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IB Economics: Inflation and Unemployment (Paper 2: intermediate)
IB Economics: Inflation and Unemployment (Paper 2: intermediate)
IB economics inflation and unemployment paper 2, intermediate: weighted index, participation, real growth per head and the Phillips curve.
Direct answers Answers in order: 7 percent, 5 percent, 60 percent, about 3.56 percent, about 2.75 percent, 13,200, 4 percent, 12 percent, 75,000 people, and the index is a weighted average.
01 Paper details (check answers afterwards)
| Item | Detail |
|---|---|
| Questions | 10 |
| Suggested time | 20 |
| Difficulty mix | Foundation 3 · Intermediate 3 · Challenge 3 · Error redo 1 |
| Chapter | Chapter: IB Economics: Inflation and Unemployment |
| Level | IB |
02 Questions (10 items)
- FoundationFood is 40 percent of spending with prices up 10 percent, housing 60 percent up 5 percent. What is the weighted inflation rate?
- FoundationEmployment is 5,700,000 and unemployment 300,000. What is the unemployment rate?
- FoundationThe labour force is 6,000,000 and the working age population 10,000,000. What is the participation rate?
- IntermediateNominal output rises 9 percent, population 1.2 percent and prices 4 percent. What is real growth per head?
- IntermediateThe nominal rate is 12 percent and inflation 9 percent. What is the real rate?
- IntermediateSpending is 12,000 a month when the index is 110. What is needed for the same basket at 121?
- ChallengeThe Phillips curve is inflation equals 6 minus 0.5 times unemployment. What is inflation at 4 percent unemployment?
- ChallengeOn the same curve, what unemployment rate gives zero inflation?
- ChallengeUnemployment is 8 percent, the natural rate 5 percent and the labour force 2,500,000. How many are cyclically unemployed?
- Error redoA student says a rising consumer price index means every price rises. What is wrong?
03 Answers and one-line notes
| # | Answer | One-line note |
|---|---|---|
| 1 | 7 percent | The weighted average is 0.4 times 10 plus 0.6 times 5, which gives 7 percent. |
| 2 | 5 percent | The labour force is 6,000,000, and 300,000 over 6,000,000 gives 5 percent. |
| 3 | 60 percent | The participation rate divides the labour force by the working age population. |
| 4 | About 3.56 percent | The three effects are chained: 1.09 divided by 1.012 and then by 1.04. |
| 5 | About 2.75 percent | 1.12 divided by 1.09 minus one gives 2.75 percent. |
| 6 | 13,200 | Spending scales with the index, so 12,000 times 121 over 110 applies. |
| 7 | 4 percent | Substituting gives 6 minus 2, that is 4 percent, as inflation rises below the natural rate. |
| 8 | 12 percent | Setting 6 minus 0.5u to zero gives u equal to 12, a natural rate reading. |
| 9 | 75,000 people | The three point gap times the labour force gives 75,000 people. |
| 10 | The index is a weighted average, so individual prices can fall | An average can rise while some items fall, and the weights favour large spending items. |
04 What to do after marking
- After marking, redo only the wrong items and write down which step went wrong (formula, unit, or misread number).
- Repeat the same item two days later; move to the next paper only when both attempts are correct.
- Parents only need the answer and note columns; there is no need to explain every item.
Work out inflation from the change in the consumer price index, convert every real value by division, and remember that the unemployment rate divides by the labour force, not the whole population.Tutor Registration →
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