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style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35118/unit-2111-market-power-theory-of-production-and-costs-hl.html" title="Unit 2.11(1) Market power - Theory of production and costs (HL)">Unit 2.11(1) Market power - Theory of production and costs (HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35125/unit-2112-market-power-perfect-competitionhl.html" title="Unit 2.11(2) Market power - Perfect competition(HL)">Unit 2.11(2) Market power - Perfect competition(HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35147/unit-2113-market-power-monopolyhl.html" title="Unit 2.11(3) Market power - Monopoly(HL)">Unit 2.11(3) Market power - Monopoly(HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35151/unit-2114-market-power-monopolistic-competitionhl.html" title="Unit 2.11(4) Market power - Monopolistic competition(HL)">Unit 2.11(4) Market power - Monopolistic competition(HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35153/unit-2115-market-power-oligopolyhl.html" title="Unit 2.11(5) Market power - Oligopoly(HL)">Unit 2.11(5) Market power - Oligopoly(HL)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../41603/economics-real-world-examples-and-extension-material-.html" title="Economics real world examples and extension material ">Economics real world examples and extension material </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43378/opportunity-cost-and-production-possibility-curves.html" title="Opportunity cost and production possibility curves">Opportunity cost and production possibility curves</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42559/demand-theory.html" title="Demand theory">Demand theory</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41886/the-price-mechanism.html" title="The price mechanism">The price mechanism</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43188/market-demand-and-supply.html" title="Market demand and supply">Market demand and supply</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41705/demerit-goods.html" title="Demerit goods">Demerit goods</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42275/market-failure-and-climate-change.html" title="Market failure and climate change">Market failure and climate change</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42925/market-power.html" title="Market power">Market power</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42099/applying-game-theory.html" title="Applying game theory">Applying game theory</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../34407/chapter-3-macroeconomics.html" title="Chapter 3: Macroeconomics">Chapter 3: Macroeconomics</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34355/unit-311-measuring-the-level-of-economic-activity.html" title="Unit 3.1(1): Measuring the level of economic activity">Unit 3.1(1): Measuring the level of economic activity</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34432/unit-312-measuring-economic-development.html" title="Unit 3.1(2): Measuring Economic Development">Unit 3.1(2): Measuring Economic Development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34485/unit-321-variations-in-economic-activity-aggregate-demand-ad-.html" title="Unit 3.2(1): Variations in economic activity - aggregate demand (AD) ">Unit 3.2(1): Variations in economic activity - aggregate demand (AD) </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34487/unit-322-variations-in-economic-activity-aggregate-supplyas.html" title="Unit 3.2(2): Variations in economic activity - aggregate supply(AS)">Unit 3.2(2): Variations in economic activity - aggregate supply(AS)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34758/unit-331-macroeconomic-objectives-economic-growth.html" title="Unit 3.3(1) Macroeconomic objectives: economic growth">Unit 3.3(1) Macroeconomic objectives: economic growth</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34771/unit-332-macroeconomic-objectives-unemployment-.html" title="Unit 3.3(2) Macroeconomic objectives: unemployment ">Unit 3.3(2) Macroeconomic objectives: unemployment </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34778/unit-333-macroeconomic-objectives-inflation-and-deflation-.html" title="Unit 3.3(3) Macroeconomic objectives: inflation and deflation ">Unit 3.3(3) Macroeconomic objectives: inflation and deflation </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34925/unit-341-economics-of-inequality-and-poverty.html" title="Unit 3.4(1) Economics of inequality and poverty">Unit 3.4(1) Economics of inequality and poverty</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34946/unit-342-policies-to-improve-equality-equity-and-poverty.html" title="Unit 3.4(2) Policies to improve equality, equity and poverty">Unit 3.4(2) Policies to improve equality, equity and poverty</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34993/unit-35-government-management-of-the-economy-monetary-policy.html" title="Unit 3.5 Government management of the economy – monetary policy">Unit 3.5 Government management of the economy – monetary policy</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34962/unit-36-government-management-of-the-economy-fiscal-policy.html" title="Unit 3.6 Government management of the economy – fiscal policy">Unit 3.6 Government management of the economy – fiscal policy</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35017/unit-371-market-based-supply-side-policies-.html" title="Unit 3.7(1) Market based supply-side policies ">Unit 3.7(1) Market based supply-side policies </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35018/unit-372-interventionist-supply-side-policies-.html" title="Unit 3.7(2) Interventionist supply-side policies ">Unit 3.7(2) Interventionist supply-side policies </a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45803/economics-real-world-examples-and-extension-material-.html" title="Economics real world examples and extension material ">Economics real world examples and extension material </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42639/measuring-economic-well-being.html" title="Measuring economic well-being">Measuring economic well-being</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43044/inflation.html" title="Inflation">Inflation</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42350/inequality.html" title="Inequality">Inequality</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41639/inequity.html" title="Inequity">Inequity</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../35414/chapter-4-the-global-economy.html" title="Chapter 4: The Global Economy">Chapter 4: The Global Economy</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35346/unit-41-benefits-of-international-trade.html" title="Unit 4.1 Benefits of international trade">Unit 4.1 Benefits of international trade</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35348/unit-4243-trade-protectionism.html" title="Unit 4.2/4.3 Trade protectionism">Unit 4.2/4.3 Trade protectionism</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35407/unit-44-economic-integration-.html" title="Unit 4.4 Economic integration ">Unit 4.4 Economic integration </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35409/unit-45-exchange-rates.html" title="Unit 4.5 Exchange rates">Unit 4.5 Exchange rates</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35413/unit-46-balance-of-payments--1.html" title="Unit 4.6 Balance of payments ">Unit 4.6 Balance of payments </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35675/unit-47-sustainable-development.html" title="Unit 4.7 Sustainable development">Unit 4.7 Sustainable development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35685/unit-48-measuring-development-.html" title="Unit 4.8 Measuring development ">Unit 4.8 Measuring development </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35687/unit-49-barriers-to-economic-development.html" title="Unit 4.9 Barriers to economic development">Unit 4.9 Barriers to economic development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35702/unit-410-economic-growth-and-economic-development-strategies.html" title="Unit 4.10: Economic growth and economic development strategies">Unit 4.10: Economic growth and economic development strategies</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45804/economics-real-world-examples-and-extension-material-.html" title="Economics real world examples and extension material ">Economics real world examples and extension material </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41927/foreign-currency.html" title="Foreign currency">Foreign currency</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43532/exchange-rates.html" title="Exchange rates">Exchange rates</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43804/balance-of-payments.html" title="Balance of payments">Balance of payments</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41796/economic-development.html" title="Economic development">Economic development</a></li></ul></ul></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../20132/units-1-2-microeconomics.html" title="Units 