Source: https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-5-2-fiscal-policy-and-ad-as-model [Revision notes](https://senecalearning.com/en-gb/revision-notes.md) › [IB Diploma](https://senecalearning.com/en-gb/revision-notes/ib-diploma.md) › [Economics](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics.md) › [Economics: IB Diploma](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma.md) › Fiscal Policy and AD-AS Model # Fiscal Policy and AD-AS Model Economics: IB Diploma, topic 2.5.2 ## Fiscal Policy & Aggregate Demand Fiscal policy is the use of government spending and tax policy to influence the path of the economy over time. ### Fiscal policy impacting AD ![Fiscal policy impacting AD](https://image-v2.cdn.app.senecalearning.com/2018-07/b4a2b18d-e934-422b-85a3-05b314ce3d49/Speed-Light-Blur-Fast-.jpg) - Graphically, we see that fiscal policy, whether through changes in spending or taxes, shifts the aggregate demand outward in the case of expansionary fiscal policy and inward in the case of contractionary fiscal policy. ### Expansionary fiscal policy ![Expansionary fiscal policy](https://image-v2.cdn.app.senecalearning.com/2020-06/cd22bd2c-f848-422c-bbd5-bb99e3129c18/AP%20Econ%20diagrams%20(29).png) - Expansionary fiscal policy increases the level of aggregate demand, through either increases in government spending or reductions in tax rates. - Expansionary policy can do this by: - Increasing consumption by raising disposable income through cuts in personal income taxes; - Increasing investment spending through cuts in business taxes; - Increasing government purchases through increased federal government spending on final goods and services and raising federal grants to state and local governments. ### Expansionary fiscal policy ![Expansionary fiscal policy](https://image-v2.cdn.app.senecalearning.com/2020-06/cd22bd2c-f848-422c-bbd5-bb99e3129c18/AP%20Econ%20diagrams%20(29).png) - The original equilibrium (E0) represents a recession, occurring at a quantity of output (Y0) below potential GDP. - However, a shift of aggregate demand from AD0 to AD1, enacted through an expansionary fiscal policy, can move the economy to a new equilibrium output of E1 at the level of potential GDP which the LRAS curve shows. ### Contractionary fiscal policy ![Contractionary fiscal policy](https://image-v2.cdn.app.senecalearning.com/2020-06/1a46ae05-0064-404f-91dd-bbc5f1ed58e7/AP%20Econ%20diagrams%20(30).png) - Fiscal policy can also contribute to pushing aggregate demand beyond potential GDP in a way that leads to inflation. - As shown above, a very large budget deficit pushes up aggregate demand, so that the intersection of aggregate demand (AD0) and aggregate supply (SRAS0) occurs at equilibrium E0, which is an output level above potential GDP. - Economists sometimes call this an “overheating economy” where demand is so high that there is upward pressure on wages and prices, causing inflation. ### Contractionary fiscal policy ![Contractionary fiscal policy](https://image-v2.cdn.app.senecalearning.com/2020-06/1a46ae05-0064-404f-91dd-bbc5f1ed58e7/AP%20Econ%20diagrams%20(30).png) - In this situation, contractionary fiscal policy involving federal spending cuts or tax increases can help to reduce the upward pressure on the price level by shifting aggregate demand to the left, to AD1, and causing the new equilibrium E1 to be at potential GDP, where aggregate demand intersects the LRAS curve. ## Test yourself on Fiscal Policy and AD-AS Model - Which of the following would increase AD? - Why do reductions in income tax lead to increases in AD? - Which of the following is a contractionary fiscal policy? [Practise this topic for free](https://app.senecalearning.com/classroom/course/7b55fd22-05a1-435c-9704-355732f0e415/section/cdc5fc1a-6878-4277-a6f9-84e90ae784ee/session) - Previous topic: [2.5.1 Introduction to Fiscal Policy](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-5-1-introduction-to-fiscal-policy.md) - Next topic: [2.5.3 Fiscal Policy Lags](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-5-3-fiscal-policy-lags.md) ## Economics: IB Diploma contents ### 1 Microeconomics - 1.1 Competitive Markets: Demand & Suply - [1.1.1 Markets & Demand](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-1-1-markets-and-demand.md) - [1.1.2 Diminishing Marginal Returns](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-1-2-diminishing-marginal-returns.md) - [1.1.3 Supply](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-1-3-supply.md) - [1.1.4 Market Equilibrium](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-1-4-market-equilibrium.md) - [1.1.5 Price Mechanism](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-1-5-price-mechanism.md) - [1.1.6 Consumer & Producer Surplus](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-1-6-consumer-and-producer-surplus.md) - [1.1.7 IB Multiple Choice - Demand](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-1-7-ib-multiple-choice-demand.md) - [1.1.8 IB Multiple Choice - Supply](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-1-8-ib-multiple-choice-supply.md) - 