Macroeconomics Practice Test 1 [125 marks]

1. [Maximum mark: 25] 19M.1.SL.TZ1.4

(a) Explain the role of improved productivity in achieving
economic growth. [10]

(b) Discuss the view that economic growth can only be achieved at
the expense of other macroeconomic objectives such as a low
and stable rate of inflation and equity in the distribution of
income. [15]

2. [Maximum mark: 25] 19M.1.SL.TZ2.3

(a) Explain how increased investment by the government in
education and training can affect both aggregate demand and
aggregate supply. [10]

(b) Evaluate the view that inflationary pressures in an economy are

best reduced using supply-side policies. [15]

3. [Maximum mark: 25] 19M.1.SL.TZ2.4

(a) Explain the various phases of the business cycle. [10]

(b) Discuss the view that economies will always return to the full
employment level of output in the long run. [15]
4. [Maximum mark: 25] 19M.1.HL.TZ1.3
(a) Explain how a deflationary gap might occur. [10]

(b) Using the monetarist/new classical model and the Keynesian

model, discuss the view that increases in aggregate demand
will inevitably be inflationary. [15]

5. [Maximum mark: 25] 19M.1.HL.TZ1.4

(a) Explain how government spending might promote greater
equity in an economy. [10]

(b) Evaluate the view that government policies to promote greater

equity will always have a negative effect on efficiency. [15]

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