Changes in AD, markets,

market failure and economic

development (HL and SL)
IB Examination style paper 2

Overview of Morocco
Like nearly all economies in the world, Morocco has been hit very hard by the emergence of the
2019 Covid19 pandemic. Moroccan GDP contracted by 6.3% in 2020 as the pandemic adversely
affected both aggregate demand and aggregate supply in the economy. [Paragraph 1]

A series of lockdown situations made it very difficult for certain sectors of the economy to produce
and as household incomes decreased consumption spending fell dramatically. 2020 was also a year
when Morocco experienced a dramatic decline in business and consumer confidence. [Paragraph 2]

One sector that was hit particularly hard by the pandemic was Morocco’s tourism industry which
saw a 33% fall in output. This is a country with ‘year-round’ good weather, great beaches and vibrant
culture. Morocco attracts over 12 million tourists each year, had total spending of $7.5 billion in
2018 and accounts for 7% of the country’s real GDP. Morocco’s hotels, restaurants and tourist
attractions saw their total revenue fall significantly as travel regulations and ‘lockdown’ restrictions
were put in place. Up until the start of the pandemic Morocco’s economy had performed well
relative to other countries in the region. [Paragraph 3]

Table 1

Indicator Morocco 10-year Arab states 10-year

average average

Economic growth rate 3.1% 2.3%

Unemployment rate 8.2% 9.1%

Inflation rate 1.6% 4.3%

Balance of payment current account deficit as a 4.2% 2.9%

% of GDP

*10-year average 2009 – 2019. The data excludes the pandemic year 2020.
Morocco is ranked as a medium human development country in the UN’s Human
Development Report. Its HDI of 0.667 puts it above the average of 0.645 for other countries in this
group, but it is below the average of 0.699 for the Arab States. One area of criticism levelled at
Morocco is gender inequality. Although there has been some progress in recent years women lack
political representation, leave school earlier than their male counterparts and do not achieve their
full economic potential. Morocco has a GII value of 0.482 which puts it 119th out of the 160
countries in the index. [Paragraph 4]

Morocco is one is the world’s leading countries in terms of renewable energy. It has the ambitious
aim of achieving a target of 50% of energy production in renewable form by 2030. One of the most
significant parts of this drive to sustainable energy production is the Noor-Ouarzazate solar energy
complex. The 3,000-acre site produces enough electricity to continuously power a large city. It
provides 580 megawatts which saves the planet 760,000 tonnes of carbon emissions. The switch to
renewable energy in Morocco is making a significant contribution to sustainable economic growth
and reducing negative externalities associated with energy provision. [Paragraph 5]

Answer the following questions

a. (i) Define the term total revenue. (Paragraph 3) [2]

(ii) Define the term aggregate supply. (Paragraph 1) [2]

b. The number of unemployed in Morocco in 2019 was 1,482,000.

(i) Using the data in table 1, calculate the size of the labour force. [2]

(ii) Using the information in table 1, describe Morocco’s economic performance in terms of inflation.
[3]

c. Using an AD/AS diagram, explain the impact a fall in consumer confidence in Morocco might have
on its real GDP. (Paragraph 2) [4]

d. Using a demand and supply diagram, explain the impact a fall in the number of tourists due to the
pandemic in Morocco would have on the total revenue of the hotel market. (Paragraph 3) [4]

e. Explain how Morocco’s HDI value of 0.667 is calculated. (Paragraph 4) [4]

f. Using a market failure diagram, explain the effect the increase in the use of solar power in
Morocco would have on the market failure associated with using fossil fuels to generate electricity.
(Paragraph 5) [4]

g. Using information from the text/data and your knowledge of economics, discuss Morocco’s
progress in achieving economic development. [15]

Total [40]