ECONOMICSWritten examination
Thursday 27 October 2016 Reading time: 2.00 pm to 2.15 pm (15 minutes) Writing time: 2.15 pm to 4.15 pm (2 hours)
QUESTION AND ANSWER BOOK
Structure of bookSection Number of
questionsNumber of questions
to be answeredNumber of
marks
A 15 15 30B 4 4 60
Total 90
• 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.
©VICTORIANCURRICULUMANDASSESSMENTAUTHORITY2016
SUPERVISOR TO ATTACH PROCESSING LABEL HEREVictorian Certificate of Education 2016
STUDENT NUMBER
Letter
2016ECONOMICSEXAM 2
SECTION A – continued
SECTION A – Multiple-choice questions
Instructions for Section AAnswerallquestionsinpencilontheanswersheetprovidedformultiple-choicequestions.Choosetheresponsethatiscorrectorthatbest answersthequestion.Acorrectanswerscores2;anincorrectanswerscores0.Markswillnotbedeductedforincorrectanswers.Nomarkswillbegivenifmorethanoneansweriscompletedforanyquestion.
Question 1Whichoneofthefollowingcomponentsofaggregatedemandisthemostunstable?A. privateinvestmentexpenditureB. privateconsumptionexpenditureC. governmentinvestmentexpenditureD. governmentconsumptionexpenditure
Question 2Whenresourcesareusedtoproducethegoodsandservicesthatbestsatisfysociety’sneedsandwants,thisisknownasA. dynamicefficiency.B. allocativeefficiency.C. intertemporalefficiency.D. productiveortechnicalefficiency.
Question 3Theconstructionofatallapartmentbuildingthatblocksoutthelighttoanearbypublicparkisanexampleofwhatkindofmarketfailure?A. marketpowerB. apublicgoodC. anegativeexternalityD. asymmetricinformation
Question 4Whichoneofthefollowingtermsdescribesthe‘potentialoutputofaneconomy’?A. productionB. productivityC. productivecapacityD. GrossDomesticProduct(GDP)
3 2016ECONOMICSEXAM
SECTION A – continuedTURN OVER
Question 5ConsiderthefollowinghypotheticalConsumerPriceIndex(CPI)data.
Time period CPI
Quarter1 100
Quarter2 101
Quarter3 102
Quarter4 103
TheannualisedrateofinflationforQuarter2isA. 1%B. 3%C. 4%D. 6%
Question 6ArecessioninAustraliainconjunctionwithadepreciationoftheAustraliandollarislikelytoleadtoA. anincreaseinthevolumeofAustralia’simportsandadecreaseinthevolumeofexports.B. adecreaseinthevolumeofAustralia’simportsandanincreaseinthevolumeofexports.C. adecreaseinthevolumeofAustralia’simportsandadecreaseinthevolumeofexports.D. anincreaseinthevolumeofAustralia’simportsandanincreaseinthevolumeofexports.
Question 7Whichoneofthefollowinggovernmentpolicieswillnotleadtoalong-termexpansionofaggregatesupply?A. loweringthecompanytaxationrateB. increasingskilledmigrationby5000personsperyearC. extendingthesolarenergyrebateschemeforhouseholdsD. increasingunemploymentbenefitsbyanamountequaltotherateofinflation
Question 8The‘transmissionmechanism’referstothewayachangeininterestratesaffectseconomicactivity.Thetransmissionoccursviaanumberofchannels.ThechannelthataffectsdecisionsbythoseintheeconomywithexistingvariableratehomeloansisknownastheA. assetvaluesorassetpriceschannel.B. exchangeratechannel.C. costofcreditchannel.D. cashflowchannel.
2016ECONOMICSEXAM 4
SECTION A – continued
Question 9Considerthefollowinginformationrelatedtothelabourmarketofahypotheticaleconomy.
Year Population who are of working age (millions)
Employed persons (millions)
Unemployed persons (millions)
1 20 14 2
2 25 17 2
IncomparingYear2toYear1,whichoneofthefollowingstatementsistrue?A. Year2hasalowerparticipationrateandalowerunemploymentrate.B. Year2hasalowerparticipationrateandahigherunemploymentrate.C. Year2hasahigherparticipationrateandalowerunemploymentrate.D. Year2hasahigherparticipationrateandahigherunemploymentrate.
