When AD falls in the Keynesian model and the economy is below
full employment the average price level does not fall because wages and costs tend not to
fall.
NB Candidates can approach this question in terms of deflationary conditions in the

economy or as deflation.
Assessment Criteria
Part (b) 15 marks
Level Marks
0 0
descriptors below.
1 1–5
question.
2 6–9
question.
4 13–15
question.
4. (a) Explain how government expenditures are used to promote equity in the distribution
of income. [10]

• definitions of government expenditure, equity, distribution of income
• diagram to show two Lorenz curves showing different degrees of inequality
• explanation that governments can provide or subsidize merit goods such as education
and health care to benefit those on low incomes and also increase transfer payments
• examples of government expenditure measures to promote equity.
Assessment Criteria
Part (a) 10 marks
Level Marks
0 0
descriptors below.
1 1–3
question.
2 4–6
question.
4 9–10
question.
(b) Evaluate the impact on efficiency in the allocation of resources when the government
uses taxation to promote equity. [15]

• definitions of allocative efficiency, taxation, equity
• a diagram is not required for this question
• explanation that using taxation can promote equity in the distribution of income but this
can lead to negative effects on efficiency. An increase in progressive tax may reduce the
incentive to work, reduce FDI in a country and if firms’ costs increase because of higher
tax their prices might rise
• examples of where taxation has been used to promote equity
Evaluation may include: consideration of the extent to which there is a trade-off between
equity and efficiency and why an attempt to improve equity can have positive and negative
effects on efficiency. Evaluation can consider the impact on incentives to work and whether
higher taxation does actually lead to disincentives.
Assessment Criteria
Part (b) 15 marks
Level Marks
0 0
descriptors below.
1 1–5
question.
2 6–9
question.
4 13–15
question.
http://www.ibo.org/contact-the-ib/media-inquiries/for-publishers/guidance-for-third-party-
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De plus, la licence associée à ce produit interdit toute utilisation commerciale de tout

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l’IB par l’intermédiaire d’une licence. Pour plus d’informations sur la procédure à suivre
pour demander une licence, rendez-vous à l’adresse http://www.ibo.org/fr/contact-the-
ib/media-inquiries/for-publishers/guidance-for-third-party-publishers-and-providers/how-
to-apply-for-a-license.
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apoyo académico o ayuda para el estudio, colegios preparatorios, desarrolladores de
aplicaciones y entidades que presten servicios de planificación curricular u ofrezcan
recursos para docentes mediante plataformas digitales— no está permitido y estará
sujeto al otorgamiento previo de una licencia escrita por parte del IB. En este enlace
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contact-the-ib/media-inquiries/for-publishers/guidance-for-third-party-publishers-and-
providers/how-to-apply-for-a-license.
N19/3/ECONO/SP1/ENG/TZ0/XX
Economics
Standard level
Paper 1
Wednesday 6 November 2019 (afternoon)
1 hour 30 minutes
yyDo not open this examination paper until instructed to do so.
yyYou are not permitted access to any calculator for this paper.
yySection A: a nswer one question.
yySection B: a nswer one question.
yyUse fully labelled diagrams and references to examples where appropriate.
yyThe maximum mark for this examination paper is [50 marks].
8819 – 5110
–2– N19/3/ECONO/SP1/ENG/TZ0/XX
Section A
Microeconomics
1. (a) Explain two reasons why the demand for manufactured goods might be price elastic. [10]
(b) Evaluate the importance of cross price elasticity of demand for a business selling a
good if the price of a related good increases. [15]
2. (a) Explain the view that the best allocation of resources occurs when consumer surplus
and producer surplus are maximized. [10]
(b) Discuss the implications of the direct provision of public goods by a government. [15]
–3– N19/3/ECONO/SP1/ENG/TZ0/XX
Section B
Macroeconomics
3. (a) Explain why a reduction in interest rates might lead to an increase in

aggregate demand. [10]
(b) Evaluate the view that expansionary monetary policy is the most effective way to
achieve economic growth. [15]
4. (a) Explain, using a production possibilities curve (PPC) diagram, an increase in the actual
output of an economy. [10]
(b) Discuss the view that economic growth always leads to a rise in living standards. [15]