1.2 Elasticity - [1.2.1 Elasticities of Demand](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-2-1-elasticities-of-demand.md) - [1.2.2 Factors Affecting Price Elasticity of Demand](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-2-2-factors-affecting-price-elasticity-of-demand.md) - [1.2.3 Elasticity of Supply](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-2-3-elasticity-of-supply.md) - [1.2.4 Price Elasticity of Supply](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-2-4-price-elasticity-of-supply.md) - [1.2.5 IB Multiple Choice - Price Elasticity of Demand](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-2-5-ib-multiple-choice-price-elasticity-of-demand.md) - [1.2.6 IB Multiple Choice - Price Elasticity of Supply](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-2-6-ib-multiple-choice-price-elasticity-of-supply.md) - [1.2.7 IB Multiple Choice - Other Elasticities](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-2-7-ib-multiple-choice-other-elasticities.md) - 1.3 Government Intervention - [1.3.1 Indirect Taxes & Subsidies](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-3-1-indirect-taxes-and-subsidies.md) - [1.3.2 Application Question - Taxing Prices or Quantities](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-3-2-application-question-taxing-prices-or-quantities.md) - [1.3.3 Subsidies & Price Controls](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-3-3-subsidies-and-price-controls.md) - [1.3.4 Deadweight Loss & Government Intervention](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-3-4-deadweight-loss-and-government-intervention.md) - [1.3.5 Elasticity & Tax Incidence](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-3-5-elasticity-and-tax-incidence.md) - [1.3.6 IB Multiple Choice - Government Intervention](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-3-6-ib-multiple-choice-government-intervention.md) - 1.4 Market Failure - [1.4.1 Types of Market Failure](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-4-1-types-of-market-failure.md) - [1.4.2 Introduction to Externalities](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-4-2-introduction-to-externalities.md) - [1.4.3 Negative Externalities](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-4-3-negative-externalities.md) - [1.4.4 Policy for Negative Externalities](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-4-4-policy-for-negative-externalities.md) - [1.4.5 Positive Externalities](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-4-5-positive-externalities.md) - [1.4.6 The Deadweight Welfare Loss of Externalities](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-4-6-the-deadweight-welfare-loss-of-externalities.md) - [1.4.7 Case Study - The Externalities of Education](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-4-7-case-study-the-externalities-of-education.md) - [1.4.8 Public Goods & the Free-Rider Problem](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-4-8-public-goods-and-the-free-rider-problem.md) - [1.4.9 Asymmetric Information](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-4-9-asymmetric-information.md) - [1.4.10 End of Topic Test - Market Failure](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-4-10-end-of-topic-test-market-failure.md) - [1.4.11 Application Questions - Market Failure](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-4-11-application-questions-market-failure.md) - 1.5 HL: Theory of the Firm & Market Structures - [1.5.1 Theory of the Firm & Market Structures](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/1-5-1-theory-of-the-firm-and-market-structures.md) ### 2 Macroeconomics - 2.1 The Level of Overall Economic Activity - [2.1.1 The Circular Flow of Income](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-1-1-the-circular-flow-of-income.md) - [2.1.2 Defining GDP](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-1-2-defining-gdp.md) - [2.1.3 Limitations of GDP](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-1-3-limitations-of-gdp.md) - [2.1.4 IB Multiple Choice - Economic Indicators](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-1-4-ib-multiple-choice-economic-indicators.md) - [2.1.5 Business Cycles](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-1-5-business-cycles.md) - [2.1.6 Output Gaps](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-1-6-output-gaps.md) - 2.2 Aggregate Demand & Aggregate Supply - [2.2.1 The Aggregate Demand Curve](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-2-1-the-aggregate-demand-curve.md) - [2.2.2 Components of Aggregate Demand](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-2-2-components-of-aggregate-demand.md) - [2.2.3 Shape of the Aggregate Demand Curve](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-2-3-shape-of-the-aggregate-demand-curve.md) - [2.2.4 Shifts in Aggregate Demand](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-2-4-shifts-in-aggregate-demand.md) - [2.2.5 IB Multiple Choice - Aggregate Demand](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-2-5-ib-multiple-choice-aggregate-demand.md) - [2.2.6 