economics-hsc-exam-2001

2001 H I G H E R S C H O O L C E R T I F I C AT E E X A M I N AT I O N Economics Total marks – 100 Section I General Instructions • Reading time – 5 minutes • Working time – 3 hours • Write using black or blue pen • Board-approved calculators may be used • Write your Centre Number and Student Number at the top of pages 9, 11, 13 and 15 Pages 2–8 20 marks • Attempt Questions 1–20 • Allow about 35 minutes for this section Section II Pages 9–16 40 marks • Attempt Questions 21–24 • Allow about 1 hour and 15 minutes for this section Section III Pages 17–19 20 marks • Attempt either Question 25 or Question 26 • Allow about 35 minutes for this section Section IV Page 20 20 marks • Attempt either Question 27 or Question 28 • Allow about 35 minutes for this section 145 Section I 20 marks Attempt Questions 1–20 Allow about 35 minutes for this section Use the multiple-choice answer sheet. Select the alternative A, B, C or D that best answers the question. Fill in the response oval completely. Sample: 2+4= (A) 2 A (B) 6 (C) 8 B C (D) 9 D If you think you have made a mistake, put a cross through the incorrect answer and fill in the new answer. A B C D If you change your mind and have crossed out what you consider to be the correct answer, then indicate the correct answer by writing the word correct and drawing an arrow as follows. correct A B C D The following items have been reproduced with the permission of the Reserve Bank of Australia: Q25 Table: Balance of Payments Reserve Bank of Australia Bulletin, October 2000, p 73 Q25 Quote by the Governor Media release from Reserve Bank of Australia, April 2001 Q26 Text extract Reserve Bank of Australia Bulletin, September 2000, p 1 Q26 Text extract Reserve Bank of Australia Bulletin, October 2000, p 4 Q26 Table: Commonwealth Government Budget Reserve Bank of Australia Bulletin, October 2000, p S37 –2– 1 Which one of the following is an example of structural unemployment? (A) The skills of the unemployed do not match the skills required in available jobs. (B) There is a time lapse between entering the workforce and gaining employment. (C) There is a rise in the rate of unemployment as the rate of inflation falls. (D) The unemployed no longer seek work because of a fall in the job market. 2 If the Consumer Price Index for Year 1 is 180 and for Year 2 is 198, what is the inflation rate in Year 2? (A) 10% (B) 18% (C) 80% (D) 98% 3 Which of the following indicates an expansionary fiscal policy? (A) Lower interest rates and increased government expenditure (B) Higher interest rates and reduced government expenditure (C) Higher tax rates and reduced government expenditure (D) Lower tax rates and increased government expenditure 4 Selected economic data for Australia Year $US per $A Trade Weighted Index 1 0.64 61 2 0.58 62 3 0.51 64 Over the period Year 1 to Year 3, which statement is correct? (A) The Australian dollar depreciated against both the US dollar and the Trade Weighted Index. (B) The Australian dollar appreciated against the US dollar and depreciated against the Trade Weighted Index. (C) The Australian dollar depreciated against the US dollar and appreciated against the Trade Weighted Index. (D) The Australian dollar appreciated against both the US dollar and the Trade Weighted Index. –3– 5 Which situation is normally associated with cost inflation? (A) Aggregate demand exceeds aggregate supply. (B) Labour productivity increases. (C) A nation’s foreign exchange rate appreciates. (D) The general level of wages increases. 6 Which of the following would be likely to occur if the Australian dollar depreciates significantly against the currencies of its trading partners? (A) A fall in the quantity of goods exported from Australia (B) An increase in the quantity of goods imported into Australia (C) An increase in imported inflation into Australia (D) A fall in the cost of travelling overseas from Australia 7 Selected economic data for a nation Year Change in Gross Domestic Product (%) Employment (millions) Unemployment rate (%) 1 3.5 16.7 7.0 2 4.5 18.7 7.4 What could explain the change in the unemployment rate from Year 1 to Year 2? (A) A fall in the number of job vacancies advertised (B) An increase in the labour force participation rate (C) An increase in the level of hidden unemployment (D) A fall in the level of economic activity 8 Other things being equal, what will be the resulting increase in income for an economy that has a marginal propensity to consume of 0.6, if investment increases by $10 million? (A) $6 million (B) $10 million (C) $25 million (D) $60 million –4– 9 The diagram illustrates the impact of a tariff. Price D S World price + tariff A B World price 0 G E C F S L M N R D Quantity Which of the following areas would represent government revenue raised from this tariff? (A) BLRF (B) ACEG (C) AMNG (D) ABFG 10 Selected economic data for a nation Savings (S) $450 m Investment (I) $300 m Taxation (T) $100 m Government expenditure (G) $350 m Imports (M) $150 m Exports (X) $200 m Which of the following statements is correct about this economy? (A) Economic activity is increasing and the budget is in surplus. (B) Economic activity is increasing and the budget is in deficit. (C) Economic activity is decreasing and the budget is in surplus. (D) Economic activity is decreasing and the budget is in deficit. –5– 11 Selected economic data for a nation BALANCE OF PAYMENTS $m Current Account Goods credit Goods debit 300 450 Net Services Net Income –360 ? Capital and Financial Account balance +1300 What is the value of Net Income? (A) –$790 m (B) –$510 m (C) $190 m (D) $910 m 12 Why does the market system generally fail to produce public goods? (A) The Government controls the prices and distribution of public goods. (B) The benefits of public goods cannot be restricted to those who purchase them. (C) Public goods tend to be those goods that are privatised by the Government. (D) Consumers do not have adequate purchasing power to buy public goods. 