1-2: Microeconomics">Units 1-2: Microeconomics</a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Unit 1: Introduction to economics">Unit 1: Introduction to economics</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20091/introductory-activity.html" title="Introductory activity">Introductory activity</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20093/unit-11-scarcity-choice-and-opportunity-cost.html" title="Unit 1.1: Scarcity, choice and opportunity cost">Unit 1.1: Scarcity, choice and opportunity cost</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21647/factors-of-production.html" title="Factors of production">Factors of production</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20114/economic-systems.html" title="Economic systems">Economic systems</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20134/public-and-private-sectors.html" title="Public and private sectors">Public and private sectors</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../28055/unit-12-economics-as-a-social-science.html" title="Unit 1.2: Economics as a social science">Unit 1.2: Economics as a social science</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29921/circular-flow-of-national-income.html" title="Circular flow of national income">Circular flow of national income</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29829/unit-1-review-terms-1.html" title="Unit 1: Review terms">Unit 1: Review terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../41600/introduction-to-economics-crossword.html" title="Introduction to economics crossword">Introduction to economics crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../4331/unit-1-multiple-choice-quiz.html" title="Unit 1: Multiple choice quiz">Unit 1: Multiple choice quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20177/unit-21-23-competitive-markets-demand-and-supply.html" title="Unit 2.1-2.3: Competitive markets - demand and supply">Unit 2.1-2.3: Competitive markets - demand and supply</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../28517/unit-21-demand.html" title="Unit 2.1: Demand">Unit 2.1: Demand</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22349/determinants-of-demand.html" title="Determinants of demand">Determinants of demand</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29949/unit-22-supply-.html" title="Unit 2.2: Supply ">Unit 2.2: Supply </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20184/changes-to-supply-and-demand-.html" title="Changes to supply and demand ">Changes to supply and demand </a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21992/practise-exercises.html" title="Practise exercises">Practise exercises</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../26112/gold-exchange-game-demand-and-supply.html" title="Gold exchange game: Demand and supply">Gold exchange game: Demand and supply</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20194/unit-23-competitive-market-equilibrium.html" title="Unit 2.3: Competitive market equilibrium">Unit 2.3: Competitive market equilibrium</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20144/producer-and-consumer-surplus.html" title="Producer and consumer surplus">Producer and consumer surplus</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../22351/veblen-goods-and-super-luxury-goods.html" title="Veblen goods and super luxury goods">Veblen goods and super luxury goods</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25677/are-cryptocurrencies-the-new-tulipmania.html" title="Are Cryptocurrencies the new Tulipmania?">Are Cryptocurrencies the new Tulipmania?</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20472/unit-21-23-multiple-choice-quiz.html" title="Unit 2.1-2.3: Multiple choice quiz">Unit 2.1-2.3: Multiple choice quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20113/unit-24-consumer-and-producer-behaviour-hl-only.html" title="Unit 2.4: Consumer and producer behaviour (HL only)">Unit 2.4: Consumer and producer behaviour (HL only)</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../36073/behavioural-economics-consumer-biases-nudge-theory-hl-only.html" title="Behavioural economics: Consumer biases / nudge theory (HL only)">Behavioural economics: Consumer biases / nudge theory (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20378/business-objectives-hl-only.html" title="Business objectives (HL only)">Business objectives (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../28741/unit-21-24-review-terms-.html" title="Unit 2.1-2.4: Review terms ">Unit 2.1-2.4: Review terms </a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20195/unit-25-26-elasticity.html" title="Unit 2.5-2.6: Elasticity">Unit 2.5-2.6: Elasticity</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../28713/unit-25-price-elasticity-of-demand.html" title="Unit 2.5: Price elasticity of demand">Unit 2.5: Price elasticity of demand</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21545/determinants-of-price-elasticity-.html" title="Determinants of price elasticity ">Determinants of price elasticity </a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21532/ped-elasticity-and-sales-revenue.html" title="PED elasticity and sales revenue?">PED elasticity and sales revenue?</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21259/unit-25-income-elasticity-of-demand-yed.html" title="Unit 2.5: Income elasticity of demand (YED)">Unit 2.5: Income elasticity of demand (YED)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21200/unit-26-price-elasticity-of-supply.html" title="Unit 2.6: Price elasticity of supply">Unit 2.6: Price elasticity of supply</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20207/perfectly-elastic-inelastic-supply-curves.html" title="Perfectly elastic / inelastic supply curves">Perfectly elastic / inelastic supply curves</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20230/a-mathematical-note-about-elasticity-.html" title="A mathematical note about elasticity ">A mathematical note about elasticity </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39037/demand-and-supply-crossword.html" title="Demand and supply crossword">Demand and supply crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29021/unit-25-26-review-terms.html" title="Unit 2.5-2.6: Review terms">Unit 2.5-2.6: Review terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20474/unit-25-26-multiple-choice-quiz-.html" title="Unit 2.5-2.6: Multiple choice quiz ">Unit 2.5-2.6: Multiple choice quiz </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44474/unit-21-25-competitive-markets-quiz.html" title="Unit 2.1- 2.5: Competitive markets quiz">Unit 2.1- 2.5: Competitive markets quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20243/unit-27-the-role-of-government-in-microeconomics-.html" title="Unit 2.7: The role of government in microeconomics ">Unit 2.7: The role of government in microeconomics </a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../26590/indirect-taxation.html" title="Indirect taxation">Indirect taxation</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20246/ped-and-the-burden-of-tax-hl-only-.html" title="PED and the burden of tax (HL only) ">PED and the burden of tax (HL only) </a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20277/government-subsidies-.html" title="Government subsidies ">Government subsidies </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29117/unit-27-indirect-tax-and-subsidy-review-terms.html" title="Unit 2.7: Indirect tax and subsidy review terms">Unit 2.7: Indirect tax and subsidy review terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20287/price-controls-maximum-price-.html" title="Price controls − maximum price ">Price controls − maximum price </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20288/minimum-price-.html" title="Minimum price ">Minimum price </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21540/minimum-wage-.html" title="Minimum wage ">Minimum wage </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../38849/labour-market-crossword.html" title="Labour market crossword">Labour market crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29260/unit-27-price-controls-review-terms.html" title="Unit 2.7: Price controls review terms">Unit 2.7: Price controls review terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20303/unit-28-210-market-failure-.html" title="Unit 2.8-2.10: Market failure ">Unit 2.8-2.10: Market failure </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21543/unit-28-merit-goods-.html" title="Unit 2.8: Merit goods ">Unit 2.8: Merit goods </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../23123/unit-28-demerit-goods-negative-externalities.html" title="Unit 2.8: Demerit goods / negative externalities">Unit 2.8: Demerit goods / negative externalities</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../38850/market-failure-crossword.html" title="Market failure crossword">Market failure crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29262/unit-29-economics-of-the-environment-and-public-goods-.html" title="Unit 