Economics Paper 2 HL Markscheme
Economics Paper 2 HL Markscheme
Economics Paper 2 HL Markscheme
Markscheme
November 2016
Economics
Higher level
Paper 2
20 pages
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Use the paper-specific markscheme together with the markbands. Award up to the maximum
marks as indicated.
Section A
1. (a) (i) Define the term subsidies indicated in bold in the text (paragraph ). [2]
Level Marks
0 The work does not reach a standard described by the descriptors
below. 0
1 Vague definition. 1
The idea that the government gives money to an industry.
2 Accurate definition. 2
An explanation that the government gives money to an
industry in order to, any one of the following:
• reduce cost of production
• increase output/supply of a good
• protect producers from foreign imports
• reduce the price of a product.
(ii) Define the term variable costs indicated in bold in the text
(paragraph ). [2]
Level Marks
0 The work does not reach a standard described by the descriptors
below. 0
1 Vague definition. 1
The idea that they are costs of production that change.
2 Accurate definition. 2
An explanation that they are the costs of production that change as
output changes (or increase as output increases).
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(b) Using a supply and demand diagram with international trade values from the text,
explain the statement that “The US imported 1200 million pounds (lb) of shrimp
last year and produced 100 million pounds (lb) of shrimp domestically”
(paragraph ) (Does not need to be to scale). [4]
Level Marks
0 The work does not reach a standard described by the descriptors below. 0
The numbers do not have to be on the diagram. Full marks may be awarded if
the numbers from the text are used in the explanation with correct references to
the quantities indicated on the diagram (eg 0Q1 is domestic supply of 100 million
lb and Q1-Q2 is the imported amount of 1200 million lb).
The use of P and Q on the axes is sufficient for a demand and supply diagram.
The world supply curve must be labelled SW or Sworld (to distinguish it from the
domestic supply curve). S or SD are both fine for the domestic supply curve.
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(c) Using an average costs diagram, explain the short-run consequence for shrimp
farmers if the price received “is not enough to cover their variable costs”
(paragraph ). [4]
Level Marks
0 The work does not reach a standard described by the descriptors below. 0
For a costs diagram, the use of Price or Cost (P or C) on the vertical axis and
Output or Quantity on the horizontal axis is sufficient.
AVC
Q
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(d) Using information from the text/data and your knowledge of economics, discuss
the view that the US should impose tariffs on the imported shrimp. [8]
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
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.
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2. (a) (i) Define the term interest rates indicated in bold in the text (paragraph ). [2]
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 a payment for a loan.
2 Accurate definition. 2
An explanation that it is one of the following:
• the price or cost of borrowed money
• the price of credit (or the percentage paid on borrowed money)
• the reward for saving.
(ii) Define the term normal profit indicated in bold in the text (paragraph ). [2]
Level Marks
0 The work does not reach a standard described by the descriptors
below. 0
1 Vague definition. 1
The idea that costs are equal to revenue.
2 Accurate definition. 2
Any one of the following explanations:
• revenue covers all costs, including opportunity costs
• total revenue is equal to implicit and explicit costs
• the amount of profit needed to keep a firm in business
(in the long run)
• economic profit is equal to zero.
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Level Marks
0 The work does not reach a standard described by the descriptors below. 0
For an exchange rate diagram, the vertical axis may be exchange rate, price of
British pound in other currencies, GBP/USD, USD/GBP or other currency per
British pound. The horizontal axis should be quantity or quantity of British
pounds. A title is not necessary.
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(c) Using an appropriate diagram, explain why it is possible that “British firms
producing exported goods that have few substitutes have reported no reduction
in export revenue despite the appreciation” (paragraph ). [4]
Level Marks
0 The work does not reach a standard described by the descriptors below. 0
Candidates may explain that the demand is unit elastic and so when the price
increases due to appreciation, the total revenue will remain the same (“no
reduction in export revenue”).
The use of P and Q is sufficient for a demand and supply diagram. A title is not
necessary.
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(d) Using information from the text/data and your knowledge of economics, discuss
possible consequences of the appreciation of the British pound. [8]
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
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.
Section B
3. (a) (i) Define the term market-oriented policies indicated in bold in the text
(paragraph ). [2]
Level Marks
0 The work does not reach a standard described by the descriptors
below. 0
1 Vague definition. 1
The idea that they are policies without government intervention.
2 Accurate definition. 2
An explanation that they are policies that support the allocation of
resources by supply and demand (or the price mechanism) rather
than through government intervention in markets.
(ii) Define the term GDP per capita indicated in bold in the text (Figure 1). [2]
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 a measure of output per person or the formula
expressed as GDP/population.
2 Accurate definition. 2
An explanation that it is the total value of all final goods and services
produced in an economy in one year per head of (divided by) the
population.
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(b) Explain why the Human Development Index (HDI) is considered to be a better
indicator of economic development than GDP per capita. [4]
Level Marks
0 The work does not reach a standard described by the descriptors below. 0
And for an explanation that GDP per capita is a single indicator measuring
only income, whereas the HDI is considered to be a better indicator,
because it considers more indicators and/or the qualitative nature of
economic development.
Level Marks
0 The work does not reach a standard described by the descriptors below. 0
An answer that contains only a correct formula for the multiplier should receive
[1] only.
(d) Using information from the text/data and your knowledge of economics, to what
extent does unequal income distribution impact economic development in China? [8]
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
Command term
To what extent requires students to consider the merits or otherwise of an
argument or concept. Opinions and conclusions should be presented clearly and
supported with appropriate evidence and sound argument.
4. (a) (i) Define the term budget deficit indicated in bold in the text (paragraph ). [2]
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 to do with government revenue or spending.
2 Accurate definition. 2
An explanation that it is when (planned) government spending is
greater than government revenues.
(ii) Define the term economic development indicated in bold in the text
(paragraph ). [2]
Level Marks
0 The work does not reach a standard described by the descriptors
below. 0
1 Vague definition. 1
The idea that living standards improve.
2 Accurate definition. 2
An explanation that it is a broad concept involving any two of the
following:
• improvement in standards of living
• reduction in poverty
• improved health
• improved education
• reduction in unemployment
• greater equality in income distribution
• environmental protection
• increased freedom and economic choice
• any other plausible aspect of development.
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(b) Using an exchange rate diagram, explain how the large current account deficit
may have affected the value of the Ghanaian cedi. [4]
Level Marks
0 The work does not reach a standard described by the descriptors below. 0
For an exchange rate diagram, the vertical axis may be exchange rate, cedi/USD,
USD/cedi (or other currency), price of cedi in other currencies, or other currency
per cedi. The horizontal axis should be quantity or quantity of cedi.
A title is not necessary.
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(c) Using an AD/AS diagram, explain how the falling value of the Ghanaian cedi may
have contributed to inflation. [4]
Level Marks
0 The work does not reach a standard described by the descriptors below. 0
Candidates might explain that the falling cedi results in increasing net
exports (X-M) due to cheaper exports and more expensive imports, which
increases AD causing demand-pull inflation. This alternative approach
should be fully rewarded.
For AD/AS, the vertical axis may be Average (General) Price Level, APL or Price
level. The horizontal axis may be real output, real national output, real income,
real national income, real GDP or real Y. A title is not necessary.
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(d) Using information from the text/data and your knowledge of economics,
discuss possible consequences of International Monetary Fund (IMF) financial
aid on Ghana’s economic growth and development. [8]
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
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.
Discussion may include more general consideration of the nature of aid, growth and
development and relationships between them.