Past IB Macroeconomic Questions
Question 1 examples, 60 minutes
1a--Explain how interest rates can be used to bring about an increase in economic
activity. (10)
1b--Discuss the strengths and weaknesses of demand-side policies. (15)
2a-- Using one or more diagrams, explain the difference between the equilibrium
level of national income and the full employment level of national income. (10)
2b-- Evaluate the policies a government may use to increase the full employment
level of national income. (15)
3a—Explain the difference between progressive taxation and regressive taxation (10)
3b-- Evaluate the possible effects of a decrease in direct taxation on a country’s
inflation rate, unemployment rate and balance of payments. (15)
4a-- Explain how the rate of inflation might be measured and the factors which might
make accurate measurement difficult. (10)
4b-- Evaluate the extent to which an individual government can influence the rate of
inflation in its economy. (15)
5a-- Explain how supply-side improvements to an economy may be achieved through
the use of taxes and government spending. (10)
5b-- Evaluate the use of supply-side policies to reduce unemployment. (15)
6a-- Explain what the multiplier is and, using a numerical example, demonstrate how
it can be calculated. (10)
6b-- Evaluate whether real Gross Domestic Product (GDP) can be increased by the
use of demand-side policies. (15)
Question 2 examples, 20 minutes
1-- Explain how an increase in government spending can lead to crowding out.
2-- Explain how a progressive tax system may be used to redistribute income.
3-- With the use of examples, explain the difference between a progressive tax and a
regressive tax.
4-- Explain two ways a government can reduce its natural rate of unemployment.
5-- With reference to the concept of the multiplier, explain how the level of national
income might be affected by a new government spending project worth $100 million.
6-- Using an appropriate diagram, explain how a government decision to decrease
income tax rates could lead to a movement along the short-run Phillips curve.
7-- Using a diagram, and assuming a neo-classical aggregate demand/aggregate
supply model, explain the short-term and long-term effects of a rise in aggregate
demand when a country is at full employment.
8-- A government decides to increase its spending on new roads, recognizing that
there will be a multiplier effect on national income. Using a numerical example,
explain what may determine the size of the multiplier.