Markscheme
November 2019
Economics
Standard level
Paper 1
10 pages

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marks as indicated.
Section A
Microeconomics
1. (a) Explain two reasons why the demand for manufactured goods might be
price elastic. [10]

• definitions of PED, price elastic, demand
• diagram to show a relatively elastic demand curve, elastic section on a demand curve
• explanation of two determinants of the elastic demand of manufactured goods, including:
the number and closeness of substitutes, the degree of luxury/necessity, time and the
proportion of income spent on the good
• examples of manufactured goods with a relatively price elastic demand.
NB Candidates who only explain one reason should not be awarded marks beyond level 2.
Assessment Criteria
Part (a) 10 marks
Level Marks
0 0
descriptors below.
1 1–3
question.
2 4–6
question.
(b) Evaluate the importance of cross price elasticity of demand for a business selling a good if
the price of a related good increases. [15]

• definition of cross price elasticity of demand (XED)
• diagram to show the significance of XED on the shift in demand that results from any
change in price
• explanation of the impact of XED on businesses if the price of complements and
substitutes for a good they produce changes in terms of price, quantity, revenue and profit
• examples of products that have substitutes and complements
Evaluation may include: the relative size of XED and the extent to which the revenue and
profit will rise or fall; the assumption that other factors affecting demand remain constant and
that XED is difficult to predict and measure.
Assessment Criteria
Part (b) 15 marks
Level Marks
0 0
descriptors below.
1 1–5
question.
2 6–9
question.
2. (a) Explain the view that the best allocation of resources occurs when consumer surplus and
producer surplus are maximized. [10]

• definitions of allocation of resources, consumer surplus, producer surplus
• diagram to show consumer and producer surplus being maximized
• explanation that resources are being used in the most efficient way when demand equals
supply and the consumer surplus and producer surplus are maximized
• examples of goods and services that ensure resources are allocated efficiently. Any
market example is acceptable.
Assessment Criteria
Part (a) 10 marks
Level Marks
0 0
descriptors below.
1 1–3
question.
2 4–6
question.
(b) Discuss the implications of the direct provision of public goods by a government. [15]

• definition of public goods
• a diagram is not required
• explanation that the non-rivalrous and non-excludable characteristics of public goods
means they will not be provided by the free market and will need to be provided by the
government
• examples of public goods
Discussion may include: consideration of the nature of public goods and whether they
have to be provided by the government. The problems of providing public goods by the
government, such as the opportunity cost of government spending and inefficient
government provision.
Assessment Criteria
Part (b) 15 marks
Level Marks
0 0
descriptors below.
1 1–5
question.
2 6–9
question.
Section B
Macroeconomics
3. (a) Explain why a reduction in interest rates might lead to an increase in

aggregate demand. [10]

• definitions of aggregate demand, interest rates
• diagram to show how a reduction in interest rates increases aggregate demand
• explanation that a reduction in interest rates increases consumption and investment,
leading to an increase in aggregate demand
• examples of how a reduction in interest rates increases aggregate demand in practice
and/or of countries where reduced interest rates have increased aggregate demand.
Assessment Criteria
Part (a) 10 marks
Level Marks
0 0
descriptors below.
1 1–3
question.
2 4–6
question.
(b) Evaluate the view that expansionary monetary policy is the most effective way to achieve

• definitions of monetary policy, economic growth
• diagram to show the effect of expansionary monetary policy on economic growth
• explanation of expansionary monetary policy by reducing interest rates will increase
consumption and investment, leading to a rise in aggregate demand and therefore
economic growth
• examples of the impact of expansionary monetary policy on economic growth
• synthesis and evaluation.
Evaluation may include: consideration of the problems of expansionary monetary policy,

such as inflation, that consumption and investment may not increase if business and
consumer confidence are low, and the time lags associated with interest rate changes.
Responses could also cover alternative policies to achieve economic growth, such as fiscal
policy or supply-side policy.
Assessment Criteria
Part (b) 15 marks
Level Marks
0 0
descriptors below.
1 1–5
question.
2 6–9
question.
4. (a) Explain, using a production possibilities curve (PPC) diagram, an increase in the actual
output of an economy. [10]