Question 10Ifalargepercentagefallinaproduct’spricecausesasmallpercentageincreaseinthequantitydemanded,thenA. supplyispriceelastic.B. demandispriceelastic.C. supplyispriceinelastic.D. demandispriceinelastic.
Question 11ConsiderthefollowingCPI,GDPandunemploymentratedataforahypotheticaleconomyovera two-yearperiod.
Year CPI (%)
GDP (%)
Unemployment rate (%)
1 2.9 3.5 4.5
2 2.1 2.0 5.1
Withreferencetothedatainthetableabove,attheendofYear2,whichpolicymixresponsemightberecommended?A. expansionarybudgetarypolicyandexpansionarymonetarypolicyB. contractionarybudgetarypolicyandcontractionarymonetarypolicyC. expansionarybudgetarypolicyandcontractionarymonetarypolicyD. contractionarybudgetarypolicyandexpansionarymonetarypolicy
5 2016ECONOMICSEXAM
END OF SECTION ATURN OVER
Question 12WhentheReserveBankofAustralia(RBA)sellsgovernmentsecuritiesinthemoneymarketA. interestrateswilldecrease.B. thesupplyofmoneywilldecrease.C. therewillbeareductioninunemployment.D. consumptionofgoodsandserviceswillincrease.
Question 13Assumethereisanincreaseinthechildcaresubsidyforlow-incomeearnersandanincreaseinthehighestmarginalincometaxrate.WhatisthelikelyeffectontheGiniCoefficientandtheLorenzCurve?A. TheGiniCoefficientwillincreaseandtheLorenzCurvewillmoveclosertothe45-degreeline.B. TheGiniCoefficientwillincreaseandtheLorenzCurvewillmovefurtherawayfromthe45-degree
line.C. TheGiniCoefficientwilldecreaseandtheLorenzCurvewillmoveclosertothe45-degreeline.D. TheGiniCoefficientwilldecreaseandtheLorenzCurvewillmovefurtherawayfromthe45-degree
line.
Question 14Ifaproductbecamelesspopular,whileatthesametimeincreasedcostsofproductioncausedthesupplyoftheproducttodecrease,itcanbeconcludedthat,forthisproduct,theA. equilibriumpricemightriseorfall.B. equilibriumquantitymightriseorfall.C. equilibriumpriceandtheequilibriumquantitywouldrise.D. equilibriumpriceandtheequilibriumquantitywouldfall.
Question 15Australia’sunemploymentratedecreasedfrom6.4%inJanuary2015to5.8%inFebruary2016.Theimpactofthischangeongovernmenttaxreceipts,governmentoutlaysandthesizeofthebudgetdeficitislikelytobethatA. taxreceiptsincrease,outlaysincrease,thebudgetdeficitisreduced.B. taxreceiptsincrease,outlaysdecrease,thebudgetdeficitisreduced.C. taxreceiptsincrease,outlaysdecrease,thebudgetdeficitisincreased.D. taxreceiptsdecrease,outlaysincrease,thebudgetdeficitisincreased.
2016ECONOMICSEXAM 6
SECTION B – Question 1–continued
Question 1 (14marks)
2000 2016
index
120
100
80
60
40
Australia’s terms of trade2013/14 average = 100, log scale
Source:adaptedfromABS;RBAChartPack, ‘TheAustralianEconomyandFinancialMarkets’,August2016,p.15
a. Refertothegraphofthetermsoftrade.
OutlineonefactorthatmightexplainthetrendinAustralia’stermsoftradeoverthepasttwoyears. 2marks
SECTION B – Written responses
Instructions for Section BAnswer allquestionsinthespacesprovided.
7 2016ECONOMICSEXAM
SECTION B – Question 1–continuedTURN OVER
b. AnalysehowanunfavourablemovementinthetermsoftradeislikelytoaffectAustralia’s 4marks
• balanceofpaymentsoncurrentaccount
• livingstandards.