13 Which of the following describes enterprise bargaining? (A) Increases in wages are tied to improvements in national productivity. (B) Decisions on wage increases are determined by industrial tribunals each year. (C) Wage increases in the workplace are determined by workers and management. (D) Changes in the cost of living automatically determine wage movements. –6– 14 The following diagram shows the demand for and the supply of the Australian dollar in the foreign exchange market. Price of $A in $US D S1 0 S1 S2 D S2 Quantity of $A Which one of the following is likely to cause a shift in the supply curve from S1 to S2? (A) More Australians travelling to the United States (B) More United States residents visiting Australia (C) Increased sales of exports to the United States (D) Increased subsidies to Australia’s export industries 15 Other things being equal, what will happen if tariff protection for an Australian industry is reduced? (A) The price of the industry’s product to the domestic consumer will increase. (B) Competing foreign products will be more expensive in the Australian market. (C) Employment in the Australian industry will increase in the short term. (D) The domestic market share for the Australian industry will decrease. 16 An Australian firm located in Australia makes an interest only repayment on an overseas loan. How would this interest repayment be recorded in Australia’s Balance of Payments? (A) As a debit on the Australian current account (B) As a credit on the Australian current account (C) As a debit on the Australian capital and financial account (D) As a credit on the Australian capital and financial account –7– 17 Which measure could be implemented by a government attempting to improve environmental management? (A) A reduction in the cost of petrol production (B) An increase in tax concessions for using solar energy (C) An increase in incentives for coal production (D) The replacement of renewable resources by non-renewable resources 18 Which government policy is likely to reduce the inequality of income distribution? (A) Decreasing the level of tax rates for high income earners (B) Increasing the tax-free threshold on income (C) Increasing the level of tax on essential services (D) Decreasing the level of tax on luxury items 19 The following diagram shows aggregate demand and aggregate supply curves for a nation. Price level AS AD2 AD1 0 Real GDP What could cause a shift of the aggregate demand curve from AD1 to AD2? (A) A fall in government spending on goods and services (B) A rise in government spending on goods and services (C) A rise in per unit production costs (D) A fall in per unit production costs 20 What is the most common measure of economic growth? (A) Changes in nominal Gross Domestic Product per person (B) Net foreign debt as a percentage of Gross Domestic Product (C) Changes in real Gross Domestic Product per annum (D) The distribution of Gross Domestic Product among the population –8– © Board of Studies NSW 2001 2001 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II 40 marks Attempt Questions 21–24 Allow about 1 hour and 15 minutes for this section Student Number Answer the questions in the spaces provided. Marks Question 21 (10 marks) The following information concerns trade and protection within the global economy. During the last three decades of the twentieth century many nations have dismantled their protection of domestic industries in the movement towards global free trade. However, this movement has not been without its critics. Opponents of free trade claim that removing protection has been harmful to the growth of domestic economies. (a) Outline ONE method that nations can use to protect domestic industries. 1 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Discuss TWO reasons why nations might protect their domestic industries. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 21 continues on page 10 146 –9– 2 Marks Question 21 (continued) (c) Describe TWO economic effects that the protection of domestic industries has on global trade. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (d) Analyse the economic benefits and costs to Australia associated with increased free trade. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 21 – 10 – © Board of Studies NSW 2001 5 2001 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Marks Question 22 (10 marks) The diagram shows two possible Lorenz curves for a nation. Percentage of total income 100 LC1 LC2 0 100 Percentage of income recipients (a) 1 What is a Lorenz curve? ............................................................................................................................... ............................................................................................................................... (b) In the diagram, which Lorenz curve (LC1 or LC2) has the greater Gini coefficient? ............................................................................................................................... Question 22 continues on page 12 147 – 11 – 1 Marks Question 22 (continued) (c) Which of the two Lorenz curves indicates the more equitable distribution of income? Give a reason for your answer. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (d) Outline TWO reasons that could explain inequality of income within a nation. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (e) Analyse the economic and social costs that arise from the inequality of income distribution within a nation. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 22 – 12 – © Board of Studies NSW 2001 4 2001 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Marks Question 23 (10 marks) The following information concerns environmental issues. There is no immediate shortage of basic non-renewable resources. Even at current rates of consumption there is enough copper, iron and fossil fuels to last centuries. More pressing is the concern that the water cycle and the composition of the atmosphere are on the verge of destruction. Yet the powerful myth that more production and greater consumption equals progress, remains firmly entrenched. (a) Define ecologically sustainable development. 1 ............................................................................................................................... ............................................................................................................................... (b) Describe how economic activity can have a negative impact on the environment. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 23 continues on page 14 148 – 13 – 2 Marks Question 23 (continued) (c) Distinguish between renewable and non-renewable resources. Give an example of each to support your answer. 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (d) Explain ONE economic benefit and ONE economic cost associated with achieving ecologically sustainable development. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 23 – 14 – © Board of Studies NSW 2001 4 2001 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Marks Question 24 (10 marks) (a) State an example of a government policy designed to promote microeconomic reform in Australia. 1 ............................................................................................................................... ............................................................................................................................... (b) State ONE reason why governments implement policies of microeconomic reform. 1 ............................................................................................................................... ............................................................................................................................... (c) Explain how microeconomic policy can bring about structural change in Australia. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 24 continues on page 16 149 – 15 – 4 Marks Question 24 (continued) (d) Explain TWO problems associated with microeconomic reform in Australia. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 24 – 16 – © Board of Studies NSW 2001 4 2001 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Section III 20 marks Attempt either Question 25 or Question 26 Allow about 35 minutes for this section Answer the question in a writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ use your knowledge and the economic information provided ■ apply economic terms, concepts, relationships and theory ■ present a sustained, logical and well-structured answer to the question Question 25 (20 marks) Please turn over 150 – 17 – In your answer you will be assessed on how well you: ■ use your knowledge and the economic information provided ■ apply economic terms, concepts, relationships and theory ■ present a sustained, logical and well-structured answer to the question Question 25 (20 marks) Discuss policy options the Australian Government can use to achieve external stability. Australia — Balance of Payments — Current Account ($A million) 1997/98 1998/99 1999/2000 Exports 88 538 85 687 97 476 Imports –92 084 –98 427 –110 807 –1 192 –1 870 –1 849 Net Income and Current Transfers –18 080 –19 106 –18 497 Current Account Balance –22 818 –33 716 –33 677 Net Services Reserve Bank Bulletin, October 2000 The Board of The Reserve Bank of Australia remains firmly of the view that the economy’s medium-term growth prospects are very good, but recognises that two risks to short-term growth exist. The first comes from the weaker world economy. Against this, the exchange rate gives a major competitive edge to the traded sector. The second risk is that confidence could weaken in such a way as to further dampen domestic demand in the short term. The Board views it as prudent for monetary policy to help support domestic demand under such circumstances. Adapted from media release, Reserve Bank of Australia, April 2001 OR – 18 – Question 26 (20 marks) Discuss policy options the Government can use to promote and maintain economic growth in Australia. ‘. . . there is overwhelming evidence to suggest that countries can only have sustained expansions if they are accompanied by low inflation. It is the sustainability of the expansion which is the key to maximising economic growth and employment. Thus, another way of expressing the aims of a monetary policy based on inflation-targeting is to say that its aim is to maximise the length of the economic expansion.’ I. J. MACFARLANE, Governor of the Reserve Bank Reserve Bank Bulletin, October 2000 Most microeconomic reform is designed to improve economic efficiency, and there has been a longstanding expectation that the reform undertaken in the Australian economy would lead to an improvement in productivity growth. The evidence from the 1990s is that this improvement seems to have occurred. . . . Measures of labour and multifactor productivity for the business cycle expansion of the 1990s show stronger growth than for any comparable period since the 1960s. Reserve Bank Bulletin, October 2000 Commonwealth Government Budget ($ million) 1997/98 1998/99 1999/2000 Total revenues 136 969 146 444 169 921 Total expenses 135 784 140 814 160 408 1 185 5 630 9 513 Reserve Bank Bulletin, October 2000 Please turn over – 19 – Section IV 20 marks Attempt either Question 27 or Question 28 Allow about 35 minutes for this section Answer the question in a SEPARATE writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ use economic data ■ apply economic terms, concepts, relationships and theory ■ present a sustained, logical and well-structured answer to the question Question 27 (20 marks) Analyse the impact of globalisation on the economic performance of the Australian economy. OR Question 28 (20 marks) Analyse the impact that globalisation has had on economic development strategies in an economy other than Australia. End of paper – 20 – © Board of Studies NSW 2001 2002 H I G H E R S C H O O L C E R T I F I C AT E E X A M I N AT I O N Economics Total marks – 100 Section I General Instructions • Reading time – 5 minutes • Working time – 3 hours • Write using black or blue pen • Board-approved calculators may be used • Write your Centre Number and Student Number at the top of pages 9, 11, 13 and 15 Pages 2–8 20 marks • Attempt Questions 1–20 • Allow about 35 minutes for this section Section II Pages 9–16 40 marks • Attempt Questions 21–24 • Allow about 1 hour and 15 minutes for this section Section III Pages 17–18 20 marks • Attempt either Question 25 or Question 26 • Allow about 35 minutes for this section Section IV Page 19 20 marks • Attempt either