Measuring economic activity Paper 1- IBDP Economics SL

IBDP Economics SL – Macroeconomics- Measuring economic activity Paper 1- Exam Style Practice Questions

Exam Style Questions..

IBDP Economic SL- All Topics

Question

Explain how an increase in leakages can affect the size of the circular flow of income.

▶️Answer/Explanation

Answers may include:

definitions of leakages, circular flow of income
diagram of the circular flow of income
explanation that when leakages increase money flows in the circular flow of income will fall and reduce the size of the circular flow of income
examples of where an increase in leakages have reduced national income.

Question

To what extent is the use of national income statistics an effective way of comparing the standard of living between countries?

▶️Answer/Explanation

Answers may include:

definitions of national income and standard of living
diagram: a diagram is not required for this question
explanation of how national income statistics are an effective way of making comparisons between countries
examples of how national income statistics have been used to compare countries
synthesis or evaluation (to what extent).

Question

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.

▶️Answer/Explanation

Answers may include:

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.

Question

Explain the various phases of the business cycle.

▶️Answer/Explanation

Answers may include:

definition of business cycle
diagram to show the different phases of the business cycle and possible trend line
explanation of the business cycle in terms of the different short-run phases ie boom, recession, depression/slump and recovery, and long-term trend
examples of specific countries being in different phases of the business cycle.