M13/3/ECONO/HP1/ENG/TZ1/XX/M MARKSCHEME May 2013 ECONOMICS Higher Level Paper 1 17 pages –2– M13/3/ECONO/HP1/ENG/TZ1/XX/M This markscheme is confidential and for the exclusive use of examiners in this examination session. It is the property of the International Baccalaureate and must not be reproduced or distributed to any other person without the authorization of the IB Assessment Centre. –3– M13/3/ECONO/HP1/ENG/TZ1/XX/M In addition to the assessment criteria, use the paper-specific markscheme below. Award up to the maximum marks indicated. SECTION A Microeconomics 1. (a) Explain how welfare loss may result from monopoly power. [10 marks] Answers may include: • definitions of welfare loss, monopoly power, allocative efficiency market failure • theory of the firm: monopoly market structure explaining how price is higher and output lower due to barriers to entry, allowing loss of productive and allocative efficiency at profit maximising output • diagram to show the above, highlighting welfare (deadweight) loss under monopoly • examples of welfare loss under monopoly. Assessment Criteria Part (a) 10 marks Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined. There is very little knowledge of relevant economic theory. There are significant errors. 1–3 2 There is some understanding of the specific demands of the question. Some relevant economic terms are defined. There is some knowledge of relevant economic theory. There are some errors. 4–6 3 There is understanding of the specific demands of the question. 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. 7–8 4 There is clear understanding of the specific demands of the 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. 9–10 –4– M13/3/ECONO/HP1/ENG/TZ1/XX/M (b) Discuss the effectiveness of government policies (legislation and regulation) to reduce monopoly power. [15 marks] 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. Answers may include: • definitions of monopoly power and legislation (anti-monopoly, anti-collusion, merger prevention etc.) and regulation (lower prices and larger quantities for consumers, fair prices for natural monopolies) • theory of how a monopolist’s control of price or output might be reduced by legislation or regulation in the interests of the consumer • diagram to show a comparison of monopoly and perfect competition; diagram to illustrate price regulation showing monopoly charging a price which is equal to average cost • examples of legislation, regulation, and also other solutions such as nationalization, privatization and trade liberalization • synthesis and evaluation (discuss). Discussions may include: effectiveness of policies against the sources of monopoly power, eg reduction of legal barriers to entry, control of anti-competitive behaviour. Where natural monopoly occurs, restrictive policies might not be in the consumer’s interest. Government policies might be rendered less effective by globalization. Government policies might move a market from monopoly towards a market structure which gives rise to allocative efficiency. Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded. Opinions or conclusions should be presented clearly and should be supported by appropriate examples. –5– M13/3/ECONO/HP1/ENG/TZ1/XX/M Assessment Criteria Part (b) 15 marks Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined. There is very little knowledge of relevant economic theory. There are significant errors. 1–5 2 There is some understanding of the specific demands of the question. Some relevant economic terms are defined. There is some knowledge of relevant economic theory. There are some errors. 6–9 3 There is understanding of the specific demands of the question. 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 is an attempt at synthesis or evaluation. There are few errors. 10–12 4 There is clear understanding of the specific demands of the 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 is evidence of appropriate synthesis or evaluation. There are no significant errors. 13–15 –6– M13/3/ECONO/HP1/ENG/TZ1/XX/M 2. (a) Using diagrams, explain how the incidence of an indirect tax may be affected by the price elasticity of demand. [10 marks] Answers may include: • definitions of an indirect tax, price elasticity of demand, incidence of taxation • theory of how relative price elasticities influence the proportionate sharing of an indirect tax burden between producers and consumers • diagrams to show incidence of an indirect tax on consumers and producers for goods with elastic and inelastic demand curves, showing that the more elastic the demand, the greater the incidence on the producer, and vice versa • examples of goods with differing price elasticities of demand and the resulting differences in their incidence of taxation. –7– M13/3/ECONO/HP1/ENG/TZ1/XX/M Assessment Criteria Part (a) 10 marks Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined. There is very little knowledge of relevant economic theory. There are significant errors. 