2019 economics written examination - pages · 2019 economics exam 16 section b – question 3 –...

ECONOMICSWritten examination

Thursday 14 November 2019 Reading time: 11.45 am to 12.00 noon (15 minutes) Writing time: 12.00 noon to 2.00 pm (2 hours)

QUESTION AND ANSWER BOOK

Structure of bookSection Number of

questionsNumber of questions

to be answeredNumber of

marks

A 15 15 15B 4 4 65

Total 80

• Studentsarepermittedtobringintotheexaminationroom:pens,pencils,highlighters,erasers,sharpenersandrulers.

• StudentsareNOTpermittedtobringintotheexaminationroom:blanksheetsofpaperand/orcorrectionfluid/tape.

• Nocalculatorisallowedinthisexamination.

Materials supplied• Questionandanswerbookof24pages• Answersheetformultiple-choicequestions• Additionalspaceisavailableattheendofthebookifyouneedextrapapertocompleteananswer.

Instructions• Writeyourstudent numberinthespaceprovidedaboveonthispage.• Checkthatyournameandstudent numberasprintedonyouranswersheetformultiple-choice

questionsarecorrect,andsignyournameinthespaceprovidedtoverifythis.• AllwrittenresponsesmustbeinEnglish.

At the end of the examination• Placetheanswersheetformultiple-choicequestionsinsidethefrontcoverofthisbook.

Students are NOT permitted to bring mobile phones and/or any other unauthorised electronic devices into the examination room.

©VICTORIANCURRICULUMANDASSESSMENTAUTHORITY2019

SUPERVISOR TO ATTACH PROCESSING LABEL HEREVictorian Certificate of Education 2019

STUDENT NUMBER

Letter

2019ECONOMICSEXAM 2

SECTION A–continued

SECTION A – Multiple-choice questions

Instructions for Section AAnswerallquestionsinpencilontheanswersheetprovidedformultiple-choicequestions.Choosetheresponsethatiscorrectorthatbest answersthequestion.Acorrectanswerscores1;anincorrectanswerscores0.Markswillnotbedeductedforincorrectanswers.Nomarkswillbegivenifmorethanoneansweriscompletedforanyquestion.

Question 1TheinternationalcompetitivenessofanationwouldimproveifA. itscurrencyappreciated.B. labourproductivityincreased.C. realunitlabourcosts(RULC)increased.D. itsrateofinflationincreasedrelativetothatofitstradingpartners.

Question 2Daphnecanmakeeitherthreedressesornineshirtsperhour.ForDaphne,theopportunitycostofmakinganextradressisA. one-thirdofashirt.B. one-thirdofadress.C. threeshirts.D. ninedresses.

Question 3OneweaknessofbudgetarypolicycomparedwithmonetarypolicyisthatbudgetarypolicyA. maybesubjecttopoliticalconstraints.B. cantargetcertainpartsoftheeconomytogiveassistance.C. maybecounteractedbytheoperationofautomaticstabilisers.D. tendstoberelativelyineffectiveinarecessionduetolowlevelsofconsumerconfidence.

Question 4AnincreaseinthelabourforceparticipationrateismostlikelytoA. increaseproductivity.B. increaseproductivecapacity.C. decreasegovernmentrevenue.D. increasegovernmentexpenses.

3 2019ECONOMICSEXAM

SECTION A – continuedTURN OVER

Question 5Whichoneofthefollowingbudgetarypolicyinitiativesisleastlikelytoincreaseaggregatesupplyintheeconomy?A. anincreaseintheskilledmigrationprogramB. increasedgovernmentexpenditureoneducationC. theconstructionofanewfreewayinMelbourneD. a10%increaseintheNewstartAllowance(unemploymentbenefit)providedbytheAustralian

Government

Question 6AmaximumpricesetbelowtheequilibriumpricewillcausegreatershortagesifA. bothdemandandsupplyarepriceinelastic.B. bothdemandandsupplyarepriceelastic.C. demandispriceinelasticandsupplyispriceelastic.D. demandispriceelasticandsupplyispriceinelastic.

Question 7Astheworldeconomyslows,theAustralianGovernment’sbudgetoutcomemayA. deteriorateasdemandforAustralianexportsdecreases.B. improveasemploymentinAustraliaincreases.C. deteriorateasdomesticoutputincreases.D. improveascompanyprofitsincrease.

