Recession in some economies has caused high unemployment. At the same time high levels of national debt and substantial budget deficits have been experienced. This means that governments can no longer use Keynesian demand management policies to solve the problem of unemployment. To what extent do you agree with this conclusion?

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2018). The mark or mark type is shown in brackets.

1. [25] Responses should provide a clear explanation of what economists mean by recession with the emphasis on low growth rates, deflation and rising unemployment. The link between recession and national debt and budget deficits should also be discussed. Analysis should then be used to explain how Keynesian demand management policies are supposed to work. An attempt should then be made to evaluate the extent to which Keynesian policies might be effective under the conditions described.
2. [18-25] L4: for an answer that examines why Keynesian policies might not be effective. This should include traditional criticisms of such policies, for example Crowding Out and possible problems relating to balance of payments deficits. Also it is expected that discussion will make the link between existing high levels of national debt and that this problem would be made worse by continuing to allow substantial budget deficits. Alternative approaches might also be discussed and a conclusion provided.
3. [14-17] L3: for an analysis of how Keynesian solutions to the problem of high unemployment would operate in theory. This analysis would focus upon the use of budget deficits combined with a multiplier effect and how this might impact on the level of output and employment.
4. [10-13] L2: for an answer that describes the terms recession, budget deficits and national debt and makes some attempt to explain how Keynesian demand management policies are supposed to work.
5. [1-9] L1: for an answer that has some basic correct facts but includes irrelevancies and errors of theory.