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EcoHL P2 N05 TZ0 - 2 Explain the multiplier effect of an...

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1 BO IB DIPLOMA PROGRAMME P R O G R A M M E D U DIPLOME D U B I - - PROGRAMA DEL DIPLOMA DEL BI ECONOMICS HIGHER LEVEL PAPER 2 Monday 14 November 2005 (afternoon) 1 hour INSTRUCTIONS TO CANDIDATES Do not turn over this examination paper until instructed to do so. Answer three questions. Use fully labelled diagrams and real - world examples where appropriate.
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N05/3/ECONO/HP2/ENG/TZ0/XX 8805-5102 – 2 – Answer three questions. Each question is worth [10 marks]. 1. Using appropriate diagrams, explain the difference between the law of diminishing returns and economies of scale. 2.
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Unformatted text preview: 2. Explain the multiplier effect of an increase in government spending. 3. Using an example, explain how the concept of opportunity cost is a key element in the theory of comparative advantage. 4. With reference to the Marshall-Lerner condition, explain how the depreciation of a country’s exchange rate might affect its current account balance. 5. Explain why economic growth is likely to generate external costs, which are a threat to sustainable development. 6. Explain the difference between outward-oriented and inward-oriented growth strategies....
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