Question 8Whichoneofthefollowingisasupply-sidesolutiontoelectricityshortages?A. requestingindustriestoreducetheirproductionduringheatwavesB. electricitycompanieschargingconsumershigherpricesduringheatwavesC. rewardingcustomerswithcashbonusesforlimitingtheirelectricityuseduringpeaktimesD. givingelectricitycompaniesgovernmentsubsidiestoinvestinincreasedproduction

Question 9Ifaseveredroughtaffectedthisyear’swheatharvest,whatwouldbetheeffectontheequilibriumpriceandequilibriumquantityofwheat?A. Theequilibriumpriceandequilibriumquantitybothdecrease.B. Theequilibriumpriceandequilibriumquantitybothincrease.C. Theequilibriumpricedecreasesandtheequilibriumquantityincreases.D. Theequilibriumpriceincreasesandtheequilibriumquantitydecreases.

2019ECONOMICSEXAM 4

SECTION A–continued

Question 10TheeffectofafallinthepriceofacomplementaryProductYonthemarketforProductXwillbetoA. shiftthedemandcurverightandincreasetheequilibriumprice.B. shiftthedemandcurveleftanddecreasetheequilibriumprice.C. shiftthesupplycurveleftandincreasetheequilibriumprice.D. shiftthesupplycurverightanddecreasetheequilibriumprice.

Question 11Countriesaroundtheworldhavedebatedtheintroductionofa‘sugartax’tocombatrisingratesofchildhoodobesityandtoeducateconsumersabouttheproblemsassociatedwithconsumingtoomuchsugar.SuchataxisdesignedtoovercomeA. alackofpublicgoods.B. anegativeexternalityandasymmetricinformation.C. anegativeexternalityandamisuseofcommonaccessresources.D. asymmetricinformationandamisuseofcommonaccessresources.

Question 12AcontractionarystanceinmonetarypolicybytheReserveBankofAustralia(RBA)couldbeachievedbyA. sellingCommonwealthGovernmentSecuritiestoincreasecashintheovernightmoneymarket.B. buyingCommonwealthGovernmentSecuritiestoincreasecashintheovernightmoneymarket.C. sellingCommonwealthGovernmentSecuritiestodecreasecashintheovernightmoneymarket.D. buyingCommonwealthGovernmentSecuritiestodecreasecashintheovernightmoneymarket.

Question 13Considerthefollowinginformationforahypotheticaleconomy.

totalpopulation 100million

employedpersons 70million

unemployedpersons 10million

underemployedpersons 2million

Basedonthedatashownabove,theunemploymentrateofthishypotheticaleconomyisA. 10.0%B. 12.0%C. 12.5%D. 15.0%

5 2019ECONOMICSEXAM

END OF SECTION A TURN OVER

Question 14Ahypotheticaleconomyrecordedabalanceofpaymentsoncurrentaccountof−$12075millionintheSeptember2018quarterandthen−$3510millionintheDecember2018quarter.Whatcouldbealikelycauseofthischange?A. adeclineinforeigninvestmentB. animprovementinthetermsoftradeC. aslowdowninworldeconomicgrowthD. anappreciationofthehypotheticaleconomy’sexchangerate

Question 15Intermsofachievinganefficientallocationofresources,theneedforbalancingcurrentandfutureconsumptionrelatestoA. dynamicefficiency.B. allocativeefficiency.C. productiveefficiency.D. intertemporalefficiency.

2019ECONOMICSEXAM 6

SECTION B – Question 1–continued

Question 1 (12marks)

201720152013 2019–10

–5

0

5

10

15

%

–10

–5

0

5

10

15

%

Australia’s housing pricesyear-ended growth, seasonally adjusted

Source:adaptedfromABS;RBAChartPack, ‘TheAustralianEconomyandFinancialMarkets’,August2019,p.7

a. Referringtothegraphabove,describethetrendinthegrowthofAustralia’shousingpricesoverthepasttwoyears. 2marks

SECTION B – Written responses

Instructions for Section BAnswer allquestionsinthespacesprovided.