Short & Long-Run Aggregate Supply](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-2-6-short-and-long-run-aggregate-supply.md) - [2.2.7 Alternative Models of LRAS](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-2-7-alternative-models-of-lras.md) - [2.2.8 Equilibrium in the AD-AS Model](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-2-8-equilibrium-in-the-ad-as-model.md) - [2.2.9 Output Gaps & the AD-AS Model](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-2-9-output-gaps-and-the-ad-as-model.md) - 2.3 Macroeconomic Objectives - [2.3.1 Introduction to Unemployment](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-3-1-introduction-to-unemployment.md) - [2.3.2 Limitations of Unemployment](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-3-2-limitations-of-unemployment.md) - [2.3.3 Types of Unemployment](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-3-3-types-of-unemployment.md) - [2.3.4 Causes & Impact of Unemployment](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-3-4-causes-and-impact-of-unemployment.md) - [2.3.5 Defining Inflation](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-3-5-defining-inflation.md) - [2.3.6 Measuring Inflation](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-3-6-measuring-inflation.md) - [2.3.7 Use of Index Numbers](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-3-7-use-of-index-numbers.md) - [2.3.8 The Consumer Price Index](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-3-8-the-consumer-price-index.md) - [2.3.9 Consequences of Inflation](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-3-9-consequences-of-inflation.md) - [2.3.10 Causes of Inflation](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-3-10-causes-of-inflation.md) - [2.3.11 Inflation & Unemployment Tradeoff](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-3-11-inflation-and-unemployment-tradeoff.md) - [2.3.12 The Short-Run Phillips Curve](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-3-12-the-short-run-phillips-curve.md) - [2.3.13 The Long-Run Phillips Curve](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-3-13-the-long-run-phillips-curve.md) - 2.4 Economic Growth, Poverty & Inequality - [2.4.1 Measuring Economic Growth](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-4-1-measuring-economic-growth.md) - [2.4.2 Determinants of Productivity](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-4-2-determinants-of-productivity.md) - [2.4.3 Economic Growth & Productivity](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-4-3-economic-growth-and-productivity.md) - [2.4.4 Absolute & Relative Poverty](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-4-4-absolute-and-relative-poverty.md) - [2.4.5 Inequality](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-4-5-inequality.md) - [2.4.6 Inequality 2](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-4-6-inequality-2.md) - [2.4.7 Lorenz Curve](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-4-7-lorenz-curve.md) - [2.4.8 Government Policy on Poverty](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-4-8-government-policy-on-poverty.md) - [2.4.9 End of Topic Test - Poverty & Inequality](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-4-9-end-of-topic-test-poverty-and-inequality.md) - [2.4.10 Application - Inequality & Poverty](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-4-10-application-inequality-and-poverty.md) - 2.5 Fiscal Policy - [2.5.1 Introduction to Fiscal Policy](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-5-1-introduction-to-fiscal-policy.md) - [2.5.2 Fiscal Policy and AD-AS Model](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-5-2-fiscal-policy-and-ad-as-model.md) - [2.5.3 Fiscal Policy Lags](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-5-3-fiscal-policy-lags.md) - [2.5.4 Automatic Stabilizers](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-5-4-automatic-stabilizers.md) - [2.5.5 IB Multiple Choice - Fiscal Policy](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-5-5-ib-multiple-choice-fiscal-policy.md) - 2.6 Monetary Policy - [2.6.1 Objectives of Monetary Policy](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-6-1-objectives-of-monetary-policy.md) - [2.6.2 Monetary Policy Implementation](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-6-2-monetary-policy-implementation.md) - [2.6.3 Monetary Policy & AD-AS Model](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-6-3-monetary-policy-and-ad-as-model.md) - [2.6.4 Monetary Policy Lags & Pitfalls](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-6-4-monetary-policy-lags-and-pitfalls.md) - 2.7 Supply-Side Policies - [2.7.1 Supply-Side Policies](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-7-1-supply-side-policies.md) - [2.7.2 Supply-Side Policies 2](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/2-7-2-supply-side-policies-2.md) ### 3 The Global Economy - 3.1 International Trade - [3.1.1 Globalisation](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-1-1-globalisation.md) - [3.1.2 