Question 27 or Question 28 • Allow about 35 minutes for this section 145 Section I 20 marks Attempt Questions 1–20 Allow about 35 minutes for this section Use the multiple-choice answer sheet. Select the alternative A, B, C or D that best answers the question. Fill in the response oval completely. Sample: 2+4= (A) 2 A (B) 6 (C) 8 B C (D) 9 D If you think you have made a mistake, put a cross through the incorrect answer and fill in the new answer. A B C D If you change your mind and have crossed out what you consider to be the correct answer, then indicate the correct answer by writing the word correct and drawing an arrow as follows. correct A B C –2– D 1 Which of the following defines Gross World Product? (A) Increased integration between different countries and economies (B) The total global output of goods and services by all economies (C) The sum of the interactions between the economies of individual countries (D) The final output of goods and services produced by developing economies 2 Which of the following is recognised as the bilateral trade agreement between Australia and New Zealand? (A) APEC (B) ASEAN (C) CERTA (D) WTO 3 Which of the following best describes the difference between monetary policy and fiscal policy? (A) Monetary policy is quicker to implement but has a longer time lag than fiscal policy. (B) Monetary policy is slower to implement but has a longer time lag than fiscal policy. (C) Monetary policy is slower to implement but has a shorter time lag than fiscal policy. (D) Monetary policy is quicker to implement but has a shorter time lag than fiscal policy. 4 Other things being equal, what would improve an economy’s terms of trade? (A) An increase in export prices and a decrease in import prices (B) A decrease in export prices and an increase in import prices (C) An increase in the volume of exports and a decrease in the volume of imports (D) A decrease in the volume of exports and an increase in the volume of imports 5 Which of the following could cause a decrease in hidden unemployment? (A) An increase in the general level of unemployment (B) An increase in the level of cyclical unemployment (C) An increase in the number of discouraged workers (D) An increase in the labour force participation rate –3– 6 The diagram shows the Lorenz curve for a nation. Lo re nz cu rv e Percentage of total income 100 0 Percentage of income recipients 100 What is the value of the Gini coefficient shown by the Lorenz curve? (A) −1 (B) 0 (C) 0.5 (D) 1 7 Which of the following is a feature of a fully decentralised wage determination system? (A) Compulsory unionism (B) Wage increases tied to inflation (C) Increased role of industrial tribunals (D) Negotiated workplace agreements 8 Government budget data for a nation Year Government Expenses ($ billion) Government Revenue ($ billion) 1 2 3 80 90 95 95 100 115 Which of the following explains what happened between Years 2 and 3? (A) The budget surplus increased. (B) The budget surplus decreased. (C) The budget deficit increased. (D) The budget deficit decreased. –4– 9 What action could the Reserve Bank take in order to reduce the rate of inflation? (A) Sell government securities to create a surplus of funds in the market. (B) Sell government securities to create a shortage of funds in the market. (C) Buy government securities to create a surplus of funds in the market. (D) Buy government securities to create a shortage of funds in the market. 10 What is the likely impact of a decrease in the general level of tariffs in Australia? (A) Greater advantages for Australian producers in Australian markets (B) Reduced advantages for Australian producers in overseas markets (C) Greater advantages for overseas producers in Australian markets (D) Reduced advantages for overseas producers in overseas markets 11 The diagram shows the impact of microeconomic reforms on the Australian car industry. D Price S S1 P P1 S D S1 0 Quantity Which of the following could explain the shift in the supply curve from S to S1? (A) A decrease in the price of cars (B) An increase in technical efficiency (C) An increase in car industry regulation (D) A decrease in the supply of cars –5– 12 Which of the following measures the value of the Australian dollar against the currencies of Australia’s major trading partners? (A) The terms of trade (B) The current account deficit (C) The balance of trade (D) The trade weighted index 13 Selected data for a nation Balance of Payments Goods and Services ($ billion) ? Net current transfers −10 Net income −2 Balance on Capital and Financial Account 30 What is the balance on Goods and Services? (A) −$12 billion (B) −$18 billion (C) −$30 billion (D) −$42 billion 14 Which policy could reduce income inequalities in an economy? (A) Introduction of a safety-net wage system (B) Increase in indirect taxes on basic food items (C) Removal of means tests for social security payments (D) Award of a 10% pay rise to all wage earners –6– 15 Selected data for a nation Year Consumer Price Index 1 115 2 120 3 132 4 142 In which year was the annual inflation rate 10%? (A) Year 1 (B) Year 2 (C) Year 3 (D) Year 4 16 When foreign tourists pay for hotel accommodation in Sydney, how is this recorded in Australia’s balance of payments? (A) As a debit on the Australian capital and financial account (B) As a credit on the Australian capital and financial account (C) As a debit on the Australian current account (D) As a credit on the Australian current account 17 Which of the following could improve Australia’s international competitiveness? (A) An increase in Australia’s inflation rate (B) A rise in interest rates in Australia (C) A depreciation of the Australian dollar (D) An increase in average weekly earnings in Australia –7– 18 The diagram shows the market for imported shoes. S Price S1 D D 0 Quantity According to the diagram, what is the effect of a movement in the quota from S to S1? (A) The quota increases and the domestic price falls. (B) The quota decreases and the domestic price rises. (C) The quota increases and the domestic price rises. (D) The quota decreases and the domestic price falls. 