• definitions of production possibilities curve, actual output
• PPC diagram to show an increase in actual output
• explanation that an increase in actual output results from increased utilization of
resources, showing a movement towards the production possibility curve
• example of actual growth in specific countries.
Assessment Criteria
Part (a) 10 marks
Level Marks
0 0
descriptors below.
1 1–3
question.
2 4–6
question.
(b) Discuss the view that economic growth always leads to a rise in living standards. [15]

• definitions of economic growth, living standards
• PPC diagram or AD/AS diagram to depict economic growth
• explanation of why economic growth leads to a rise in living standards because, for
example, of rising incomes and employment
• example of economic growth leading to changes in living standards
Discussion may include: consideration that economic growth may not always lead to a rise in
living standards because of factors such as environmental costs, the distribution of income,
inflation and how the increased use of capital intensive technology may lead to
unemployment.
Assessment Criteria
Part (b) 15 marks
Level Marks
0 0
descriptors below.
1 1–5
question.
2 6–9
question.

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© International Baccalaureate Organization 2022

© Organisation du Baccalauréat International 2022

© Organización del Bachillerato Internacional, 2022

Wednesday 26 October 2022 (afternoon)

Answer one question.

1. (a) Explain two forms of government intervention in markets. [10]

2. (a) Explain two goals of fiscal policy. [10]

(b) Using real-world examples, discuss the consequences for an economy of an

© International Baccalaureate Organization 2022

© Organisation du Baccalauréat International 2022

© Organización del Bachillerato Internacional, 2022

1. (a) Explain two forms of government intervention in markets. [10]

Answers may include:

A maximum of [6] should be awarded if only one form of government intervention

Marks Level descriptor

Answers may include:

Marks Level descriptor

2. (a) Explain two goals of fiscal policy. [10]

Answers may include:

Marks Level descriptor

Answers may include:

Marks Level descriptor

Answers may include:

A maximum of [6] should be awarded if only one cause of an appreciation is explained.

Marks Level descriptor

(b) Using real-world examples, discuss the consequences for an economy of an

Answers may include:

Marks Level descriptor

© Organisation du Baccalauréat International 2022

© Organización del Bachillerato Internacional, 2022

Monday 9 May 2022 (afternoon)

Answer one question.

1. (a) Governments intervene in markets to support firms and to promote equity.

© International Baccalaureate Organization 2022

© Organisation du Baccalauréat International 2022

© Organización del Bachillerato Internacional, 2022

1. (a) Governments intervene in markets to support firms and to promote equity.

Answers may include:

A maximum of [6] should be awarded if only one policy/objective is addressed.

Part (a) 10 marks

Marks Level descriptor

Answers may include:

A maximum of [9] should be awarded if only one stakeholder is mentioned.

Part (b) 15 marks

Marks Level descriptor

Answers may include:

Part (a) 10 marks

Marks Level descriptor

Answers may include:

As the question requires an evaluation of the “most effective way”, a maximum of

Part (b) 15 marks

Marks Level descriptor

Answers may include:

A maximum of [6] should be awarded if only economic growth or economic

Part (a) 10 marks

Marks Level descriptor

Answers may include:

Examiners should be flexible in the interpretation of the difference between

A maximum of [9] should be awarded if only economic growth or economic

Part (b) 15 marks

Marks Level descriptor

© Organisation du Baccalauréat International 2021

© Organización del Bachillerato Internacional, 2021

1. (a) Explain two forms of government intervention in markets. [10]

2. (a) Explain two goals of fiscal policy. [10]

1. (a) Governments intervene in markets to support firms and to promote equity.

2. (a) Explain the concept of positive externalities of consumption. [10]