Practice 3. Macroeconomics with authentic IB Economics exam questions for both SL and HL students. This question bank mirrors Paper 1, 2, 3 structure, covering key topics like microeconomics, macroeconomics, and international trade. Get instant solutions, detailed explanations, and build exam confidence with questions in the style of IB examiners.
Nepal is a landlocked country in South Asia with an estimated population of 29 million. Agriculture remains central to the economy, accounting for about 27% of gross domestic product (GDP) and employing a sizeable proportion of the workforce. However, the country also relies heavily on tourism and remittances from migrant workers abroad, which make up more than 25% of Nepal’s total GDP. Nepal has been seeking to diversify its economy through foreign direct investment (FDI) in energy, infrastructure, and services.
In 2020, Nepal’s GDP stood at US$29.3 billion. By 2021, it had increased to US$30.5 billion, partly due to post-pandemic economic recovery and continued growth in the tourism sector. Official unemployment figures in Nepal are relatively low, but underemployment remains a major issue, especially in rural areas. The country’s Gini coefficient is estimated at 0.32, indicating moderate income inequality, though rural–urban disparities still persist. Nepal’s tax system includes both direct and indirect taxes; the highest marginal rate for personal income tax is approximately 30%.
The tourism sector is vital. Trekking permits, especially for the Annapurna, Everest, and Langtang regions, represent a key source of government revenue. Due to recent changes in permit fees and fluctuations in tourism numbers, local businesses have experienced varying levels of income from trekking-related services.
Table 1: Labour market data in Nepal (2021)
| Population (millions) | Labour force (millions) | Employed (millions) | Unemployed (millions) |
|---|---|---|---|
| 29 | 16.0 | 15.6 | 0.4 |
Table 2: Trekking permit data for Nepal
| Year | Average permit price (USD) | Number of permits sold |
|---|---|---|
| 2021 | 50 | 150 000 |
| 2022 | 60 | 120 000 |
Using the information in Table 1, calculate the official unemployment rate in Nepal for 2021.
Using the data provided in the text, calculate Nepal’s real GDP growth rate from 2020 to 2021. Show your working.
Using information from Table 2, calculate the price elasticity of demand for trekking permits in Nepal when the average permit price increases from US$50 to US$60.
Using information from Table 2, calculate the change in total revenue from trekking permit sales between 2021 and 2022.
Define the term “Keynesian multiplier.”
Using an AD/AS diagram, explain how an increase in foreign direct investment might affect real output in Nepal in the short run.
Using information from Table 1, calculate the labour force participation rate in Nepal for 2021.
Using information from the text, explain how income inequality could act as a constraint on Nepal’s economic growth.
Using the text/data provided and your knowledge of economics, recommend a policy which could be implemented by the government of Nepal in order to promote sustainable economic growth.
Albania is a country in Southeastern Europe with an estimated population of about 2.8 million in 2022. The Albanian economy has been transitioning from a centrally planned system to a market-based system and has experienced positive real GDP growth in recent years. Tourism is a significant contributor to Albania’s GDP, and the government has intensified efforts to promote the country’s attractions along its Adriatic and Ionian coasts.
In 2022, Albania’s unemployment rate was around 12%, partly due to structural challenges in the economy. The government operates a progressive personal income tax system, with rates ranging from 0% up to 23%. Corporate income tax is set at 15%. Value-added tax (VAT) on most goods and services stands at 20%.
Albania’s trade balance remains negative, as the country’s main exports (textiles, footwear, and mineral fuels) have not kept pace with imports (machinery, food, and manufactured goods). The government has embarked on several infrastructural projects to attract foreign investment and reduce transport costs, including a newly announced US$200 million investment in highways. Economists estimate the marginal propensity to consume (MPC) in Albania to be about 0.8.
Table 1: Selected Macroeconomic Indicators for Albania
| Year | Real GDP (billion US$) | Unemployment Rate (%) | Gini Coefficient |
|---|---|---|---|
| 2021 | 15.2 | 11.5 | 0.30 |
| 2022 | 16.0 | 12.0 | 0.31 |
Table 2: Tourism Data in Albania (2022)
| Price per Tour Package (EUR) | Quantity Demanded of Tour Packages (thousands) |
|---|---|
| 400 | 140 |
| 450 | 120 |
Using the information provided in Table 1, calculate the percentage change in Albania’s real GDP between 2021 and 2022.