19 If Y = 200, C = 50, I = 20, G = 40 and M = 30, what is the value of exports? (A) 60 (B) 110 (C) 120 (D) 140 20 Which of the following could assist economic growth in developing countries? (A) An increase in the rate of taxation (B) A decrease in foreign investment (C) A decrease in the terms of trade (D) An increase in the level of education –8– © Board of Studies NSW 2002 2002 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II Student Number 40 marks Attempt Questions 21–24 Allow about 1 hour and 15 minutes for this section Answer the questions in the spaces provided. Marks Question 21 (10 marks) The diagram shows information about the demand and supply of Australian dollars ($A) in terms of United States dollars ($US). Both countries have flexible exchange rates. Price of $A in $US D1 D2 S 0.60 0.50 D1 S 0 (a) D2 Quantity of $A State the economic term given to the movement of the exchange rate of the $A from $US0.50 to $US0.60. 1 ............................................................................................................................... (b) Outline TWO causes of an increase in demand for $A. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 21 continues on page 10 146 –9– 2 Marks Question 21 (continued) (c) Briefly explain how the Reserve Bank could intervene in the foreign exchange market to influence the exchange rate of the $A. 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (d) Discuss TWO economic benefits to Australia of an appreciation of the $A. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 21 – 10 – © Board of Studies NSW 2002 4 2002 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Marks Question 22 (10 marks) The table shows labour force and population information for a nation. (a) Labour force data Number of persons (million) Employed persons 9 Unemployed persons 1 Population of working age 16 Total population 20 Calculate the labour force unemployment rate for this nation. 1 ............................................................................................................................... (b) Calculate the labour force participation rate for this nation. ............................................................................................................................... ............................................................................................................................... Question 22 continues on page 12 147 – 11 – 1 Marks Question 22 (continued) (c) Explain ONE economic and ONE social cost created by unemployment. 4 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (d) Explain how TWO economic policies could be used by the Australian Government to reduce the level of unemployment. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 22 – 12 – © Board of Studies NSW 2002 4 2002 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Marks Question 23 (10 marks) The table gives selected data for a closed economy. (a) Year Income (Y) ($m) Consumption (C) ($m) Savings (S) ($m) Investment (I) ($m) 1 400 360 40 200 2 500 420 80 200 3 600 480 120 200 Write the formula for the simple multiplier (k). 1 ............................................................................................................................... ............................................................................................................................... (b) Use the information in the table to calculate the value of the simple multiplier for this economy. 1 ............................................................................................................................... ............................................................................................................................... (c) Outline how the simple multiplier can affect economic activity. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 23 continues on page 14 148 – 13 – 2 Marks Question 23 (continued) (d) Explain ONE benefit of economic growth to an economy. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (e) Explain the impact of economic growth on ecologically sustainable development. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 23 – 14 – © Board of Studies NSW 2002 4 2002 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Marks Question 24 (10 marks) The following information refers to inflation. The Consumer Price Index (CPI) increased by 0.9 per cent in the December quarter, after rising by 0.3% in the September quarter, to be 3.1% higher over 2001. . . . However, the outlook for the medium term determinants of inflation has not changed substantially in the light of recent data. Wage and labour cost growth remain contained and are likely to continue to be so given the prevailing weakness in the labour market. The stability of the exchange rate over the past year, combined with downward pressure on world prices from the subdued global economy, suggests that there will be little inflationary pressure from import prices in the medium term. Adapted from Reserve Bank, Statement on Monetary Policy, February 2002 Material used with permission of the Reserve Bank of Australia (a) 2 Define the term inflation. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) 2 Outline TWO causes of inflation. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 24 continues on page 16 149 – 15 – Marks Question 24 (continued) (c) Outline TWO negative effects of inflation on an economy. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (d) Explain TWO government economic policies that could reduce the rate of inflation in an economy. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 24 – 16 – © Board of Studies NSW 2002 4 2002 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Section III 20 marks Attempt either Question 25 or Question 26 Allow about 35 minutes for this section Answer the question in a writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ use your knowledge and the economic information provided ■ apply economic terms, concepts, relationships and theory ■ present a sustained, logical and well-structured answer to the question Question 25 (20 marks) Explain the role of microeconomic policies in assisting structural change in the Australian economy. There appears to be an overwhelming case for pressing on with microeconomic reform and structural change. To abandon the process would not only deny us the benefits promised by the increased efficiency but put our economy at serious risk of falling continuously behind other economies in terms of economic development. Australia clearly needs to restructure its industries so that it becomes more competitive. Only then can we confidently expect to realise an increase in exports, an increase in import substitution and a reduction in our current account deficit. Adapted from Ecodate, May 2001, Microeconomic Policy and Structural Change in the Australian Economy, DR D ARCHBOLD OR 150 – 17 – In your answer you will be assessed on how well you: use your knowledge and the economic information provided apply economic terms, concepts, relationships and theory present a sustained, logical and well-structured answer to the question Question 26 (20 marks) Explain how the Federal Government can use fiscal policy to promote economic growth, redistribute income and assist external stability. Growth in the Australian economy strengthened over the course of 2001 against a backdrop of weakening world economic conditions. GDP increased at an annualised rate of 4 per cent over the three quarters to September 2001. The deterioration in the world economy has been reflected in a switch in the composition of Australian growth from external to domestic demand, with the external sector subtracting from growth over the second half of 2001 after contributing 2 percentage points to growth over the preceding year. Adapted from Reserve Bank, Statement on Monetary Policy, February 2002 Material used with permission of the Reserve Bank of Australia Commonwealth Government Budget Operating Result Amounts in $ million Note: + surplus, 1998–1999 1999–2000 2000–2001 + 5630 + 9514 + 4743 deficit Adapted from Reserve Bank Bulletin, January 2002 – 18 – Section IV 20 marks Attempt either Question 27 or Question 28 Allow about 35 minutes for this section Answer the question in a SEPARATE writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ use economic data ■ apply economic terms, concepts, relationships and theory ■ present a sustained, logical and well-structured answer to the question Question 27 (20 marks) Analyse the impact of changes in the global economy on Australia’s current account and net foreign debt. OR Question 28 (20 marks) Analyse the impact of protectionist policies on the domestic and global economies. End of paper – 19 – BLANK PAGE – 20 – © Board of Studies NSW 2002 2003 H I G H E R S C H O O L C E R T I F I C AT E E X A M I N AT I O N Economics Total marks – 100 Section I General Instructions • Reading time – 5 minutes • Working time – 3 hours • Write using black or blue pen • Board-approved calculators may be used • Write your Centre Number and Student Number at the top of pages 9, 11, 13 and 15 Pages 2–8 20 marks • Attempt Questions 1–20 • Allow about 35 minutes for this section Section II Pages 9–16 40 marks • Attempt Questions 21–24 • Allow about 1 hour and 15 minutes for this section Section III Pages 17–18 20 marks • Attempt either Question 25 or Question 26 • Allow about 35 minutes for this section Section IV Page 19 20 marks • Attempt either Question 27 or Question 28 • Allow about 35 minutes for this section 145 Section I 20 marks Attempt Questions 1–20 Allow about 35 minutes for this section Use the multiple-choice answer sheet. Select the alternative A, B, C or D that best answers the question. Fill in the response oval completely. Sample: 2+4= (A) 2 A (B) 6 (C) 8 B C (D) 9 D If you think you have made a mistake, put a cross through the incorrect answer and fill in the new answer. A B C D If you change your mind and have crossed out what you consider to be the correct answer, then indicate the correct answer by writing the word correct and drawing an arrow as follows. correct A B C –2– D 1 Which of the following would increase Australia’s international competitiveness? (A) An increase in Australian tariffs (B) An increase in Australian wage rates (C) A decrease in inflation in Australia (D) A decrease in imports to Australia 2 Which of the following is a likely effect of a subsidy? (A) The price of exported items will rise. (B) Resource allocation will be more efficient. (C) The supply from local producers will increase. (D) Inflation will increase due to more expensive imports. 3 Which of the following is a feature of Australian workplace agreements? (A) They apply to all workers within an industry. (B) They are organised by unions who automatically become part of the agreement. (C) They are individually negotiated and administered by the Employment Advocate. (D) They require that a majority of the employees agree to the terms and conditions. 4 Which of the following could be a consequence of an increase in real Gross Domestic Product? (A) An increase in consumption and an increase in taxation revenue (B) A decrease in consumption and a decrease in taxation revenue (C) An increase in consumption and a decrease in taxation revenue (D) A decrease in consumption and an increase in taxation revenue 5 If the present rate of unemployment equals the natural rate of unemployment, which of the following must equal zero? (A) Seasonal unemployment (B) Structural unemployment (C) Frictional unemployment (D) Cyclical unemployment –3– 6 The diagram illustrates a typical business cycle for an economy. Real GDP B A 0 Time Which of the following is likely to occur as the economy moves from A to B? (A) Lower volume of imports and lower volume of exports (B) Lower rates of unemployment and higher consumption levels (C) Lower rates of economic growth and lower government revenue (D) Lower government revenue and higher rates of unemployment 7 Which of the following is regarded as a measure of a nation’s external stability? (A) Net income as a percentage of Gross Domestic Product (B) Net foreign debt as a percentage of Gross Domestic Product (C) Net services as a percentage of Gross Domestic Product (D) Net transfers as a percentage of Gross Domestic Product 8 What is the equilibrium level of income if C = 100 + 0.8Y and I = 40? (A) 100 (B) 140 (C) 500 (D) 700 –4– 9 The diagram shows aggregate demand for a