Globalisation for LEDCs](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-1-2-globalisation-for-ledcs.md) - [3.1.3 Globalisation for MEDCs](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-1-3-globalisation-for-medcs.md) - [3.1.4 Comparative Advantage & Trade](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-1-4-comparative-advantage-and-trade.md) - [3.1.5 Protectionism](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-1-5-protectionism.md) - [3.1.6 Arguments for Protectionism](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-1-6-arguments-for-protectionism.md) - [3.1.7 Arguments Against Protectionism](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-1-7-arguments-against-protectionism.md) - [3.1.8 End of Topic Test - Globalisation & Trade](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-1-8-end-of-topic-test-globalisation-and-trade.md) - [3.1.9 Case Study - Globalisation & Trade](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-1-9-case-study-globalisation-and-trade.md) - 3.2 Exchange Rates - [3.2.1 Floating Exchange Rates](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-2-1-floating-exchange-rates.md) - [3.2.2 Fixed Exchange Rate](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-2-2-fixed-exchange-rate.md) - [3.2.3 Effect of a Stronger & Weaker Dollar](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-2-3-effect-of-a-stronger-and-weaker-dollar.md) - 3.3 The Balance of Payments - [3.3.1 Balance of Payments](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-3-1-balance-of-payments.md) - [3.3.2 Balance of Payments 2](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-3-2-balance-of-payments-2.md) - [3.3.3 FDI & Reducing a BoP Deficit](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-3-3-fdi-and-reducing-a-bop-deficit.md) - 3.4 Economic Integration - [3.4.1 Customs Unions & WTO](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-4-1-customs-unions-and-wto.md) - [3.4.2 Merged Currency](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-4-2-merged-currency.md) - 3.5 Terms of Trade - [3.5.1 Absolute & Comparative Advantage](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-5-1-absolute-and-comparative-advantage.md) - [3.5.2 Gains from Trade](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-5-2-gains-from-trade.md) - [3.5.3 Terms of Trade](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-5-3-terms-of-trade.md) - [3.5.4 IB Multiple Choice - Comparative Advantage & Trade](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-5-4-ib-multiple-choice-comparative-advantage-and-trade.md) - 3.6 Economic Development - [3.6.1 Factors Influencing Growth & Development](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-6-1-factors-influencing-growth-and-development.md) - [3.6.2 International Institutions](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-6-2-international-institutions.md) - [3.6.3 Measures of Development](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-6-3-measures-of-development.md) - [3.6.4 Barriers to Development](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-6-4-barriers-to-development.md) - [3.6.5 Case Study - The Bottom Billion](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-6-5-case-study-the-bottom-billion.md) - [3.6.6 End of Topic Test - Emerging & Developing](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-6-6-end-of-topic-test-emerging-and-developing.md) - 3.7 The Role of Domestic & International Factors - [3.7.1 Interventionist Strategies](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-7-1-interventionist-strategies.md) - [3.7.2 Development Strategies](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-7-2-development-strategies.md) - [3.7.3 Development Promotion Policies](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-7-3-development-promotion-policies.md) - [3.7.4 End of Topic Test - Growth & Global Development](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-7-4-end-of-topic-test-growth-and-global-development.md) - [3.7.5 Application Questions -Growth & Global Development](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-7-5-application-questions-growth-and-global-development.md) - 3.8 The Role of International Trade - [3.8.1 International Institutions](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-8-1-international-institutions.md) - [3.8.2 End of Topic Test - Globalisation & Trade](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-8-2-end-of-topic-test-globalisation-and-trade.md) - 3.9 The Role of Foreign Aid - [3.9.1 Aid](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-9-1-aid.md) - [3.9.2 Limitations of Aid](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-9-2-limitations-of-aid.md) - [3.9.3 Support for Aid](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-9-3-support-for-aid.md) - [3.9.4 Application Questions - Developing Countries](https://senecalearning.com/en-gb/revision-notes/ib-diploma/economics/economics-ib-diploma/3-9-4-application-questions-developing-countries.md)