2.9: Economics of the environment and public goods ">Unit 2.9: Economics of the environment and public goods </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20332/unit-210-asymmetric-information-hl-only.html" title="Unit 2.10: Asymmetric information (HL only)">Unit 2.10: Asymmetric information (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29828/unit-28-210-market-failure-review-sheet.html" title="Unit 2.8-2.10: Market failure review sheet">Unit 2.8-2.10: Market failure review sheet</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29827/unit-28-210-market-failure-review-terms.html" title="Unit 2.8-2.10: Market failure review terms">Unit 2.8-2.10: Market failure review terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20479/unit-27-210-multiple-choice-quiz-.html" title="Unit 2.7-2.10: Multiple choice quiz ">Unit 2.7-2.10: Multiple choice quiz </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44501/unit-27-210-government-failure-revision-quiz.html" title="Unit 2.7-2.10 Government failure revision quiz">Unit 2.7-2.10 Government failure revision quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20330/unit-211-market-power-hl-only.html" title="Unit 2.11: Market power (HL only)">Unit 2.11: Market power (HL only)</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29835/assessment-map.html" title="Assessment map">Assessment map</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21528/production-hl-only.html" title="Production (HL only)">Production (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29978/revenue-theory-hl-only.html" title="Revenue theory (HL only)">Revenue theory (HL only)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20357/costs-of-production-hl-only.html" title="Costs of production (HL only)">Costs of production (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21286/economies-and-diseconomies-of-scale-hl-only.html" title="Economies and diseconomies of scale (HL only)">Economies and diseconomies of scale (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22494/long-run-average-cost-curves-hl-only.html" title="Long run average cost curves (HL only)">Long run average cost curves (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../29838/breakeven-hl-only.html" title="Breakeven (HL only)">Breakeven (HL only)</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20340/economic-profit-hl-only.html" title="Economic profit (HL only)">Economic profit (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39082/market-power-crossword.html" title="Market power crossword">Market power crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../22495/revision-exercise-on-cost-and-revenue-hl-only.html" title="Revision exercise on cost and revenue (HL only)">Revision exercise on cost and revenue (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29845/unit-211-costs-revenue-and-profit-review-sheet-hl-only.html" title="Unit 2.11: Costs, revenue and profit review sheet (HL only)">Unit 2.11: Costs, revenue and profit review sheet (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44484/unit-211-multiple-choice-quiz-sl-units.html" title="Unit 2.11: Multiple choice quiz (SL units)">Unit 2.11: Multiple choice quiz (SL units)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29846/market-structures-hl-only.html" title="Market structures (HL only)">Market structures (HL only)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29981/perfect-competition-hl-only.html" title="Perfect competition (HL only)">Perfect competition (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24486/profit-in-perfect-competition-hl-only.html" title="Profit in perfect competition (HL only)">Profit in perfect competition (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21302/efficiency-in-perfect-competition-hl-only.html" title="Efficiency in perfect competition (HL only)">Efficiency in perfect competition (HL only)</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20430/monopoly-hl-only.html" title="Monopoly (HL only)">Monopoly (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24529/profit-and-revenue-maximisation-in-monopoly-hl-only.html" title="Profit and revenue maximisation in monopoly (HL only)">Profit and revenue maximisation in monopoly (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21306/a-comparison-of-monopoly-and-perfect-competition-hl-only.html" title="A comparison of monopoly and perfect competition? (HL only)">A comparison of monopoly and perfect competition? (HL only)</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20435/monopolistic-competition-hl-only.html" title="Monopolistic competition (HL only)">Monopolistic competition (HL only)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20436/oligopoly-hl-only.html" title="Oligopoly (HL only)">Oligopoly (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22310/game-theory-hl-only.html" title="Game theory (HL only)">Game theory (HL only)</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29918/unit-211-market-structures-review-sheet-hl-only.html" title="Unit 2.11: Market structures review sheet (HL only)">Unit 2.11: Market structures review sheet (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32337/unit-211-diagram-revision-.html" title="Unit 2.11: Diagram revision ">Unit 2.11: Diagram revision </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20480/unit-211-multiple-choice-quiz-hl-only.html" title="Unit 2.11: Multiple choice quiz (HL only)">Unit 2.11: Multiple choice quiz (HL only)</a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../32425/unit-212-the-markets-inability-to-achieve-equity-hl-only.html" title="Unit 2.12: The market’s inability to achieve equity (HL only)">Unit 2.12: The market’s inability to achieve equity (HL only)</a></li></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../21842/unit-3-macroeconomics-.html" title="Unit 3: Macroeconomics ">Unit 3: Macroeconomics </a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../3942/unit-31-measuring-economic-activity-and-illustrating-its-variati.html" title="Unit 3.1: Measuring economic activity and illustrating its variations">Unit 3.1: Measuring economic activity and illustrating its variations</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20558/calculating-national-income.html" title="Calculating national income">Calculating national income</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21297/gdp-gni-as-a-measure-of-living-standards.html" title="GDP / GNI as a measure of living standards">GDP / GNI as a measure of living standards</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20567/national-income-statistics.html" title="National income statistics">National income statistics</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21580/the-business-cycle.html" title="The business cycle">The business cycle</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29931/unit-31-economic-activity-review-sheet.html" title="Unit 3.1: Economic activity review sheet">Unit 3.1: Economic activity review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20592/unit-32-variations-in-economic-activityaggregate-demand-and-aggr.html" title="Unit 3.2: Variations in economic activity—aggregate demand and aggregate supply">Unit 3.2: Variations in economic activity—aggregate demand and aggregate supply</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29933/aggregate-demand-and-supply.html" title="Aggregate demand and supply">Aggregate demand and supply</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21582/components-of-aggregate-demand.html" title="Components of aggregate demand">Components of aggregate demand</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20634/equilibrium-in-macroeconomics-neo-classical-perspective.html" title="Equilibrium in macroeconomics (neo-classical perspective)">Equilibrium in macroeconomics (neo-classical perspective)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20439/equilibrium-in-macroeconomics-keynesian-perspective.html" title="Equilibrium in macroeconomics (keynesian perspective)">Equilibrium in macroeconomics (keynesian perspective)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21349/john-maynard-keynes.html" title="John Maynard Keynes">John Maynard Keynes</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20650/keynesian-v-free-market-debate-.html" title="Keynesian v free market debate ">Keynesian v free market debate </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21342/changes-in-the-long-run-aggregate-supply.html" title="Changes in the long run aggregate supply">Changes in the long run aggregate supply</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30055/unit-32-aggregate-demand-and-supply-review-sheet.html" title="Unit 3.2: Aggregate demand and supply review sheet">Unit 3.2: Aggregate demand and supply review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20610/unit-35-and-36-demand-management-fiscal-and-monetary-policy.html" title="Unit 3.5 and 3.6: Demand management - fiscal and monetary policy">Unit 3.5 and 3.6: Demand