1–3 2 There is some understanding of the specific demands of the question. Some relevant economic terms are defined. There is some knowledge of relevant economic theory. There are some errors. 4–6 3 There is understanding of the specific demands of the question. 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. 7–8 4 There is clear understanding of the specific demands of the 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. 9–10 –8– M13/3/ECONO/HP1/ENG/TZ1/XX/M (b) To what extent might the problems of negative externalities of consumption be resolved by the use of indirect taxation? [15 marks] 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. Answers may include: • definitions of negative externalities of consumption, indirect taxation • theory of externalities with its implications for overconsumption/ under-pricing and the opportunity to attempt to correct misleading market signals through an indirect tax • diagrams to show a negative externality of consumption being abated by the use of indirect taxation • examples of (demerit) goods, with negative externalities of consumption, which are subject to indirect taxes • synthesis and evaluation (to what extent). Consideration of the merits of the statement may include: the difficulty of setting indirect taxes at the correct level to reduce the negative externality to the social optimum/redress specific damage. Candidates may choose to set this response in the context of market failure. Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded. Opinions or conclusions should be presented clearly and should be supported by appropriate examples. –9– M13/3/ECONO/HP1/ENG/TZ1/XX/M Assessment Criteria Part (b) 15 marks Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined. There is very little knowledge of relevant economic theory. There are significant errors. 1–5 2 There is some understanding of the specific demands of the question. Some relevant economic terms are defined. There is some knowledge of relevant economic theory. There are some errors. 6–9 3 There is understanding of the specific demands of the question. 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 is an attempt at synthesis or evaluation. There are few errors. 10–12 4 There is clear understanding of the specific demands of the 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 is evidence of appropriate synthesis or evaluation. There are no significant errors. 13–15 – 10 – M13/3/ECONO/HP1/ENG/TZ1/XX/M SECTION B Macroeconomics 3. (a) Explain why the market system may not result in an equitable distribution of income. [10 marks] Answers may include: • definitions of market system, equitable distribution of income • theory of why market systems may not result in an equitable distribution of income, for example private ownership of factors of production in the face of minimal intervention by the government may lead to unequal returns • diagram to show an indicator of income equality/inequality, ie a Lorenz Curve diagram or a diagram showing income distribution by quintiles, deciles etc • examples of economies with more unequal distribution of income, (eg Brazil), or less unequal distribution of income (eg Sweden). – 11 – M13/3/ECONO/HP1/ENG/TZ1/XX/M Assessment Criteria Part (a) 10 marks Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined. There is very little knowledge of relevant economic theory. There are significant errors. 1–3 2 There is some understanding of the specific demands of the question. Some relevant economic terms are defined. There is some knowledge of relevant economic theory. There are some errors. 4–6 3 There is understanding of the specific demands of the question. 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. 7–8 4 There is clear understanding of the specific demands of the 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. 9–10 – 12 – M13/3/ECONO/HP1/ENG/TZ1/XX/M (b) Evaluate government policies to promote equity in terms of their effects on efficiency in the allocation of resources. [15 marks] 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. Answers may include: • definitions of equity, efficiency in the allocation of resources • theory of how government policies (taxation, government expenditure on merit goods and subsidies and transfer payments) may promote equity but possibly reduce efficiency in the allocation of resources • diagrams to show indirect taxes and subsidies and their implications for efficiency in the allocation of resources • examples of government policies to promote greater income equality in particular countries and their effects on the achievement of efficiency • synthesis and evaluation. Evaluation may include: consideration of the trade off between equity and efficiency, and whether transfer payments and progressive taxation reduce incentives to work. Government provision of merit goods may be less efficient than private provision. The use of indirect taxes and/or subsidies may move the economy closer to, or further away from, the position of allocative efficiency. Poverty reduction and investment in human capital may be consistent with the achievement of both improved income equality and efficiency. Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded. Opinions or conclusions should be presented clearly and should be supported by appropriate examples. – 13 – M13/3/ECONO/HP1/ENG/TZ1/XX/M Assessment Criteria Part (b) 15 marks Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined. There is very little knowledge of relevant economic theory. There are significant errors. 1–5 2 There is some understanding of the specific demands of the question. Some relevant economic terms are defined. There is some knowledge of relevant economic theory. There are some errors. 6–9 3 There is understanding of the specific demands of the question. 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 is an attempt at synthesis or evaluation. There are few errors. 10–12 4 There is clear understanding of the specific demands of the 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 is evidence of appropriate synthesis or evaluation. There are no significant errors. 13–15 – 14 – M13/3/ECONO/HP1/ENG/TZ1/XX/M 4. (a) Explain how labour market reforms may be used to promote economic growth. [10 marks] Answers may include: • definitions of labour market reforms, economic growth • explanation of how making labour markets more flexible may lead to an increase in efficiency and economic growth • diagram to show the labour market (AD/AS or ADL/ASL) lending to economic growth • examples of labour market reforms, both interventionist and market-oriented, such as reducing unemployment benefits, reducing the power of labour unions and abolishing minimum wages, expenditure on education and training, introduction of minimum wages to increase participation rates, to increase consumption and promote economic growth. – 15 – M13/3/ECONO/HP1/ENG/TZ1/XX/M Assessment Criteria Part (a) 10 marks Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined. There is very little knowledge of relevant economic theory. There are significant errors. 1–3 2 There is some understanding of the specific demands of the question. Some relevant economic terms are defined. There is some knowledge of relevant economic theory. There are some errors. 4–6 3 There is understanding of the specific demands of the question. 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. 7–8 4 There is clear understanding of the specific demands of the 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. 9–10 – 16 – M13/3/ECONO/HP1/ENG/TZ1/XX/M (b) “Market-oriented supply-side policies will always be more effective in promoting economic growth than demand-side policies.” To what extent do you agree with this statement? [15 marks] 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. Answers may include: • definitions of market-oriented policies (as against interventionist policies), demand-side policies and economic growth • theory of Aggregate Demand and Aggregate Supply and how either may be used to increase real GDP • diagrams to show increased real GDP resulting from changes to AD and AS • examples of market-oriented supply-side policies and demand-side policies • synthesis and evaluation (to what extent). Consideration of the merits of the statement may include: discussion of the term effectiveness in the context of economics. Candidates may distinguish the effectiveness of each policy in the short run and the long run. Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded. Opinions or conclusions should be presented clearly and should be supported by appropriate examples. – 17 – M13/3/ECONO/HP1/ENG/TZ1/XX/M Assessment Criteria Part (b) 15 marks Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined. There is very little knowledge of relevant economic theory. There are significant errors. 1–5 2 There is some understanding of the specific demands of the question. Some relevant economic terms are defined. There is some knowledge of relevant economic theory. There are some errors. 6–9 3 There is understanding of the specific demands of the question. 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 is an attempt at synthesis or evaluation. There are few errors. 10–12 4 There is clear understanding of the specific demands of the 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 is evidence of appropriate synthesis or evaluation. There are no significant errors. 13–15 M13/3/ECONO/HP1/ENG/TZ2/XX/M MARKSCHEME May 2013 ECONOMICS Higher Level Paper 1 17 pages –2– M13/3/ECONO/HP1/ENG/TZ2/XX/M This markscheme is confidential and for the exclusive use of examiners in this examination session. It is the property of the International Baccalaureate and must not be reproduced or distributed to any other person without the authorization of the IB Assessment Centre. –3– M13/3/ECONO/HP1/ENG/TZ2/XX/M In addition to the assessment criteria, use the paper-specific markscheme below. Award up to the maximum marks indicated. SECTION A Microeconomics 1. (a) Distinguish between decreasing returns to scale and the law of diminishing returns. [10 marks] Answers may include: definitions of decreasing returns to scale and the law of diminishing returns theory of costs, particularly short run and long run, with reference to fixed and variable costs diagrams to show a long run average total costs curve with increasing, constant and decreasing returns to scale, and diminishing returns to one factor of production in the short run examples such as agricultural labour or natural monopoly. Allow access to Level 3 for students who can explain either one clearly. Assessment Criteria Part (a) 10 marks Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined. There is very little knowledge of relevant economic theory. There are significant errors. 