Approaching Data Response Questions with Confidence

1. Approaching Data Response Questions with Confidence Skills Involved in Answering Data Response Questions in IB Economics

2. Outline • Introduction • Skills Tested in Data Response Questions • Questions to Consider with Data • Practice

3. Introduction • IB Economics assessment has four parts • Paper 1. One long essay, 1 hour, 20% • Paper 2. Three short answers, 1 hour, 20% • Paper 3. Three data response questions, 2 hours, 40% • Internal Assessment. Four commentaries, 20%

4. Introduction • Data Response Questions (DRQ) account for 40% of HL assessment • 2 hours, must answer 3 out of 5 questions • Only standard IB reading time – 5 minutes before exam starts • The “Data” may consist of • Text, maximum 400 words • Data tables • Data charts • Or a combination of all three

5. Introduction • Each DRQ will have exactly the same format • Part 1: 2 definitions and/or calculations • 2 points each for a total of 4 points • Vague definition will earn you 1 of 2 points per question • Precise definition with an appropriate example will earn you 2 of 2 points per question • For calculations, show your steps • E.g. What is the price elasticity of demand? • E.g. What is the multiplier implied in the data? • (need to define and calculate)

6. Introduction • Part 2 & 3 – identification and application of appropriate theory • 4 points in total per Part (each Part with only 1 question) • For each Part, identification of correct appropriate theory will earn you 1 point of 2 • Correct application of appropriate theory will earn you full marks

7. Introduction • Part 4 – effective evaluation, supported by appropriate evidence or theory • 8 points in total (only 1 question) • Relevant concepts recognized and developed in reasonable depth, with some attempt at application and analysis will earn you 3-5 points • Relevant concepts recognized and developed in reasonable depth, effective evaluation, supported by appropriate evidence or theory will earn you 6-8 points • Tip: When deciding which DRQ to answer, read Part 4 of each DRQ and see if you are comfortable with that question • Part 4 generally builds upon the first three parts and • Part 4 is worth more points than each of the first three parts

8. Introduction • The DRQ’s will cover all sections of the syllabus • Each DRQ may cover a couple of sections • Need to apply theory in a linked way • MUST use evidence/data from the article for the last 3 parts!! • Extract data from article and label the diagrams with appropriate and specific labels, e.g. • Price of oil and not just Price • Price points – use real values, $50/barrel, instead of just P0 • Refer to the text in your answers!! • Need to EVALUATE in the last part • See separate guidance on how to EVALUATE

9. Outline • Introduction • Skills Tested in Data Response Questions • Questions to Consider with Data • Practice

10. Skills Tested in DRQ The range of skills Examples of questions and banana skins to avoid!

11. Basics of good preparation for the data response paper • Thorough knowledge of basic definitions and important economic data measures • Good understanding of key economic relationships (theoretical ideas are tested!) • Awareness of current policy debates in the world • Ability to interpret figures and work with them - the essence of data response! • Awareness of the limitations of economic data • Willingness to bring into an answer wider knowledge and evidence (not provided in the question)

12. Part 1. Knowledge questions - definitions • Tests a lower order skill but from knowledge comes the higher order skills • Appears at the start of a paper - e.g. define the terms used in the text, or charts and tables • Clear, precise definitions are required • Learn up to four main economics definitions a day in the final prep for the exams! • Look carefully at the mark allocation - only 2 marks will be available per definition • Don’t spend too much time on the definitions but beware dropped marks • If calculations, show your work!

13. opportunity cost monopoly market failure negative externality demerit good economic growth labor productivity structural unemployment multiplier-accelerator process real disposable income real rate of interest standard of living price level inflation trade-weighted exchange rate index Can you define these precisely? • All terms to be defined must be from the syllabus (not necessarily mentioned, but could be included implicitly • Must read the IB Glossary (on intranet) and the definitions at the back of the Lipsey textbook • Ask me for a copy of the Collins Economics Dictionary

14. Can you distinguish between: • direct and indirect taxation • fixed and floating exchange rates • GDP and GNP • income and wealth • inflation and the value of money • money and real income • private and social costs • relative and absolute poverty

15. Part 2 & 3. Data analysis / theory application questions (1) • First, comprehension • Without data comprehension, you can’t have correct application of theory to data • Answers might include • outlining a trend • identifying a peak or a trough • selecting relevant evidence from information given. • some summarising of the data or simple calculations particularly where index numbers are used • Are you asked to describe short run or longer run changes?