management - fiscal and monetary policy</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30058/government-budget.html" title="Government budget">Government budget</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21585/fiscal-policy-.html" title="Fiscal policy ">Fiscal policy </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21343/multiplier-hl-only.html" title="Multiplier (HL only)">Multiplier (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21795/monetary-policy-.html" title="Monetary policy ">Monetary policy </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30071/independent-central-banks.html" title="Independent central banks">Independent central banks</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30083/unit-35-and-36-review-sheet.html" title="Unit 3.5 and 3.6 review sheet">Unit 3.5 and 3.6 review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20615/unit-37-supply-side-policies.html" title="Unit 3.7: Supply side policies">Unit 3.7: Supply side policies</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20651/the-role-of-supply-side-policies.html" title="The role of supply side policies">The role of supply side policies</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20622/market-based-and-interventionist-supply-side-policies-.html" title="Market based and interventionist supply side policies ">Market based and interventionist supply side policies </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39129/aggregate-demand-and-supply-crossword.html" title="Aggregate demand and supply crossword">Aggregate demand and supply crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30086/unit-37-review-sheet.html" title="Unit 3.7: Review sheet">Unit 3.7: Review sheet</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20755/unit-31-32-and-35-37-multiple-choice-quiz-.html" title="Unit 3.1-3.2 and 3.5-3.7: Multiple choice quiz ">Unit 3.1-3.2 and 3.5-3.7: Multiple choice quiz </a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44522/unit-31-32-and-35-37-revision-quiz.html" title="Unit 3.1-3.2 and 3.5-3.7: Revision quiz">Unit 3.1-3.2 and 3.5-3.7: Revision quiz</a></li><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20686/unit-33-macroeconomic-objectives.html" title="Unit 3.3: Macroeconomic objectives">Unit 3.3: Macroeconomic objectives</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30118/unemployment.html" title="Unemployment">Unemployment</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21351/types-of-unemployment.html" title="Types of unemployment?">Types of unemployment?</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21593/equilibrium-unemployment-.html" title="Equilibrium unemployment ">Equilibrium unemployment </a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21594/disequilibrium-unemployment.html" title="Disequilibrium unemployment">Disequilibrium unemployment</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../30458/unemployment-review-sheet-1.html" title="Unemployment review sheet">Unemployment review sheet</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20713/inflation-.html" title="Inflation ">Inflation </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20712/measuring-inflation-hl-only.html" title="Measuring inflation (HL only)">Measuring inflation (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20685/costs-of-inflation-and-deflation.html" title="Costs of inflation and deflation">Costs of inflation and deflation</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../30465/inflation-review-sheet.html" title="Inflation review sheet">Inflation review sheet</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20716/unemployment-v-inflation-trade-off-hl-only.html" title="Unemployment v inflation trade off (HL only)">Unemployment v inflation trade off (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39133/macroeconomic-objectives-crossword.html" title="Macroeconomic objectives crossword">Macroeconomic objectives crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44511/unit-33-macroeconomic-indicators-revision-quiz.html" title="Unit 3.3: Macroeconomic indicators revision quiz">Unit 3.3: Macroeconomic indicators revision quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20741/unit-34-economics-of-inequality-and-poverty.html" title="Unit 3.4: Economics of inequality and poverty">Unit 3.4: Economics of inequality and poverty</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32398/inequality.html" title="Inequality">Inequality</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21356/the-role-of-spending-and-taxation-on-inequality-.html" title="The role of spending and taxation on inequality ">The role of spending and taxation on inequality </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21313/consequences-of-economic-growth.html" title="Consequences of economic growth">Consequences of economic growth</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30257/economic-growth-and-inequality-review-sheet.html" title="Economic growth and inequality review sheet">Economic growth and inequality review sheet</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20756/unit-33-34-multiple-choice-.html" title="Unit 3.3-3.4: Multiple choice ">Unit 3.3-3.4: Multiple choice </a></li></ul></ul><li class="ancestor parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right fa-rotate-90"></i><a class="" href="../21844/unit-4-global-economy.html" title="Unit 4: Global economy">Unit 4: Global economy</a></li><ul class="level-1 expanded"><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../21367/unit-41-benefits-of-international-trade.html" title="Unit 4.1: Benefits of international trade">Unit 4.1: Benefits of international trade</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30529/benefits-of-international-trade.html" title="Benefits of international trade">Benefits of international trade</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20823/absolute-and-comparative-advantage-hl-only.html" title="Absolute and comparative advantage (HL only)">Absolute and comparative advantage (HL only)</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20845/unit-42-43-trade-protection.html" title="Unit 4.2-4.3: Trade protection">Unit 4.2-4.3: Trade protection</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32419/barriers-to-trade-calculations-are-hl-only.html" title="Barriers to trade (calculations are HL only)">Barriers to trade (calculations are HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21610/case-study-on-tata-steel.html" title="Case study on Tata Steel">Case study on Tata Steel</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../23455/the-defence-industry.html" title="The Defence industry">The Defence industry</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30610/unit-41-43-review-sheet.html" title="Unit 4.1-4.3: Review sheet">Unit 4.1-4.3: Review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20894/unit-44-economic-integration-.html" title="Unit 4.4: Economic integration ">Unit 4.4: Economic integration </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30634/economic-integration-some-hl-tasks.html" title="Economic integration (some HL tasks)">Economic integration (some HL tasks)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20840/world-trade-organisation-wto.html" title="World trade organisation (WTO)">World trade organisation (WTO)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30635/unit-44-review-sheet.html" title="Unit 4.4: Review sheet">Unit 4.4: Review sheet</a></li></ul><li class="ancestor parent" style="padding-left: 14px"><i class="expander fa fa-caret-right fa-rotate-90"></i><a class="" href="../20853/unit-45-exchange-rates.html" title="Unit 4.5: Exchange rates">Unit 4.5: Exchange rates</a></li><ul class="level-2 expanded"><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30611/floating-exchange-rates.html" title="Floating exchange rates">Floating exchange rates</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../31824/fixed-managed-exchange-rate-systems-some-hl-tasks.html" title="Fixed / managed exchange rate systems (some HL tasks)">Fixed / managed exchange rate systems (some HL tasks)</a></li><li class="current" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="the-market-for-foreign-exchange.html" title="The market for foreign exchange">The market for foreign exchange</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30614/unit-45-review-sheet.html" title="Unit 4.5: Review sheet">Unit 4.5: Review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20859/unit-46-balance-of-payments.html" title="Unit 4.6: Balance of payments">Unit 4.6: Balance of payments</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30624/balance-of-payments-.html" title="Balance of payments ">Balance of payments </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21386/current-account-hl-only.html" title="Current account (HL only)">Current account (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20872/the-marshall-lerner-condition-j-curve-hl-only.html" title="The Marshall-Lerner condition / J curve (HL only)">The Marshall-Lerner condition / J curve (HL only)</a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20899/units-41-46-multiple-choice-quiz-.html" title="Units 4.1-4.6: Multiple choice quiz ">Units 4.1-4.6: Multiple choice quiz </a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../42989/unit-41-46-multiple-choice-quiz-ii.html" title="Unit 4.1-4.6: Multiple choice quiz II">Unit 4.1-4.6: Multiple choice quiz II</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../39438/unit-41-46-international-trade-crossword.html" title="Unit 4.1-4.6: International trade crossword">Unit 4.1-4.6: International trade crossword</a></li><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../32423/unit-47-sustainable-development-.html" title="Unit 4.7: Sustainable development ">Unit 4.7: Sustainable development </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../26092/water-scarcity-activity.html" title="Water scarcity activity">Water scarcity activity</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32426/sustainable-development.html" title="Sustainable development">Sustainable development</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20928/unit-48-measuring-development-.html" title="Unit 4.8: Measuring development ">Unit 4.8: Measuring development </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30686/measuring-development.html" title="Measuring development">Measuring development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21627/economic-development-.html" title="Economic development ">Economic development </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30679/unit-47-48-review-sheet.html" title="Unit 4.7-4.8: Review sheet">Unit 4.7-4.8: Review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Unit 4.9: Barriers to development">Unit 4.9: Barriers to development</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30727/barriers-to-development-in-international-trade.html" title="Barriers to development in International trade">Barriers to development in International trade</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../32430/unit-410-economic-growth-andor-economic-development-strategies.html" title="Unit 4.10: Economic growth and/or economic development strategies">Unit 4.10: Economic growth and/or economic development strategies</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30687/the-role-of-domestic-factors.html" title="The role of domestic factors">The role of domestic factors</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30688/the-role-of-international-trade-and-development.html" title="The role of international trade and development">The role of international trade and development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30689/the-role-of-foreign-direct-investment-fdi.html" title="The role of foreign direct investment (FDI)">The role of foreign direct investment (FDI)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../25240/the-role-of-foreign-aid-.html" title="The role of foreign aid ">The role of foreign aid </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30819/multilateral-development-assistance.html" title="Multilateral development assistance">Multilateral development assistance</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21632/the-role-of-international-debt.html" title="The role of international debt">The role of international debt</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../25242/the-balance-between-markets-and-intervention.html" title="The balance between markets and intervention">The balance between markets and intervention</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30926/unit-49-410-review-sheet.html" title="Unit 4.9 - 4.10: Review sheet">Unit 4.9 - 4.10: Review sheet</a></li></ul></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../21380/assessment.html" title="Assessment">Assessment</a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Internal assessment ">Internal assessment </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20608/how-to-write-your-ia-student-handout.html" title="How to write your IA? 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<div id="main-column" class="span9"> <article id="the-market-for-foreign-exchange" style="margin-top: 16px;">
<h1 class="section-title">The market for foreign exchange</h1>
<ul class="breadcrumb"><li><a title="Home" href="../../../economics.html"><i class="fa fa-home"></i></a><span class="divider">/</span></li><li><span class="gray">Unit 4: Global economy</span><span class="divider">/</span></li><li><a title="Go to: Unit 4.5: Exchange rates" href="../20853/unit-45-exchange-rates.html">Unit 4.5: Exchange rates</a><span class="divider">/</span></li><li><span class="active">The market for foreign exchange</span></li></ul>
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<h2><img alt="" src="../../../ib/economics/images/international-trade-2/4000.jpg" style="width: 320px; height: 192px; float: left;">Introduction</h2><p>This page looks at the factors that lead to changes in currency demand and supply, including foreign demand for a country’s exports, domestic demand for imports, relative interest rates, relative inflation rates, investment from overseas in a country’s firms (foreign direct investment and portfolio investment) and speculation. This lesson also describes the balance any government / central bank must strike in attempting to protect the interests of all stakeholders in the economy - consumers, exporters, importers and domestic businesses.</p><hr class="hidden"><div class="blueBg"><h3>Enquiry question</h3><p>What are the factors that lead to changes in currency demand and supply and what exchange rate should central banks and governments aim for?</p></div><div class="blueBg"><p><span style="font-size:11.5pt"><img alt="" src="../../../ib/economics/images/international-trade-2/images-(3).jpg" style="width: 250px; height: 333px; float: right;" title="image: http://www.cartagenatravelguide.com/"></span><strong>Lesson time: </strong>70 minutes</p><p><strong>Lesson objectives:</strong></p><p>Explain the factors that lead to changes in currency demand and supply, including foreign demand for a country’s exports, domestic demand for imports, relative interest rates, relative inflation rates, investment from overseas in a country’s firms (foreign direct investment and portfolio investment) and speculation.</p><p>Examine the possible consequences of overvalued and undervalued currencies.</p><p>Evaluate the possible economic consequences of a change in the value of a currency, including the effects on a country’s inflation rate, employment, economic growth and current account balance.</p><p><strong>Teacher notes:</strong></p><p><span style="color:#FF0000;"></span></p><section class="tib-hiddenbox"><p><span style="color:#FF0000;"><strong>1.</strong> <strong>Beginning activity </strong>- begin with the prezi and the opening question and then discuss this as a class. (Allow 5 minutes in total)</span></p><p><span style="color:#FF0000;"><strong>2.</strong> <strong>Processes</strong> -<strong> technical vocabulary </strong>-<strong> </strong>the students can learn the background information from the opening video, activity 1 and 2 and the list of key terms. (20 minutes)</span></p><p><span style="color:#FF0000;"><strong>3. Applying the theory</strong> - activity 3 is a discussion based exercise and considers why the UK£ may have risen following a government decision to call an early election. (10 minutes)</span></p><p><span style="color:#FF0000;"><strong>4. Developing the theory</strong> - activities 4 and 5 consider the impact of a depreciation / devaluation on the other macroeconomic indicators. (15 minutes)</span></p><p><span style="color:#FF0000;"><strong>5. Revision exercise</strong> - activity 6 contains a paper two style question which makes an ideal homework or classwork exercise. (20 minutes)</span></p></section></div><p>The activities on this page are available as a class handout at: <a href="/media/ib/economics/files/international-trade/foreign-exchange-rate-market.pdf" target="_blank" title="Student handouts"><img class="ico" src="../../../thinkib/icons/student-handout.png"> The exchange rate market</a></p><div class="greenBg"><h4><em>Key terms:</em></h4><p><strong>Determinants of the market for a currency </strong>- the relative popularity for a nation's products, average price level, relative income levels, interest rates and investment transactions.</p><p><strong>Devaluation</strong> - an official lowering of the value of a country's currency, either covertly or discretely within a fixed or managed exchange rate system.