1–3 2 There is some understanding of the specific demands of the question. Some relevant economic terms are defined. There is some knowledge of relevant economic theory. There are some errors. 4–6 3 There is understanding of the specific demands of the question. 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. 7–8 4 There is clear understanding of the specific demands of the question. Relevant economic terms are clearly defined. Relevant economic theory is clearly explained and applied. Where appropriate, diagrams are included and applied effectively. –4– M13/3/ECONO/HP1/ENG/TZ2/XX/M Where appropriate, examples are used effectively. There are no significant errors. 9–10 (b) Using diagrams, compare and contrast the market structure of monopoly with that of perfect competition. [15 marks] 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. Answers may include: definitions of monopoly, perfect competition theory of the firm, how both monopoly and perfect competition have their advantages and disadvantages in terms of efficiency, price and output diagram to show the possible market outcomes under monopoly and perfect competition examples of natural monopolies, agricultural markets synthesis and evaluation (compare and contrast). Factors considered may include: the effects on efficiency, welfare effects, price and output, research and development and economies of scale. Points of comparison could be that they both profit maximise and can both make abnormal profits in the short run. Candidates may obtain level 3 where they have discussed the two market structures in terms of their respective advantages and disadvantages. Level 4 is for those who compare and contrast. Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded. Opinions or conclusions should be presented clearly and should be supported by appropriate examples. –5– M13/3/ECONO/HP1/ENG/TZ2/XX/M Assessment Criteria Part (b) 15 marks Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined. There is very little knowledge of relevant economic theory. There are significant errors. 1–5 2 There is some understanding of the specific demands of the question. Some relevant economic terms are defined. There is some knowledge of relevant economic theory. There are some errors. 6–9 3 There is understanding of the specific demands of the question. 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 is an attempt at synthesis or evaluation. There are few errors. 10–12 4 There is clear understanding of the specific demands of the 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 is evidence of appropriate synthesis or evaluation. There are no significant errors. 13–15 –6– M13/3/ECONO/HP1/ENG/TZ2/XX/M 2. (a) Explain the factors which might influence the cross price elasticity of demand between different products. [10 marks] Answers may include: definitions of cross price elasticity of demand theory to include explanation of formula, significance of positive and negative coefficient of cross price elasticity. Emphasis is likely to be on complements and substitutes. diagrams to show markets where the change in price of one good influences demand for another good positively (substitutes) or negatively (complements) examples of substitutes, complements and unrelated goods. –7– M13/3/ECONO/HP1/ENG/TZ2/XX/M Assessment Criteria Part (a) 10 marks Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined. There is very little knowledge of relevant economic theory. There are significant errors. 1–3 2 There is some understanding of the specific demands of the question. Some relevant economic terms are defined. There is some knowledge of relevant economic theory. There are some errors. 4–6 3 There is understanding of the specific demands of the question. 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. 7–8 4 There is clear understanding of the specific demands of the 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. 9–10 –8– M13/3/ECONO/HP1/ENG/TZ2/XX/M (b) Examine the importance of income elasticity of demand for the producers of primary products, manufactured goods and services. [15 marks] 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. Answers may include: definitions of income elasticity of demand, primary products theory of the importance of income elasticity for producers of primary products, manufactured goods and services diagrams to show the effect of differing coefficients of income elasticity of demand examples of different types of primary products, manufactured goods and services synthesis and evaluation (examine). Examination may include: knowledge that a change in income will have differing effects on the three types of products specified in the question necessitating different strategies for the producers of these products, for example, diversification, value added. Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded. Opinions or conclusions should be presented clearly and should be supported by appropriate examples. –9– M13/3/ECONO/HP1/ENG/TZ2/XX/M Assessment Criteria Part (b) 15 marks Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined. There is very little knowledge of relevant economic theory. There are significant errors. 1–5 2 There is some understanding of the specific demands of the question. Some relevant economic terms are defined. There is some knowledge of relevant economic theory. There are some errors. 6–9 3 There is understanding of the specific demands of the question. 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 is an attempt at synthesis or evaluation. There are few errors. 10–12 4 There is clear understanding of the specific demands of the 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 is evidence of appropriate synthesis or evaluation. There are no significant errors. 13–15 – 10 – M13/3/ECONO/HP1/ENG/TZ2/XX/M SECTION B Macroeconomics 3. (a) Using a diagram, describe how expansionary monetary policy might be used to close a deflationary (recessionary) gap. [10 marks] Answers may include: definitions of expansionary monetary policy, deflationary (recessionary) gap theory of the mechanism through which expansionary policy can help close a deflationary gap diagram to show expansionary monetary policy shifting the AD curve with effects dependent on the shape of the AS curve (neoclassical/Keynesian) examples of policies which might be used such as reducing the rate of interest. – 11 – M13/3/ECONO/HP1/ENG/TZ2/XX/M Assessment Criteria Part (a) 10 marks Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined. There is very little knowledge of relevant economic theory. There are significant errors. 1–3 2 There is some understanding of the specific demands of the question. Some relevant economic terms are defined. There is some knowledge of relevant economic theory. There are some errors. 4–6 3 There is understanding of the specific demands of the question. 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. 7–8 4 There is clear understanding of the specific demands of the 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. 9–10 – 12 – M13/3/ECONO/HP1/ENG/TZ2/XX/M (b) Discuss why, in contrast to the monetarist/new classical model, an economy can remain stuck in a deflationary (recessionary) gap according to the Keynesian model. [15 marks] 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. Answers may include: definitions of monetarist/new classical model, deflationary (recessionary) gap, Keynesian model theory of why deflationary (recessionary) gaps can persist according to the Keynesian model whereas they cannot in the monetarist/new classical model diagrams to show monetarist model and Keynesian model examples such as Japan in the 1990s synthesis and evaluation (discuss). Discussion may include: the Keynesian argument that deflationary (recessionary) gaps persist because of the inability of wages and prices to fall and the Keynesian assumption that the AS curve has a long, horizontal section meaning that equilibrium GDP is lower than potential GDP. In the monetarist model, wages and prices are assumed to be flexible, allowing markets to clear thus maintaining full employment of resources. Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded. Opinions or conclusions should be presented clearly and should be supported by appropriate examples. – 13 – M13/3/ECONO/HP1/ENG/TZ2/XX/M Assessment Criteria Part (b) 15 marks Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined. There is very little knowledge of relevant economic theory. There are significant errors. 1–5 2 There is some understanding of the specific demands of the question. Some relevant economic terms are defined. There is some knowledge of relevant economic theory. There are some errors. 6–9 3 There is understanding of the specific demands of the question. 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 is an attempt at synthesis or evaluation. There are few errors. 10–12 4 There is clear understanding of the specific demands of the 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 is evidence of appropriate synthesis or evaluation. There are no significant errors. 13–15 – 14 – M13/3/ECONO/HP1/ENG/TZ2/XX/M 4. (a) Explain how labour market reforms may be used to promote economic growth. [10 marks] Answers may include: definitions of labour market reforms, economic growth explanation of how making labour markets more flexible may lead to an increase in efficiency and economic growth diagram to show the labour market (AD/AS or ADL/ASL) lending to economic growth examples of labour market reforms, both interventionist and market-oriented, such as reducing unemployment benefits, reducing the power of labour unions and abolishing minimum wages, expenditure on education and training, introduction of minimum wages to increase participation rates, to increase consumption and promote economic growth. – 15 – M13/3/ECONO/HP1/ENG/TZ2/XX/M Assessment Criteria Part (a) 10 marks Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined. There is very little knowledge of relevant economic theory. There are significant errors. 