closed economy. Expenditure ($) Y C+I J K C L 45° 0 Ye Income ($) What is the level of aggregate demand at the equilibrium level of income? (A) 0L (B) LK (C) 0K (D) 0J 10 What is one way a government can finance a budget deficit? (A) Borrowing from the public (B) Reducing its annual spending (C) Reducing the level of imports (D) Increasing income tax rates 11 Other things being equal, which action by the Reserve Bank of Australia could cause a depreciation of the Australian dollar against other currencies? (A) Selling Australian dollars in foreign exchange markets (B) Selling foreign currency in foreign exchange markets (C) Influencing domestic money markets to raise interest rates (D) Influencing domestic financial markets to lower securities prices –5– 12 The table shows Consumer Price Index information for a nation. Year Consumer Price Index 1 100.0 2 104.0 3 106.6 What is the inflation rate for Year 3? (A) 2.5% (B) 2.6% (C) 4.0% (D) 6.6% 13 Which of the following explains why the market system fails to produce public goods? (A) Consumers prefer to buy private goods rather than public goods. (B) Consumers can benefit from public goods without having to pay for them. (C) Low income earners are disadvantaged because they cannot afford public goods. (D) Government business enterprises produce public goods cheaper than private industry. 14 The table shows the marginal propensity to consume for an economy. Year Marginal propensity to consume (MPC) 1 0.2 2 0.3 3 0.6 What does the table indicate about the size of the simple multiplier for this economy? (A) It was highest in Year 1. (B) It was lowest in Year 3. (C) It increased between Years 1 and 3. (D) It doubled between Years 2 and 3. –6– 15 The table shows selected economic data for a nation. Year Export price index Import price index 1 100 110 2 110 112 What does the table indicate about this economy? (A) Import volumes exceeded export volumes in both years. (B) The terms of trade worsened between Year 1 and Year 2. (C) The balance of trade improved marginally between Year 1 and Year 2. (D) Fewer exports were required to pay for the same volume of imports in Year 2. 16 Which of the following would indicate that Australia’s capital and financial account is in surplus? (A) An increase in Australia’s Current Account Deficit (B) A reduction in Australia’s foreign debt as a percentage of GDP (C) When income from Australian exports is greater than expenditure on imports (D) When Australia’s lending to overseas exceeds Australia’s borrowing from overseas 17 The table shows population and employment data for a nation. Year Population (million) Working age population (million) Employed persons (million) Officially unemployed (million) 1 20 10 6 2 2 25 13 9 3 Which of the following is correct concerning this nation between Years 1 and 2? (A) The participation rate decreased. (B) The participation rate increased. (C) The unemployment rate decreased. (D) The unemployment rate increased. –7– 18 The diagram illustrates the effect of a tariff. Price D S Pe Pt Tariff Pw World price D S 0 Q1 Q2 Q Q3 Q4 Quantity Which of the following represents the effect of this tariff on the economy? (A) The domestic price would increase to the equilibrium price (0Pe ). (B) Domestic production would increase from 0Q1 to 0Q2. (C) Import volumes would increase from 0Q2 to 0Q3. (D) Government revenue would be equal to the world price (0Pw ). 19 What is an advantage of free trade? (A) Nations are free to take measures to protect all domestic industries. (B) Nations attempt to become self-sufficient to satisfy domestic wants. (C) Nations are able to specialise and as a result produce more output. (D) Nations can prevent cheap imports being dumped on domestic markets. 20 Which of the following describes a role of the World Trade Organisation (WTO)? (A) It promotes international financial stability. (B) It regulates investment in public infrastructure. (C) It advocates protectionist policies for developing countries. (D) It monitors developments in world trade and reviews barriers to world trade. –8– © Board of Studies NSW 2003 2003 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II Student Number 40 marks Attempt Questions 21–24 Allow about 1 hour and 15 minutes for this section Answer the questions in the spaces provided. Marks Question 21 (10 marks) The table shows selected economic data for the Australian economy, which has a floating exchange rate system. (a) Year Exchange rate of the $A (in terms of $US) Trade weighted index (TWI) 1 0.60 70 2 0.65 72 3 0.68 70 4 0.64 65 2 Define the term exchange rate. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Identify TWO possible reasons for the movement in the exchange rate of the $A (in terms of $US) from Year 1 to Year 2. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 21 continues on page 10 146 –9– 2 Marks Question 21 (continued) (c) Briefly explain why an exchange rate can move in the opposite direction to the Trade Weighted Index. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (d) Explain the likely impact on Australia’s Balance of Payments of the decline in the Trade Weighted Index from Year 3 to Year 4. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 21 – 10 – © Board of Studies NSW 2003 4 2003 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Marks Question 22 (10 marks) The table shows selected data for a nation. (a) Year Money gross domestic product (GDP) ($m) Consumer price index (CPI) 1 2 380 416 100 104 Calculate the real GDP for this economy in Year 2. 1 ............................................................................................................. ($ million) (b) 2 Define the term economic growth. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (c) Explain how an increase in productivity contributes to economic growth. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 22 continues on page 12 147 – 11 – 3 Marks Question 22 (continued) (d) Explain the benefits of economic growth to business firms and the government. