Download ON EVALUATING

ON EVALUATION
J.Blink, Vienna, April 2004
There are likely to be several places on your exam where you are asked to evaluate something. One place is likely to be
the last part-question on the data response question and the other main one is in part (b) of the essay. It is also possible
to evaluate on Higher Level Paper 2, but it is more important on this paper to present accurate theory with appropriate
diagrams as quickly as possible.
On the questions on HL3 and SL 2, the highest mark bands are reserved for students who can illustrate the skill of
evaluation.
What does evaluation mean?
Two dictionary definitions of evaluate are as follows:


v: to examine and judge carefully; appraise
v : place a value on; judge the worth of something
How can I accomplish evaluation?
It is not quite enough to simply finish a sentence that begins, “On the other hand . . .” but it is a good start.

Prioritise the arguments
“The most important argument against protectionism in international trade is that it represents a global
misallocation of resources.” or “The least effective argument for protectionism in international trade, in terms of
economic reasoning, is that the industry is a strategic industry.”

Long run vs. short run
“In the short run, abnormal profits can be earned. However, in the long run this is not possible.” or “In the
short run, it may be possible to justify the infant industry argument. However, the danger is that in the long
run, the industry will remain inefficient.”

Consider the issue from the points of view of different stakeholders.
What is a stakeholder? One dictionary definition is as follows: a person or group that has an investment, share, or
interest in something.
In terms of economic theory, examples of stakeholders could be domestic producers, consumers, foreign
producers, high income people, low income people, or the government.
“A high exchange rate may be good for consumers because it makes imported goods less expensive and forces
domestic producers to be more efficient so that they compete with the less expensive imports. On the other hand,
it is clearly a disadvantage for those domestic producers who suffer from the competition from imports which
become less expensive with the higher value of the currency.” or “Supply side policies may be very good in terms
of creating a more flexible labour force and achieving economic growth. However, it may lower the standards
of living of workers who may suffer from deregulation of the labour laws.”
Practice

The law of demand says that the higher the price of a good, the lower will be the quantity demanded. This
accounts for the downward-sloping demand curve. However, there are exceptions to this law. Two exceptions to
the law are ____________________________.
1

There are several factors which cause a shift in the supply curve. These are ___ and . . . The most important of
these is _____ because ____ . . .

Minimum prices are good for _______________ because_____ . . .. However, they can be considered to be
negative for __________ because _______ . . . .

Maximum prices are good for _______________ because_____ . . . However, they can be considered to be
negative for __________ because ______ . . . .

Subsidies are good for _____ because ___ . . However, . . .

The answer to the question, “Should prices be increased?” depends on many things. It depends on ______ . . .

One way to correct the market failure of negative externalities is to tax the producers of the good creating the
negative externality. However, this is difficult because, _____ . . It is also a problems because _____ . . . ( Market
failure is a topic which involves much evaluation. You have to be able to evaluate any of the solutions to any of
the sources of market failure.)

In the short run, a firm is only able to increase output up to a certain point. This is due to the law of ____.
However, in the long run, all ____ . . . .

The biggest advantage of perfect competition (although it is primarily a theoretical advantage as is it very unlikely
that a real life market structure would follow all the assumptions of perfect competition) is that _____. The
disadvantage , however, would be that ____ . . (Assess the advantages and disadvantages of all the market
structures, considering the different stakeholders - and using the terms producer and consumer sovereignty)

Price discrimination can be considered to be negative because ______________ . . . On the positive side,
however, ______ . . .

There are four main central macroeconomic objectives which every government pursues. These are: ____ . . . The
difficulty that governments face is that when they pursue one objective, it is highly likely that other objectives
will come into conflict. For example, ___ . . (You can do this many times)

In the short run, economists agree that the aggregate supply curve is upward sloping. There is considerable
controversy over the likely shape of a country’s long run aggregate supply curve. Neo-Keynesians believe that
___ . . . Neo-classical economists, on the other hand, argue that ____ …. However, economists agree that the
LRAS curve is vertical at the full employment level of output. (This writing would obviously be accompanied by
several diagrams!)

Increasing aggregate demand may be good when ___ . . However, if the economy is __ . . . . .

Demand management may be appropriate for solving ____ unemployment. However, if the unemployment is ___
. . then increasing AD is likely to ___ . . .

In the short run, there may be a trade-off between inflation and unemployment. However, ___ . . . .

If a government wants to increase its spending to stimulate the economy, it may have to run a budget deficit. The
disadvantages of this are ___ . .

The advantages and disadvantages of tariffs depend on the various stakeholders. The diagram showing the effect
of a tariff is very useful for pointing out the various advantages and disadvantages. As can be seen in the diagram
below, ___ . . .
2

A country may decide to deal with a current account deficit by using expenditure reducing policies. These include
__ . . . The problems with these are __ . . . An alternate policy would be expenditure switching. This can be done
by ____ . . Disadvantages associated with these are ___ . . .

A high value of a currency is good for ____ and . . . . because ___ . . . However, it can be very damaging for ___
. . . because _____ . . .

A low value of a currency is good for ____ and . . . . because ___ . . . However, it can be very damaging for ___ .
. . because _____ . . .

Economic growth is highly desirable because ____ . . . However, on the negative side, __ .. . .
 The principal difference between economic growth and economic development is that ______ . . . .
 When considering the advantages and disadvantages of foreign direct investment, it is important to look at the
implications for both growth and development. In terms of achieving economic growth, FDI is very important
because ___ . . . However, when considering economic development, there are different arguments. For example,
__ . .
 When considering the advantages and disadvantages of international trade to LDCs, it is important to look at the
implications for both growth and development. In terms of achieving economic growth, trade is very important
because ___ . . . However, when considering economic development, there are different arguments. For example,
__ . ..
 When considering the advantages and disadvantages of foreign aid, it is important to look at the implications for
both growth and development. In terms of achieving economic growth, aid can be very important in filling several
gaps such as ___ . . However, the implications in terms of development are ___ . . .
 An outward-oriented strategy may be successful in terms of achieving _____. However, the disadvantages may be
___ . . . .
 The biggest disadvantage of an inward-oriented strategy is that ____ . .
ESSAY QUESTIONS

Evaluate the solutions that a government might employ to correct the problems of market failure.

Evaluate the effects of a rising interest rate on an economy.

Evaluate the effects of a falling exchange rate on an economy.

Evaluate the arguments in favour of MNC investment in LDCs.

Evaluate the view that foreign aid is more of a disadvantage for LDCs than an advantage.

Evaluate the measures that a government might use to reduce unemployment.

Evaluate the measures that a government might use to reduce inflation.

Evaluate the measures that a government might use to achieve economic growth.

Evaluate the measures that a government might use to reduce a current account deficit.
Please note: The practice questions and essay titles above do not represent an exhaustive list of all the questions you could be asked.
Examiners do their best to come up with original questions to test your knowledge and skills as an economist!
3