1–3 2 There is some understanding of the specific demands of the question. Some relevant economic terms are defined. There is some knowledge of relevant economic theory. There are some errors. 4–6 3 There is understanding of the specific demands of the question. 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. 7–8 4 There is clear understanding of the specific demands of the 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. 9–10 – 16 – M13/3/ECONO/HP1/ENG/TZ2/XX/M (b) “Market-oriented supply-side policies will always be more effective in promoting economic growth than demand-side policies.” To what extent do you agree with this statement? [15 marks] 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. Answers may include: definitions of market-oriented policies (as against interventionist policies), demand-side policies and economic growth theory of Aggregate Demand and Aggregate Supply and how either may be used to increase real GDP diagrams to show increased real GDP resulting from changes to AD and AS examples of market-oriented supply-side policies and demand-side policies synthesis and evaluation (to what extent). Consideration of the merits of the statement may include: discussion of the term effectiveness in the context of economics. Candidates may distinguish the effectiveness of each policy in the short run and the long run. Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded. Opinions or conclusions should be presented clearly and should be supported by appropriate examples. – 17 – M13/3/ECONO/HP1/ENG/TZ2/XX/M Assessment Criteria Part (b) 15 marks Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined. There is very little knowledge of relevant economic theory. There are significant errors. 1–5 2 There is some understanding of the specific demands of the question. Some relevant economic terms are defined. There is some knowledge of relevant economic theory. There are some errors. 6–9 3 There is understanding of the specific demands of the question. 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 is an attempt at synthesis or evaluation. There are few errors. 10–12 4 There is clear understanding of the specific demands of the 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 is evidence of appropriate synthesis or evaluation. There are no significant errors. 13–15 M13/3/ECONO/HP2/ENG/TZ0/XX/M MARKSCHEME May 2013 ECONOMICS Higher Level Paper 2 20 pages –2– M13/3/ECONO/HP2/ENG/TZ0/XX/M This markscheme is confidential and for the exclusive use of examiners in this examination session. It is the property of the International Baccalaureate and must not be reproduced or distributed to any other person without the authorization of the IB Assessment Centre. –3– M13/3/ECONO/HP2/ENG/TZ0/XX/M In addition to the assessment criteria use the paper-specific markscheme below. Award up to the maximum marks as indicated. SECTION A 1. (a) (i) Define the term appreciation indicated in bold in the text (paragraph ). [2 marks] Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 Vague definition. 1 The idea that the exchange rate rises. 2 Accurate definition. 2 An explanation that it is an increase in the value (price) of a currency plus one of the following: • in terms of a foreign currency • in a floating exchange rate system. (ii) Define the term exchange rate indicated in bold in the text (paragraph ). [2 marks] Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 Vague definition. 1 The idea that it is the value (or the price) of a currency. 2 Accurate definition. 2 An explanation that it is the value (price) of one currency expressed in terms of another. –4– M13/3/ECONO/HP2/ENG/TZ0/XX/M (b) Using a diagram, explain how the “increase in foreign investment in the Philippine stock market” has affected the value of the Philippine peso (paragraph ). [4 marks] Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 There is a correct diagram or an accurate written response. 1–2 For drawing an accurate, labelled demand and supply diagram for the peso with the demand curve for the peso shifting to the right leading to a higher exchange rate or for an explanation that increased foreign investment means that there will have been an increase in demand for the peso and this has caused an increase in the value of the peso. 2 There is a correct diagram and an accurate written response. 