2016ECONOMICSEXAM 8
SECTION B – Question 1–continued
c. DescribehowadepreciationoftheAustraliandollarmightaffecttherateofinflationinAustralia. 2marks
d. Usingoneexample,explainhowamicroeconomicreformpolicymightbeusedtoimproveAustralia’sinternationalcompetitivenessandexternalstability. 3marks
9 2016ECONOMICSEXAM
SECTION B – continuedTURN OVER
e. Usingone example,explainhowbudgetarypolicymightbeusedtoinfluenceAustralia’sinternationalcompetitivenessandexternalstability. 3marks
2016ECONOMICSEXAM 10
SECTION B – Question 2–continued
Question 2 (14marks)a. Outlinetwocharacteristicsofaperfectlycompetitivemarket. 2marks
11 2016ECONOMICSEXAM
SECTION B – Question 2–continuedTURN OVER
b. Explainwhyaperfectlycompetitivemarketismorelikelytoachieveanefficientallocationofresourcesthananoligopolisticmarket. 4marks
2016ECONOMICSEXAM 12
SECTION B – Question 2–continued
c. Outlineonereasonforgovernmentinterventioninthemarketinordertostabilisethelevelofeconomicactivity. 2marks
13 2016ECONOMICSEXAM
SECTION B – continuedTURN OVER
d. ReferringtoaspecificexampleofamarketinAustralia(suchasanagriculturalmarket,acommoditymarket,aretailmarket),describeoneeconomicfactorinfluencingtheoperationofthismarketanddiscusstheextenttowhichthismarketoperatesfreelyinAustralia. 6marks
2016ECONOMICSEXAM 14
SECTION B – Question 3–continued
Question 3 (20marks)Overthepasttwoyears,theAustralianGovernmenthasbeeninvolvedindiscussionsabouthowtoreformAustralia’staxationsystem.
a. OutlineonereasonwhytheAustralianGovernmentbelievesAustralia’staxationsystemneedstobereformed. 2marks
15 2016ECONOMICSEXAM
SECTION B – Question 3–continuedTURN OVER
b. Explainhowachangeinbothpersonalincometaxpolicyandcompanytaxpolicymightinfluenceaggregatesupplyandthereforetherateofeconomicgrowth. 6marks
2016ECONOMICSEXAM 16
SECTION B – Question 3–continued
c. Identifyoneexampleofadiscretionarybudgetarypolicyannouncedinthe2016–2017Budget,andexaminehowthispolicymightinfluencelivingstandardsandlong-termeconomicprosperity. 4marks
17 2016ECONOMICSEXAM
SECTION B – Question 3–continuedTURN OVER
d. OutlineonefactorthatmayhaveinfluencedtheoperationoftheReserveBankofAustralia’s(RBA)monetarypolicystanceduring2016. 2marks
2016ECONOMICSEXAM 18
SECTION B – continued
e. Describehowbudgetaryandmonetarypolicieshaveoperatedinthepolicymixin2016toinfluenceaggregatedemandandtherateofeconomicgrowth. 6marks
19 2016ECONOMICSEXAM
SECTION B – Question 4–continuedTURN OVER
Question 4 (12marks)TheAustralianGovernment‘facesagrowingjobschallengeasthenumberofpeopletrappedinlong-termunemploymenthitsa16-yearhigh…’
Source:MattWade,‘Long-termunemployment:Sharprisetakingatollon Australia’swellbeing’,Sydney Morning Herald,6June2015
a. Outlineoneeconomicfactorthatmightexplainwhylong-termunemploymenthasincreasedinAustraliaoverrecentyears. 2marks
2016ECONOMICSEXAM 20
SECTION B – Question 4–continued
b. Describethelikelyeffectofbeinglong-termunemployedonbothequityofincomedistributionandlivingstandards. 4marks
21 2016ECONOMICSEXAM
TURN OVER
c. Usingoneexample,explainhowbudgetarypolicymightbeusedtoincreasethelabourforceparticipationrateand,usinganotherexample,explainhowbudgetarypolicymightbeusedtolowertherateoflong-termunemployment. 6marks
END OF QUESTION AND ANSWER BOOK
2016ECONOMICSEXAM 22
Extra space for responses
Clearly number all responses in this space.
23 2016ECONOMICSEXAM
TURN OVER
2016ECONOMICSEXAM 24
Ananswerbookisavailablefromthesupervisorifyouneedextrapapertocompleteyouranswer.Pleaseensureyouwriteyourstudent numberinthespaceprovidedonthefrontcoveroftheanswerbook.At the end of the examination, place the answer book inside the front cover of this question and answer book.