</p></div><div class="pinkBg"><h4><strong>The market for foreign exchange</strong></h4><p>Begin by watching the following short video focusing on the exchange rate market for US and Canadian $ and then apply the theory to the questions that follow:</p><p style="text-align: center;"><iframe allowfullscreen="" frameborder="0" height="360" src="//www.youtube.com/embed/D41EuDh3epI" width="640"></iframe></p></div><div class="pinkBg"><h4><strong>Activity 1: Demand and supply for a currency</strong></h4><p>1. Start by drawing the supply and demand for two currencies e.g. US and UK$. Presume an initial exchange rate of £1 = $1.25 / $1 = £0.8</p><section class="tib-hiddenbox"><div class="row-fluid"><div class="span6 col-left"><div><p style="text-align: center;"><strong>Market for $</strong></p><p style="text-align: center;"><img alt="" src="../../../ib/economics/images/international-trade/uk-to-us-market.jpg" style="width: 320px; height: 320px;"></p></div></div><div class="span6"><div><p style="text-align: center;"><strong>Market for £</strong></p></div></div><p style="text-align: center;"><img alt="" src="../../../ib/economics/images/international-trade/us-to-uk-market.jpg" style="width: 320px; height: 320px;"></p></div></section><p>2. According to the video what are the 4 determinants of supply and demand (the video calls this shifters).</p><section class="tib-hiddenbox"><ul><li><span style="color:#FF0000;">tastes and preferences for both US / UK goods and services</span></li><li><span style="color:#FF0000;">average price level</span></li><li><span style="color:#FF0000;">income level (disposable income)</span></li><li><span style="color:#FF0000;">interest rates</span></li></ul></section><p>3. Illustrate the impact on the two diagrams if US products become less popular, relative to UK goods and services in both nations.</p><section class="tib-hiddenbox"><div class="row-fluid"><div class="span6 col-left"><div><p style="text-align: center;"><strong>Market for $</strong></p><p style="text-align: center;"><img alt="" src="../../../ib/economics/images/international-trade/market-for-%24-2.jpg" style="width: 320px; height: 320px;"></p></div></div><div class="span6"><div><p style="text-align: center;"><strong>Market for £</strong></p></div></div><p style="text-align: center;"><img alt="" src="../../../ib/economics/images/international-trade/market-for-%C2%A3-2.jpg" style="width: 320px; height: 320px;"></p></div><p><span style="color:#FF0000;">If US products were less popular in both nations then we would expect demand for $s (from the UK) to fall and the supply of £s to fall. This is because more UK citizens would wish to purchase American imports.</span></p></section><p>4. Explain the likely impact on the $ / £ exchange rate if the level of inflation in the UK was higher over a period of time.</p><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Over time goods and services in the UK would become increasingly more expensive, relative to US products. This means that demand for £s would fall and the supply would rise, meaning a depreciation in value.</span></p></section><p>5. Explain the likely impact on the $ / £ exchange rate if US raises interest rates relative to those offered in the UK over time.</p><section class="tib-hiddenbox"><div class="row-fluid"><div class="span6 col-left"><p style="text-align: center;"><strong>Market for $</strong></p><p style="text-align: center;"><img alt="" src="../../../ib/economics/images/international-trade/market-for-%24.jpg" style="width: 320px; height: 320px;"></p></div><div class="span6"><div><p style="text-align: center;"><strong>Market for £</strong></p></div></div><p style="text-align: center;"><img alt="" src="../../../ib/economics/images/international-trade/market-for-%C2%A3-s-rise.jpg" style="width: 320px; height: 320px;"></p></div><p><span style="color:#FF0000;">If US interest rates rise, relative to those offered in the UK, then we would expect demand for $s (from the UK) to rise and the supply of £s to rise, as more UK citizens would wish to purchase US$ to take advantage of the higher rates.</span></p></section></div><div class="pinkBg"><h4><strong>Activity 2</strong></h4><p>The following supply and demand curves represent the market for Єs, relative to the $. Illustrate the impact on the market for Єs of the following:</p><p> <span style="color:#000080;"> A rise in US GDP A fall in Euro zone interest rates</span></p><p><img alt="" src="../../../ib/economics/images/international-trade/euro-to-%24.jpg" style="width: 320px; height: 320px;"> <img alt="" src="../../../ib/economics/images/international-trade/euro-to-%24.jpg" style="width: 320px; height: 320px;"></p><section class="tib-hiddenbox"><p><span style="color:#FF0000;">A rise in the demand for Єs </span><span style="color:#FF0000;"><span style="color:#FF0000;">A fall in the demand for Єs</span></span></p></section><p> <span style="color:#000080;"> The imposition of tariffs on German cars <span style="font-size:12.0pt;line-height:115%;
font-family:"Times New Roman",serif;mso-fareast-font-family:Calibri;mso-fareast-theme-font:
minor-latin;color:navy;mso-ansi-language:TR;mso-fareast-language:EN-US;
mso-bidi-language:AR-SA">More US holidays sold in the EU </span><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman",serif;
mso-fareast-font-family:"Times New Roman";mso-ansi-language:TR;mso-fareast-language:
TR;mso-bidi-language:AR-SA"><span style="mso-spacerun:yes"> </span></span> </span></p><p><img alt="" src="../../../ib/economics/images/international-trade/euro-to-%24.jpg" style="width: 320px; height: 320px;"> <img alt="" src="../../../ib/economics/images/international-trade/euro-to-%24.jpg" style="width: 320px; height: 320px;"></p><section class="tib-hiddenbox"><p><span style="color:#FF0000;">A fall in the <span style="color:#FF0000;">demand for Є </span></span><span style="color:#FF0000;">A rise in <span style="color:#FF0000;">the supply of Єs</span></span></p></section><p> <span style="color:#000080;">A fall in Euro zone GDP A rise in US income tax rates</span></p><p><img alt="" src="../../../ib/economics/images/international-trade/euro-to-%24.jpg" style="width: 320px; height: 320px;"> <img alt="" src="../../../ib/economics/images/international-trade/euro-to-%24.jpg" style="width: 320px; height: 320px;"></p><section class="tib-hiddenbox"><p><span style="color:#FF0000;">A fall in <span style="color:#FF0000;">the supply of Єs </span></span><span style="color:#FF0000;">A fall in demand for <span style="color:#FF0000;"><span style="color:#FF0000;">Єs</span></span>.</span></p></section></div><div class="pinkBg"><h4><strong>Activity 3: Political considerations</strong></h4><p>Watch the following video which outlines the impact on the value of the UK£ following the news that Boris Johnson won a substantial majority in the 2019 general election. Explain why this news will have strengthened the £.</p><p style="text-align: center;"><iframe allowfullscreen="" frameborder="0" height="360" src="//www.youtube.com/embed/CeCEAWGDqOk" width="640"></iframe></p></div><section class="tib-hiddenbox"><p><strong>Hint:</strong></p><p><span style="color:#FF0000;">The video highlights that following the news of the victory for the standing government the £ made significant gains in value. This was widely believed to be the currency market reacting to the stability that a enhanced majority was likely to bring to the nation. </span></p><p><span style="color:#FF0000;">However, the video also stated that moving forward Theresa May's enhanced position might actually weaken the value of the £. The reasoning behind this is that a stronger position in the Parliament might make the UK Prime Minister negotiate a harder 'Brexit', which could effect the UK's future trading position. </span></p></section><div class="pinkBg"><h4><strong>Activity 4: Currency devaluation</strong></h4><p>Watch the following short video before discussing why China might be trying to devalue its currency?</p><p style="text-align: center;"><iframe allowfullscreen="" frameborder="0" height="360" src="//www.youtube.com/embed/i3RZoHZ0EgI" width="640"></iframe></p><p>(a) Why might China be deliberately trying to reduce the value of their currency?</p><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Cheaper exports may cause an increase in AD through a rise in net exports. Though this may also lead to falls in real wages as inflation rises, causing a fall in AD. This in turn <span style="color:#FF0000;">may reduce cyclical unemployment levels.</span></span></p></section><p>(b) Illustrate the impact of a depreciation on AD and AS.</p><p><img alt="" src="../../../ib/economics/images/macro-economics/sras-diagram.jpg" style="width: 320px; height: 320px;"> <img alt="" src="../../../ib/economics/images/macro-economics/sras-diagram.jpg" style="width: 320px; height: 320px;"></p><section class="tib-hiddenbox"><p><img alt="" src="../../../ib/economics/images/macro-economics/fall-in-sras.jpg" style="width: 320px; height: 320px;"> <img alt="" src="../../../ib/economics/images/macro-economics/rise-in-y-on-srad-curve.jpg" style="width: 320px; height: 320px;"></p></section><p>(c) Based on your responses (a - b), is China correct in trying to devalue the Chinese Yuan?</p><section class="tib-hiddenbox"><p><span style="color:#FF0000;">This depends, China would expect to see a rise in net exports but a fall in consumption as cost push inflation eats into real wage levels.</span></p></section></div><div class="pinkBg"><h4><strong>Activity 5: </strong><strong>How a devaluation the UK economy?