3–4 For drawing an accurate, labelled demand and supply diagram for the peso with the demand curve for the peso shifting to the right leading to a higher exchange rate and for an explanation that increased foreign investment means that there will have been an increase in demand for the peso and this has caused an increase in the value of the peso. An alternative approach would be to illustrate a market for the US$ against the peso, showing an increase in supply of the US$, resulting in a fall in the value of the dollar against the peso. If drawn correctly and accompanied by a correct explanation that this means that there is an increase in the value of the peso, then this may be fully rewarded. Candidates who incorrectly label diagrams can be rewarded with a maximum of [3 marks]. For an exchange rate diagram, the vertical axis may be exchange rate, price of peso in US$, USD/peso, dollars per peso. The horizontal axis should be quantity, or quantity of pesos. A title is not necessary. –5– M13/3/ECONO/HP2/ENG/TZ0/XX/M (c) Using an AD/AS diagram, explain how the Philippine peso remittances affect the national output of the Philippine economy. [4 marks] Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 There is a correct diagram or an accurate written response. 1–2 For drawing an accurate, labelled AD/AS diagram showing an increase in AD/movement to the right of the AD curve or an explanation that the remittances sent to the Philippines have the effect of increasing consumption (or investment) leading to an increase in AD and therefore leading to an increase in national output. 2 There is a correct diagram and an accurate written response. 3–4 For drawing an accurate, labelled AD/AS diagram showing an increase in AD/movement to the right of the AD curve and an explanation that the remittances sent to the Philippines have the effect of increasing consumption (or investment) leading to an increase in AD and therefore leading to an increase in national output. An alternative approach would be to illustrate an increase in the long run aggregate supply with the explanation that remittances used to finance construction will increase capital in the economy and therefore lead to an increase in the LRAS. If this is correctly illustrated and explained, full marks may be awarded. Given the information in the text, candidates may explain the effect of a fall in remittances on the national output. If correctly illustrated and explained, this approach may be fully rewarded. Candidates who incorrectly label diagrams can be rewarded with a maximum of [3 marks]. For AD/AS, the vertical axis may be price level, average price level, or general price level. The horizontal axis may be real output, national output, real national output, national income (Y), or GDP. Any appropriate abbreviations such as APL, GPL, RNO, or RNY are allowable. A title is not necessary. –6– M13/3/ECONO/HP2/ENG/TZ0/XX/M (d) Using information from the text/data and your knowledge of economics, discuss the likely impact of an appreciating currency on the performance of the Philippine economy. [8 marks] Examiners should be aware that candidates may take a different approach, which, if appropriate, should be rewarded. Do not award beyond Level 2 if the answer does not contain reference to the information provided. Level Marks 0 The work does not reach a standard described by the descriptors below. 0 1 Few relevant concepts are recognized. 1–2 There is basic knowledge/understanding. 2 Relevant concepts are recognized and developed in reasonable depth. 3–5 There is clear knowledge/understanding. There is some attempt at application/analysis. 3 Relevant concepts are recognized and developed in reasonable depth. 6–8 There is clear knowledge/understanding. There is some effective application/analysis. There is synthesis/evaluation, supported by appropriate theory and evidence. Command term “Discuss” requires candidates to offer a considered and balanced review that includes a range of arguments, factors or hypotheses. Opinions or conclusions should be presented clearly and supported by appropriate evidence. Responses may include • identification of measures of performance, ie employment, stable prices, growth, current account balance • appreciation results in a fall in the price of imported factors of production and will reduce inflationary pressure (increase SRAS) • domestic producers will be forced to become more efficient as appreciation means that their products are less competitive in international markets and as imported goods become less expensive • the effect of the appreciation on the current account and AD depends on the elasticities of demand for exports and imports, but the president is worried about the export sector (paragraph ) • domestic producers may have to lay off workers in order to cut costs, resulting in more unemployment • The effect of the appreciation on the amount of remittances is unclear. It may reduce amount of remittances and thus slow down consumption and construction; or, as expected, Filipinos abroad may continue to absorb the losses themselves (paragraph ¹). • Some Filipinos working overseas may return to the Philippines if the value of their remittances is not worth them working away from home. This may result in increased unemployment in the Philippines and lower disposable incomes for those reliant on remittances (paragraph ).
Enter the password to open this PDF file:
-
-
-
-
-
-
-
-
-
-
-
-