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    Macroecomics Practice Test HL

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    yeetmyfeet645
    The document discusses Brazil's economic policies from 2010-2019, including a period of economic growth with social spending that reduced poverty, followed by a recession with rising poverty. It describes debate around new market-oriented policies introduced in 2018 to stimulate growth through trade, privatization, and labor reforms, but some argue this could harm the environment or workers.

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    Macroecomics Practice Test HL

    Uploaded by

    yeetmyfeet645
    24 views7 pages
    The document discusses Brazil's economic policies from 2010-2019, including a period of economic growth with social spending that reduced poverty, followed by a recession with rising poverty. It describes debate around new market-oriented policies introduced in 2018 to stimulate growth through trade, privatization, and labor reforms, but some argue this could harm the environment or workers.

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    MacroecomicsPracticeTestHL

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    The document discusses Brazil's economic policies from 2010-2019, including a period of economic growth with social spending that reduced poverty, followed by a recession with rising poverty. It describes debate around new market-oriented policies introduced in 2018 to stimulate growth through trade, privatization, and labor reforms, but some argue this could harm the environment or workers.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    24 views7 pages

    Macroecomics Practice Test HL

    Uploaded by

    yeetmyfeet645
    The document discusses Brazil's economic policies from 2010-2019, including a period of economic growth with social spending that reduced poverty, followed by a recession with rising poverty. It describes debate around new market-oriented policies introduced in 2018 to stimulate growth through trade, privatization, and labor reforms, but some argue this could harm the environment or workers.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 7

    MacroecomicsPracticeTestHL [31 marks]

    1. 23M.1.SL.TZ2.2

    (a)

    Using real-world examples, evaluate the view that inequality can best be reduced through the
    use of taxation.

    [15]

    Markscheme

    Refer to Paper 1 markbands for May 2022 forward, available under the "My tests"
    tab > supplemental materials. Answers may include:

    • Terminology: inequality, taxation.


    • Explanation: of the view in terms of the use of progressive taxes and how they can work
    to make the post-tax distribution of income more equal; the difficulty of reducing income
    inequalities through any means other than progressive taxation; the selective use of
    indirect taxes involving higher taxes on luxury goods consumed by the better off and
    lower taxes/no taxes on essential items needed by the poor.
    • Diagram: use of an appropriate diagram, such as the Lorenz curve to show the impact
    on inequality.
    • Synthesis (evaluate): a challenge to the view in terms of the possible disincentive effects
    of progressive taxation and the problems of using indirect taxes; a consideration of
    alternative measures such as use of transfer payments, a universal basic income,
    minimum wages, policies to reduce discrimination, other policies to reduce inequalities of
    opportunity, such as health and education.
    • Examples: real-world examples of changes in taxation and/or other policies reducing
    inequality.

    A maximum of [12] should be awarded if only changes in taxation are


    considered. N.B. It should be noted that definitions, theory and examples that
    have already been given in part (a), and then referred to in part (b), should be
    rewarded. Examiners should be aware that candidates may take a different
    approach which, if appropriate, should be rewarded.
    Assessment Criteria
    Part (b) 15 marks

    2. 21N.2.HL.TZ0.4

    New policies for Brazil


    1. From 2010 to 2014, Brazil experienced an economic boom with annual gross domestic product
    (GDP) growth of 8 %. During this time, the government spent heavily on social programmes
    (including cash transfers and pensions) that helped millions to get out of the poverty cycle. The
    poverty rate decreased from 22 % to 9 % and the Gini coefficient dropped from 0.581 to 0.515.
    However, the spending on social programmes resulted in fiscal deficits and a large public debt,
    which is currently 80 % of GDP.

    2. In 2015, Brazil entered a recession that lasted until 2017. During the recession GDP declined by
    an average of 3 % per year. By 2017, the number of Brazilians living in absolute poverty climbed
    by 13 %, inequality worsened, and unemployment was 12 %. From late 2017 to 2019, Brazil
    struggled to recover, with only approximately 1 % annual economic growth.

    3. Some economists blamed the slow recovery on the lack of investment in education and
    technology during the economic boom. According to those economists, investment in human and
    physical capital was necessary to improve productivity and decrease the reliance on the
    production of primary commodities. Historically, spending on education has not been effective in
    reaching the very poor.

