IB Internal Assessment (IA) Economics Higher level (HL) 2026 May Solution & Worked Answer

Economic Analysis of Corrective Taxation, Monetary Intervention, and Trade Protectionism

Solution Overview

This collection examines three core economic themes: the efficiency of corrective taxes on negative externalities, the impact of central bank intervention on inflation, and the consequences of trade protectionism on global interdependence.

The analysis employs rigorous economic modeling, utilizing supply and demand, money market, and AD/AS diagrams to evaluate policy effectiveness. Key findings address how sugary drink taxes reallocate resources, how interest rate hikes manage inflation, and how lumber tariffs trigger cost-push inflation.

The exemplar demonstrates analytical depth through nuanced evaluations of stakeholder impacts, such as the regressive nature of consumption taxes and the risks of trade diversion, alongside precise diagrammatic application.

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