7 2019ECONOMICSEXAM

SECTION B – Question 1–continuedTURN OVER

b. Describeonelikelyeffectofthetrendinthegrowthofhousingpricesdescribedinpart a.onAustralianlivingstandards. 3marks

c. Explainwhetherthedemandforbuyingahouseislikelytobepriceelasticorpriceinelastic. 3marks

2019ECONOMICSEXAM 8

SECTION B – continued

d. Assumethefollowingpolicychangesareimplemented:• TheReserveBankofAustralia(RBA)reducesthecashrate.• TheAustralianGovernmentoffersloanguaranteesforfirsthomebuyers.

Selectoneofthesepolicychangesandexplainhowtheselectedpolicychangemayinfluencethehousingmarket.Drawandlabelademandandsupplydiagramtoillustrateyourexplanation. 4marks

9 2019ECONOMICSEXAM


Question 2 (21marks)a. Explainthemeaningoftheterm‘businesscycle’. 2marks

b. Explainhowoneaggregatedemandfactormaycauseabusinesscyclecontraction. 3marks

2019ECONOMICSEXAM 10


c. Explainthelikelyeffectofabusinesscycleexpansionontherateofeconomicgrowthandontherateofinflation. 4marks

11 2019ECONOMICSEXAM


d. Usingtwomonetarypolicytransmissionmechanisms,explaintheroleofmonetarypolicyincounteringaslowdowninratesofeconomicgrowth. 6marks


SECTION B – continued

e. Assumeaneconomyisexperiencingafallintherateofunemploymentbutaweakerthanexpectedgrowthinwages.

Explainhowthisscenariomightinfluencethesettingofaggregatedemandpolicies. 6marks



Question 3 (22marks)a. Explaintherelationshipbetweenthebudgetoutcomeandthelevelofgovernment(public)

debt. 4marks



b. Selectoneexampleofabudgetarypolicyautomaticstabiliseranddescribehowitoperatestoinfluenceaggregatedemandandtherateofeconomicgrowth. 4marks



c. DiscussonelikelyimpactoftheAustralianGovernment’sbudgetarypolicystancethisyear,asannouncedinthe2019–2020Budget,ontheachievementoffullemploymentandlowinflation(pricestability). 6marks



d. SelectoneexampleofawelfareortaxationreformpolicythathasbeenimplementedinAustraliain2018or2019,orthathasbeenannouncedforimplementationinthefuture,andexplainhowthispolicyisdesignedtoinfluenceaggregatesupplyandlivingstandards. 4marks


SECTION B – continuedTURN OVER

e. DescribeonestrengthandoneweaknessofusingaggregatesupplypoliciestoachievetheAustralianGovernment’sdomesticmacroeconomicgoaloffullemployment. 4marks



Question 4 (10marks)

GrowthinAustralia’smajortradingpartnersisexpectedtoslowslightlyoverthenextcoupleofyears.FurtherUS–Chinatariffmeasurescameintoeffectinthepastfewmonths,andtraderestrictionsappeartobeweighingonexportordersforsomeeconomies.Thepossibilityoftradeprotectionismescalatingfurtherpresentsasignificantdownsiderisktoglobalgrowth…

Source:RBA,Statement on Monetary Policy,November2018,p.1

a. Distinguishbetweentradeliberalisationandbarrierstotrade. 3marks



b. Explain onewayinwhichadeclineintherateofeconomicgrowthofAustralia’smajortradingpartnersmayinfluenceeitherAustralia’sbalanceofpaymentsoncurrentaccountorthevalueoftheAustraliandollar. 3marks


c. AssumeAustraliaexperiencesanunfavourablemovementinthetermsoftradeacross atwo-yearperiod.

ExplainhowthisscenariomightaffectAustralia’sdomesticmacroeconomicgoalofstrongandsustainableeconomicgrowth,andAustralia’slivingstandards. 4marks

END OF QUESTION AND ANSWER BOOK


TURN OVER

Extra space for responses

Clearly number all responses in this space.


TURN OVER


Ananswerbookisavailablefromthesupervisorifyouneedextrapapertocompleteananswer.Pleaseensureyouwriteyourstudent numberinthespaceprovidedonthefrontcoveroftheanswerbook.At the end of the examination, place the answer book inside the front cover of this question and answer book.

2019 economics written examination - pages · 2019 economics exam 16 section b – question 3 –...

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