</strong></h4><p>In the aftermath of the UKs decision to leave the trading bloc the £ fell by 15% against the U$. The table below highlights the impact on the UK economy. Does it support the above theory that a devaluation will provide both advantages and disadvantages for an economy? </p><table border="3" cellpadding="0" cellspacing="0"><tbody><tr><td style="text-align: center;"><strong>Time period</strong></td><td style="text-align: center;"><strong>Current account £ million </strong></td><td style="text-align: center;"><strong>Inflation</strong></td><td style="text-align: center;"><strong>Economic Growth</strong></td></tr><tr><td style="text-align: center;">Pre-referendum (June 2016)</td><td style="text-align: center;">(33,034)</td><td style="text-align: center;">0.75 %</td><td style="text-align: center;">1.8% (year on year)</td></tr><tr><td style="text-align: center;">Post-referendum (2017)</td><td style="text-align: center;">(23,182)</td><td style="text-align: center;">3 %</td><td style="text-align: center;">1.7% (year on year)</td></tr><tr><td style="text-align: center;">Post-referendum (2018)</td><td style="text-align: center;">(23,700)</td><td style="text-align: center;">2.5 %</td><td style="text-align: center;">1.4 % (year on year)</td></tr></tbody></table><section class="tib-hiddenbox"><p><span style="color:#FF0000;">The table would appear to support this view. In the year after the referendum decision a number of UK products have been reduced in size to reduce costs (a term known as shrink-flation). At the same time inflation crept up to 3%, above the Bank of England target rate, forcing the bank to raise interest rates for the first time in ten years, following its October meeting.</span></p><p><span style="color:#FF0000;">At the same time UK manufacturers have enjoyed the weaker sterling value with the sector growing and the has helped Britain reduce its current account deficit. This sector will also have contributed to the UKs growth figures and compensated, in part, for the fall in consumer sales in 2017 and 2018.</span> <span style="color:#FF0000;">Though i</span><span style="color:#FF0000;">t is noticeable that economics growth rates were lower following the result, suggesting that any gains from an improvement in net exports is not sufficient to compensate for the rise in import costs.</span></p></section></div><div class="pinkBg"><h4><strong>Activity 6: Link to the assessment - paper two type question (old syllabus)</strong></h4><p><span style="color:#0000CD;"></span><a href="https://www.bbc.com/news/business-45360223"><span style="color:#000080;"><strong>Argentina raises rates as peso plummets</strong></span></a></p><p>(a) Define the following terms:</p><p>i.<strong><em> exchange rate</em></strong> (line 8) <em>[2 marks]</em></p><section class="tib-hiddenbox"><table border="1" cellpadding="0" cellspacing="0"><tbody><tr><td style="width:47px;"><p align="center"><strong>Level</strong></p></td><td style="width:491px;"><p><strong>Descriptor</strong></p></td><td style="width:63px;"><p align="center"><strong>Mark</strong></p></td></tr><tr><td style="width:47px;"><p align="center">0</p></td><td style="width:491px;"><p>The work does not reach any of the standard described below</p></td><td style="width:63px;"><p align="center">0</p></td></tr><tr><td style="width:47px;"><p align="center">1</p></td><td style="width:491px;"><p>The idea that it is something to do with the relative price of currencies</p></td><td style="width:63px;"><p align="center">1</p></td></tr><tr><td style="width:47px;"><p align="center">2</p></td><td style="width:491px;"><p>An accurate definition that it is the price of one currency in terms of another</p></td><td style="width:63px;"><p align="center">2</p></td></tr></tbody></table><p><span style="color:#FF0000;"></span></p></section><p>ii. <strong><em>interest rates </em></strong>(line 12) <em>[2 marks]</em></p><section class="tib-hiddenbox"><table border="1" cellpadding="0" cellspacing="0"><tbody><tr><td style="width:47px;"><p align="center"><strong>Level</strong></p></td><td style="width:491px;"><p><strong>Descriptor</strong></p></td><td style="width:63px;"><p align="center"><strong>Mark</strong></p></td></tr><tr><td style="width:47px;"><p align="center">0</p></td><td style="width:491px;"><p>The work does not reach any of the standard described below</p></td><td style="width:63px;"><p align="center">0</p></td></tr><tr><td style="width:47px;"><p align="center">1</p></td><td style="width:491px;"><p>The idea that it relates to the price of money</p></td><td style="width:63px;"><p align="center">1</p></td></tr><tr><td style="width:47px;"><p align="center">2</p></td><td style="width:491px;"><p>An accurate definition that it is the price of borrowing money, money added to the value of a loan that must be repaid</p></td><td style="width:63px;"><p align="center">2</p></td></tr></tbody></table></section><p>(b) i. Calculate the % devaluation of the Peso, relative to the US$ and the fall in national income between 2018 and 2021. <em>[3 marks]</em></p><section class="tib-hiddenbox"><p><span style="color:#FF0000;"><em>Economic growth % </em><em>base year = (0.1% + 0.2% + 15.5% + 1.4%) = 17.47%</em></span></p><p><span style="color:#FF0000;"><em>Currency devaluation</em><em> % (</em><em>100.2 – 37.69)</em><em> / </em><em>37.69</em><em> x 100 = </em><em>165.8</em><em>%</em></span></p><p><span style="color:#FF0000;"><em>Mark as 2+2 (maximum marks 3)</em></span></p></section><p>ii. Describe the inflation described in the passage? <em>[2 marks]</em></p><section class="tib-hiddenbox"><table border="1" cellpadding="0" cellspacing="0"><tbody><tr><td style="width:47px;"><p align="center"><strong>Level</strong></p></td><td style="width:491px;"><p><strong>Descriptor</strong></p></td><td style="width:63px;"><p align="center"><strong>Mark</strong></p></td></tr><tr><td style="width:47px;"><p align="center">0</p></td><td style="width:491px;"><p>The work does not reach any of the standard described below</p></td><td style="width:63px;"><p align="center">0</p></td></tr><tr><td style="width:47px;"><p align="center">1</p></td><td style="width:491px;"><p>A vague definition that it is caused by a rise in output costs not AD</p></td><td style="width:63px;"><p align="center">1</p></td></tr><tr><td style="width:47px;"><p align="center">2</p></td><td style="width:491px;"><p>An accurate definition that the Peso devaluation and higher interest rates have caused cost push inflation (higher output costs)</p></td><td style="width:63px;"><p align="center">2</p></td></tr></tbody></table></section><p>(c) List <strong><em>four</em></strong> factors that contribute to the demand for a currency. <em>[4 marks]</em></p><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Demand for a nation's currency is derived from a combination of the following:</span></p><ul><li><span style="color:#FF0000;">the popularity of a country’s exports (including tourist revenues)</span></li><li><span style="color:#FF0000;">the level of investment by overseas citizens in a nation</span></li><li><span style="color:#FF0000;">foreign currency derived from remittances from abroad</span></li><li><span style="color:#FF0000;">speculators looking to make a profit on changes in currency values. </span></li></ul><p><span style="color:#FF0000;"><em>Mark as 1 for each factor identified </em></span></p></section><p>(d) Using a diagram, explain how a fall in inward foreign investment can affect the value of the Peso. <em>[4 marks]</em></p><section class="tib-hiddenbox"><table border="1" cellpadding="0" cellspacing="0"><tbody><tr><td style="width:47px;"><p align="center"><strong>Level</strong></p></td><td style="width:491px;"><p><strong>Descriptor</strong></p></td><td style="width:63px;"><p align="center"><strong>Mark</strong></p></td></tr><tr><td style="width:47px;"><p align="center">0</p></td><td style="width:491px;"><p>The work does not reach any of the standard described below</p></td><td style="width:63px;"><p align="center">0</p></td></tr><tr><td style="width:47px;"><p align="center">1</p></td><td style="width:491px;"><p>An accurate diagram showing a decline in the value of the Peso, relative to the US$ as a result of falling demand for its currency <strong>OR</strong> an explanation that the fall in demand for the Peso is a consequence of fewer foreign citizens choosing to invest in the country. When an institution chooses to invest in a country, in this case Argentina, they must first convert their foreign currency into Pesos.</p></td><td style="width:63px;"><p align="center">1-2</p></td></tr><tr><td style="width:47px;"><p align="center">2</p></td><td style="width:491px;"><p>An accurate diagram showing a decline in the value of the Peso, relative to the US$ as a result of falling demand for its currency <strong>AND</strong> an explanation that the fall in demand for the Peso is a consequence of fewer foreign citizens choosing to invest in the country. When an institution chooses to invest in a country, in this case Argentina, they must first convert their foreign currency into Pesos.