The Albanian government’s US$200 million highway project is expected to raise national income through the Keynesian multiplier, assuming the marginal propensity to consume (MPC) is 0.8. Calculate the total increase in national income that could result from this project.
Using the data in Table 2, calculate the price elasticity of demand (PED) for Albania’s tour packages when the price increases from EUR 400 to EUR 450.
Using the data in Table 1, calculate the absolute change in the unemployment rate between 2021 and 2022.
Define the term “progressive tax.”
Using an AD/AS diagram, explain how an increase in government spending on infrastructure could affect real GDP in Albania.
Using information from Table 1, calculate the approximate percentage change in Albania's Gini coefficient between 2021 and 2022. Show your working.
Using information from the text, explain how a persistent trade deficit might impact Albania’s economic growth.
Using the text/data provided and your knowledge of economics, recommend a policy which the government of Albania could implement in order to reduce unemployment.
Guatemala is a Central American country with an estimated population of 17.9 million (2022). According to World Bank data, real GDP was approximately US$85 billion in 2022. Agriculture, particularly coffee, sugar, and bananas, makes up a significant portion of Guatemala’s exports (around 28% of total exports). While the tourism sector has been expanding, recent global events caused slowdowns. The country experiences persistent inequality, with a Gini coefficient estimated at about 0.48 in 2021. Poverty remains a major concern, especially in rural areas.
Guatemala’s tax system includes both direct and indirect taxes, although collection remains challenging. Personal income tax rates are progressive, with a top rate of 31%, while the corporate income tax rate is 25%. A value-added tax (VAT) of 12% applies to most goods. Government spending has focused on infrastructure and social programs to reduce poverty and increase potential long-term growth.
Table 1: Macroeconomic Indicators of Guatemala (2019–2022)
| Year | Real GDP (US$ bn) | Nominal GDP (US$ bn) | Exports of Goods & Services (US$ bn) | Government Spending (US$ bn) |
|---|---|---|---|---|
| 2019 | 76.0 | 78.2 | 11.5 | 11.8 |
| 2020 | 73.5 | 75.0 | 10.2 | 12.1 |
| 2021 | 78.4 | 81.0 | 12.4 | 12.3 |
| 2022 | 85.0 | 88.0 | 13.5 | 13.2 |
Table 2: Income Distribution in Guatemala (2021)
| Quintile | Income share |
|---|---|
| 1 (lowest 20%) | 4.1% |
| 2 | 9.0% |
| 3 | 15.0% |
| 4 | 24.0% |
| 5 (highest 20%) | 47.9% |
Table 3: Market for Guatemalan Coffee in the US (price per 50 kg bag)
| Price per 50 kg bag | Quantity Demanded (tons) | Quantity Supplied (tons) |
|---|---|---|
| $110 | 900 | 550 |
| $120 | 850 | 600 |
| $130 | 800 | 650 |
| $140 | 750 | 700 |
| $150 | 700 | 740 |
Table 4: Tax Rates in Guatemala
| Type of tax | Rate of tax |
|---|---|
| Corporate income tax | 25% |
| Personal income tax | Progressive up to 31% |
| Value Added Tax (VAT) | 12% on most goods; some items taxed at 0% |
Figure 1 (not drawn here) shows that, when government spending in Guatemala increases by US$1 billion, real GDP rises by an estimated US$2.5 billion. This suggests a government spending multiplier of 2.5.
Using the information in Table 1, calculate the real GDP growth rate from 2021 to 2022.
Using Figure 1, the government spending rises by US$1 billion, yet real GDP rises by US$2.5 billion. Calculate the government spending multiplier and explain the main step used in your calculation.
Using the information in Table 3, calculate the price elasticity of demand (PED) for Guatemalan coffee when the price rises from US$120 to US$130 per 50 kg bag.
Using the information in Table 3, calculate the price elasticity of supply (PES) for Guatemalan coffee when the price increases from US$140 to US$150 per 50 kg bag.
Define the term “progressive tax.”
Using an AD/AS diagram, explain how an increase in government spending might increase real GDP and reduce unemployment in Guatemala.
Using the data in Table 3, calculate the approximate equilibrium price for Guatemalan coffee. Show your working.
Using information from Table 2, explain two ways in which high income inequality might hamper economic development in Guatemala.
Using the text/data provided and knowledge of economics, recommend a policy that the government of Guatemala could implement to reduce income inequality. Justify the recommendation.