    4. In 2018, a newly elected government, aiming to stimulate economic growth, introduced market-
    oriented policies. Since Brazil has a large economy, the new government believed that Brazil
    should take advantage of world trade and foreign investment to boost economic growth and
    achieve economic development.

    5. The new government aimed to increase the number of multinational corporations (MNCs)
    investing in Brazil through deregulation and trade liberalization. Furthermore, in 2020 several
    state-owned enterprises were privatized.

    6. Additionally, new labour market and tax reforms were introduced to create jobs, increase labour
    force participation and make it easier for firms to hire and fire workers. The reforms included
    increasing the retirement age and reducing transfer payments. However, trade unions claim that
    the reforms are unfair and will lead to the exploitation of workers.

    7. There is concern that deregulation, privatization and market liberalization will put pressure on
    Brazil’s environment, threaten sustainable development, and benefit only urban areas. In 2017,
    the government introduced “green GDP” as an official measure and committed to environmental
    protection goals. This is necessary because, for example, over 40 % of the population live in
    areas without access to a sewage system and manufacturing companies are dumping untreated
    wastewater in rivers, contributing to water pollution.

    (a.i) Define the term multinational corporations indicated in bold in the text (paragraph [5]).

    [2]

    Markscheme

    (a.ii) Define the term green GDP indicated in bold in the text (paragraph [7]).

    [2]

    Markscheme

    (a.iii) Using a business cycle diagram from 2010 to 2019, explain how cyclical unemployment
    may have changed during the economic boom (paragraph [1]) and the recession
    (paragraph [2]) in Brazil.

    [4]
    Markscheme

    Candidates who incorrectly label diagrams can be awarded a maximum of [3].


    For a business cycle diagram, the vertical axis should be (Real) GDP, (Real) GDP
    growth/%, level of economic activity, (Real) output. The horizontal axis should be
    time and show dates from 2010–19. A title is not necessary.
    If a student labels growth and shows a recession as positive the student can not
    be awarded full marks.
    (a.iiii) Using information from the text/data and your knowledge of economics, evaluate the
    impact of market-oriented policies on economic development in Brazil.

    [8]

    Markscheme

    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.

    Command term
    “Evaluate” requires candidates to make an appraisal by weighing up the strengths
    and limitations. Opinions and conclusions should be presented clearly and
    supported with appropriate evidence and sound argument.
    Answers may include:

    • Definitions of:

    – Economic development.
    – Market-orientated policies.

    Economic analysis, focusing on economic development, may include:

    • AD/AS analysis.
    • Poverty cycle.
    • Lorenz curve.
    • Externalities.

    Positive outcomes on economic development may include:

    • Labour reforms (raising retirement age), may increase the size of the labour force, which
    may increase LRAS as quantity of labour has increased. This may increase LRAS,
    leading to increased real GDP/potential output, which may increase job opportunities
    and increase income, for low income earners and encourage economic development
    (paragraph [6]).
    • Lowering business costs through labour reforms, making the hiring and firing of
    employees easier, may increase AS, leading to increased real GDP and a possibility of
    more employment opportunities for low income earners.
    • Privatization may decrease public debt and government can redirect spending into
    economic development (paragraph [5]).
    • More multinationals/foreign investment – may lead to more jobs (paragraph [4]).
    • Trade liberalization may lead to lower prices for consumers, more choice (paragraph
    [5]).
    • May promote diversification and move away from commodities (paragraph [1]).
    • Encouraging more competition from MNCs may promote more efficiency (paragraph [5]).

    Negative outcomes on economic development may include:

    • Spending on education in the past has been ineffective (paragraph [3]).


    • Labour reforms decreasing standard of living through lower job security (paragraph [4]).
    • Privatization may increase prices of goods and services / cause unemployment as
    private firms aim for efficiency and profit maximization (paragraph [5]).
    • Multinationals repatriate profits and may not employ local people (paragraph [5]).
    • Some industries may suffer from increased competition due to trade liberalization
    (paragraph [3]).
    • Concern of environment destruction and externalities (paragraph [7]).
    • Increasing the retirement age may decrease standards of living (paragraph [6]).
    • Inequalities may occur through market-orientated policies.
    • Dual economy can develop as a result of market-orientated policies.

    Any reasonable evaluation.

    © International Baccalaureate Organization, 2024

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