</p></td><td style="width:63px;"><p align="center">3-4</p></td></tr></tbody></table><p><span style="color:#FF0000;">Mark as 2 (diagram) + 2 (explanation). Incorrectly labelled diagrams can be rewarded with a maximum of 1. Suitable labels include: P and Q; Price of Peso relative to $; Peso / $ and the X index should be labelled quantity of Peso; Quantity or Q.</span></p></section><p>(e) Using an AD/AS diagram, explain how a fall in the value of a currency can lead to higher levels of economic growth in an economy. <em>[4 marks]</em></p><section class="tib-hiddenbox"><table border="1" cellpadding="0" cellspacing="0"><tbody><tr><td style="width:47px;"><p align="center"><strong>Level</strong></p></td><td style="width:491px;"><p><strong>Descriptor</strong></p></td><td style="width:63px;"><p align="center"><strong>Mark</strong></p></td></tr><tr><td style="width:47px;"><p align="center">0</p></td><td style="width:491px;"><p>The work does not reach any of the standard described below</p></td><td style="width:63px;"><p align="center">0</p></td></tr><tr><td style="width:47px;"><p align="center">1</p></td><td style="width:491px;"><p>For an accurate AD / AS diagram showing a shift to the right (a rise in in AD) and an increase in real GDP <strong>OR </strong>an explanation that a weaker currency increases the international competitiveness of the nation's products and hence net exports. For example, more tourists may choose to visit the nation, encouraged by lower prices. With net exports forming one of the components of AD this may result in higher levels of growth in real GDP.</p></td><td style="width:63px;"><p align="center">1-2</p></td></tr><tr><td style="width:47px;"><p align="center">2</p></td><td style="width:491px;"><p>For an accurate AD / AS diagram showing a shift to the right (a rise in in AD) and an increase in real GDP <strong>AND </strong>an explanation that a weaker currency increases the international competitiveness of the nation's products and hence net exports. For example, more tourists may choose to visit the nation, encouraged by lower prices. With net exports forming one of the components of AD this may result in higher levels of growth in real GDP.</p></td><td style="width:63px;"><p align="center">3-4</p></td></tr></tbody></table><p><span style="color:#FF0000;"><span style="color:#FF0000;"><img alt="" src="../../../ib/economics/images/macro-economics/demand-pull-inflation.jpg" style="width: 300px; height: 300px; float: left;"></span>Mark as 2 (diagram) + 2 (explanation). Incorrectly labelled diagrams can be rewarded with a maximum of 1. Suitable labels include: Average price or AP and real GDP, Y, real national income or real Y.</span></p></section><p>(f) Illustrate using an appropriate diagram why a further rise in interest rates might reduce the downward pressure on the Argentina Peso? <em>[4 marks]</em></p><section class="tib-hiddenbox"><table border="1" cellpadding="0" cellspacing="0"><tbody><tr><td style="width:47px;"><p align="center"><strong>Level</strong></p></td><td style="width:491px;"><p><strong>Descriptor</strong></p></td><td style="width:63px;"><p align="center"><strong>Mark</strong></p></td></tr><tr><td style="width:47px;"><p align="center">0</p></td><td style="width:491px;"><p>The work does not reach any of the standard described below</p></td><td style="width:63px;"><p align="center">0</p></td></tr><tr><td style="width:47px;"><p align="center">1</p></td><td style="width:491px;"><p>For an accurate diagram showing the supply and demand for the Argentina Peso, with a left shift supply and / or a right shift in demand for the Peso <strong>OR </strong>an explanation that following the rise in interest rates fewer Argentinians will choose to purchase overseas assets (hence the fall in supply) and more overseas citizens will place their savings in Argentinian banks (hence the rise in demand for the Peso).</p></td><td style="width:63px;"><p align="center">1-2</p></td></tr><tr><td style="width:47px;"><p align="center">2</p></td><td style="width:491px;"><p>For an accurate diagram showing the supply and demand for the Argentina Peso, with a left shift supply and / or a right shift in demand for the Peso <strong>AND </strong>an explanation that following the rise in interest rates fewer Argentinians will choose to purchase overseas assets (hence the fall in supply) and more overseas citizens will place their savings in Argentinian banks (hence the rise in demand for the Peso).</p></td><td style="width:63px;"><p align="center">3-4</p></td></tr></tbody></table><p><span style="color:#FF0000;">Mark as 2 (diagram) + 2 (explanation). Incorrectly labelled diagrams can be rewarded with a maximum of 1. Suitable labels include: Price; P; price of Peso or Price of Peso / US$. The X axis should be labelled Q; quantity or quantity of Peso.</span></p></section><p>(g) Using your knowledge of economics, evaluate the likely impact of a depreciating currency on the performance of the Argentina economy. <em>[15 marks]</em></p><section class="tib-hiddenbox"><p><strong>Command term: Evaluate</strong></p><p><em>This command term asks candidates to reflect on both the positive and negative impacts of a depreciating currency on the performance of the economy and reach a plausible conclusion supported by appropriate evidence.</em></p><p><strong><em>Positive impacts of a depreciating currency on the economy:</em></strong></p><ul><li>A weaker currency improves the competitiveness of a nation's products, making exports cheaper and imports more expensive. This should increase the level of net exports, which will increase real GDP in the economy. This in turn can improve employment levels. This may be particularly true for the nation's tourist sector which is very labour intensive.</li><li>a recognition that the exact impact on export revenues and import expenditure will ultimately depend on the price elasticities of demand for traded products.</li></ul><p><strong><em>Negative impacts of a depreciating currency on the economy:</em></strong></p><ul><li>a depreciating currency value increases the price of imported goods, including raw materials that the nation depends upon, increasing the costs of production and leading to cost push inflationary pressures.</li><li>a depreciated currency may also encourage complacency and reduced inefficiency among domestic producers.</li><li>rising inflation, unless accompanied by higher rates of GDP, will reduce real income levels and this will be noticed particularly by citizens travelling overseas or those consuming imported products</li></ul><p><strong>Responses for question (g) should be graded according to the following mark bands:</strong></p><table border="1" cellpadding="0" cellspacing="0"><tbody><tr><td><p align="center"><strong>Marks</strong></p></td><td style="width:550px;"><p align="center"><strong>Level descriptor</strong></p></td></tr><tr><td><p align="center">0</p></td><td style="width:550px;"><p>The response is below the standards described below.</p></td></tr><tr><td><p align="center">1-3</p></td><td style="width:550px;"><p>The response indicates little understanding of the demands of the question</p><p>The response uses little relevant theory</p><p>Little attempt is made to make use of the text/data.</p></td></tr><tr><td><p align="center">4-6</p></td><td style="width:550px;"><p>The response indicates some understanding of the demands of the question</p><p>The response makes limited use of theory </p><p>There is limited evaluation contained in the response</p><p>The response makes limited use of the text/data to support their arguments.</p></td></tr><tr><td><p align="center">7-9</p></td><td style="width:550px;"><p>The response indicates an understanding of the demands of the question</p><p>Some relevant theory is used in the response</p><p>The response contains some evaluation</p><p>The response makes some use of the text/data.</p></td></tr><tr><td><p align="center">10-12</p></td><td style="width:550px;"><p>The response indicates an understanding of the demands of the question</p><p>The response uses relevant theory appropriately</p><p>Evaluation is used appropriately</p><p>There is appropriate use of the text/data.</p></td></tr><tr><td><p align="center">13-15</p></td><td style="width:550px;"><p>The response indicates an understanding of the demands of the question</p><p>The response makes effective use of relevant theory</p><p>Evaluation is used effectively</p><p>The response makes effective use of the text/data.</p></td></tr></tbody></table></section></div><p>The P2 style question is available as a PDF file at: <a href="/media/ib/economics/files/international-trade/argentina-peso.pdf" target="_blank" title="Questions"><img class="ico" src="../../../thinkib/icons/question.png"> Argentina Peso</a></p><p>Mark scheme is available as a PDF file at: <a href="/media/ib/economics/files/international-trade/argentina-peso-mark-scheme.pdf" target="_blank" title="Questions"><img class="ico" src="../../../thinkib/icons/question.png"> Markscheme</a></p><script>document.querySelectorAll('.tib-teacher-only').forEach(e => e.remove());</script>
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