16. balance of payments interest rates money supply inflation measures real GDP data consumption and savings data general macroeconomic forecasts company investment and profits competitiveness indicators currency trends employment data unemployment data taxation and government spending international economic indicators Data sets used in questions

17. Example -consumption trends Remember to describe the rate of change carefully!

18. Part 2. Data analysis / theory application questions (2) • Second, analyse the data with application of economic principles • Higher order skills - reflected in the mark allocation • Often requires a theoretical relationship to be • identified • explained • illustrated / supported / questioned by using the data available in the exam • You need to use the data to score highly! • A change in the data is normally multi-causal

19. Global disinflation What factors might explain the lower inflation experienced in G7 nations during the 1990s?

20. Trends in the sterling exchange rate Why has the exchange rate been so strong in the last two years?

21. Trends in unemployment What is meant by long-term unemployment? Why has unemployment fallen in the last 3 years?

22. Real output & unemployment

23. Analysis questions on economic growth & the budget deficit Explain using the evidence in the chart how might the trend In economic growth might be expect to affect the PSBR

24. The exchange rate & the BOP

25. Part 3. Evaluation • Pros and cons • On the one hand, on the other hand • From the …’s point of view • The Keynesians believe… but the monetarists… • In the short run,…, but in the long run… • Review the paper on EVALUATION!

26. Outline • Introduction • Skills Tested in Data Response Questions • Questions to Consider with Data • Practice

27. Questions to Consider with Data • In what time period is the data presented? • quarterly / monthly / annual data? • Is data measured as a level or as a percentage change? • Is the data showing a percentage change and percentage of something (important!) • Is the data in monetary terms or an index number? • What unit of currency is used? (common currency?) • Is the data expressed in nominal or real terms? • Has the data been subjected to a seasonal adjustment? • Does the evidence include forecasts? • Who has produced the information? How reliable is it?

28. Quarterly data example (1) • Look for turning points in the charts • Look also for peaks & troughs This is just one way of showing the economic cycle

29. Percentage change and level of …consumption and interest rates

30. Both percentage changes What theoretical relationship would you expect between economic growth and total employment?

31. Percentage of Why has the savings ratio stayed so high?

32. Percentage change (growth of) • Rate of inflation - the annual percentage change in consumer prices • Consumer spending • Retail sales growth • Growth of wages and average earnings • Percentage change in real gross fixed investment spending • Percentage change in the money supply

33. Percentage of (scale measure) • Budget Deficit (PSBR) as a percentage of GDP (e.g. one of the Maastricht Convergence Criteria) • Personal Sector Savings Ratio - measured as a percentage of Real Personal Disposable Income • The Current Account deficit/surplus on the UK Balance of Payments as a percentage of GDP • UK Manufactured Exports as a percentage of total world trade • Unemployment as a percentage of the employed labour force

34. Examples of index numbers • Relative Unit Labour Costs (a measure of international competitiveness) • Consumer Price Index or the Producer Price Index (various other measures!) • Terms of Trade • Effective Exchange Rate Index • Consumer Confidence Index

35. Index numbers • Indices are values expressed as a percentage of a chosen base figure. • They don't have specified units such as pounds sterling • This is an advantage of index numbers - particularly when we want to look at data measured in different units to identify trends and relationships • Do some simple calculations if presented with index number series

36. Data in index number format

37. The sterling exchange rate index

38. Describing data in index format • Check the base year • Is it a weighted index? CPI and the Weighted Exchange Rate are examples of this • Calculate percentage changes in the data based on the index numbers (a good skill to practise!) • Be careful not to express the figures in monetary terms!

39. Outline • Introduction • Skills Tested in Data Response Questions • Questions to Consider with Data • Practice

40. Practice • The Economist – back pages with data and charts • The Financial Times • The World Bank Development Report 2004 • Other sources on the Economics subject page (e.g. Bized) • The news articles you use for your portfolio • In-class tests and exercises