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 22 – 12 – © Board of Studies NSW 2003 4 2003 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Marks Question 23 (10 marks) The table shows the Balance of Payments for a nation. (Assume a floating exchange rate.) Current account ($ billion) Balance on goods and services Net current transfers Net income (a) Capital and financial account ($ billion) – 1.2 Capital account 0.5 Financial account 1.5 ? –18.5 Using the data in the table, calculate the balance on financial account. 1 ............................................................................................................................... .............................................................................................................. ($ billion) (b) Outline TWO factors that could increase a nation’s Current Account Deficit. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 23 continues on page 14 148 – 13 – 2 Marks Question 23 (continued) (c) Explain the relationship between net income in the current account and the capital and financial account. 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (d) Explain how a sustained increase in the Current Account Deficit could affect an economy. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 23 – 14 – © Board of Studies NSW 2003 4 2003 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Marks Question 24 (10 marks) (a) Outline ONE advantage and ONE disadvantage of using monetary policy to manage the economy. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Explain how the Reserve Bank influences changes in the level of interest rates in the Australian economy. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 24 continues on page 16 149 – 15 – 4 Marks Question 24 (continued) (c) 4 The diagram shows the demand and supply of cash. Cash rate S1 S2 D r1 r2 D Quantity of cash 0 Explain the effects of a move in the cash rate from 0r1 to 0r2 on the level of economic activity and the exchange rate. (Assume a floating exchange rate.) ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 24 – 16 – © Board of Studies NSW 2003 2003 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Section III 20 marks Attempt either Question 25 or Question 26 Allow about 35 minutes for this section Answer the question in a writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ use your knowledge and the economic information provided ■ apply economic terms, concepts, relationships and theory ■ present a sustained, logical and well-structured answer to the question Please turn over 150 – 17 – In your answer you will be assessed on how well you: ■ use your knowledge and the economic information provided ■ apply economic terms, concepts, relationships and theory ■ present a sustained, logical and well-structured answer to the question Question 25 (20 marks) In relation to the Australian economy, discuss the causes of unemployment and the economic and social problems created by unemployment. The Australian economy has continued to expand at a good pace in the recent period, despite the continued drag from the weak world economy and the drought. This outcome reflected continued strong growth in domestic demand, though the pace moderated somewhat in the second half of last year. The ongoing expansion of the economy has been sufficient to generate a further strengthening of the labour market, with the unemployment rate declining significantly during 2002. Adapted from Statement on Monetary Policy, Reserve Bank of Australia, February 2003 Reproduced with the permission of the Reserve Bank of Australia Despite Australia’s relatively low rate of unemployment, the plight of the long-term unemployed remains a serious economic and social concern. Unsourced quote OR Question 26 (20 marks) Discuss the causes of inflation and the policies available to the Australian Government to control the rate of inflation. During the year to December 2002 Australia’s underlying inflation was around 2.5 per cent, having declined from just over 3 per cent at the end of the previous year. The main factor contributing to the decline in underlying inflation appears to have been the fading of the impact of the exchange rate depreciation that took place over the period 1998–2000. In addition to this impact from the traded goods sector, there was some easing in wage costs. Adapted from Statement on Monetary Policy, Reserve Bank of Australia, February 2003 Reproduced with the permission of the Reserve Bank of Australia – 18 – Section IV 20 marks Attempt either Question 27 or Question 28 Allow about 35 minutes for this section Answer the question in a SEPARATE writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ use economic data ■ apply economic terms, concepts, relationships and theory ■ present a sustained, logical and well-structured answer to the question Question 27 (20 marks) Explain the impact of globalisation on the economic performance of EITHER the Australian economy OR an economy other than Australia. OR Question 28 (20 marks) Explain how current labour market policies contribute to the management of the Australian economy. End of paper – 19 – BLANK PAGE – 20 – © Board of Studies NSW 2003 2004 HI GHER SCHOOL CERTI FI CATE EX AMI NATI ON Economics Total marks – 100 Section I General Instructions • Reading time – 5 minutes • Working time – 3 hours • Write using black or blue pen • Board-approved calculators may be used • Write your Centre Number and Student Number at the top of pages 13, 17, 19 and 21 Pages 2–9 20 marks • Attempt Questions 1–20 • Allow about 35 minutes for this section Section II Pages 13–22 40 marks • Attempt Questions 21–24 • Allow about 1 hour and 15 minutes for this section Section III Pages 23–24 20 marks • Attempt either Question 25 or Question 26 • Allow about 35 minutes for this section Section IV Page 25 20 marks • Attempt either Question 27 or Question 28 • Allow about 35 minutes for this section 145 Section I 20 marks Attempt Questions 1–20 Allow about 35 minutes for this section Use the multiple-choice answer sheet. Select the alternative A, B, C or D that best answers the question. Fill in the response oval completely. Sample: 2+4= (A) 2 A (B) 6 (C) 8 B C (D) 9 D If you think you have made a mistake, put a cross through the incorrect answer and fill in the new answer. A B C D If you change your mind and have crossed out what you consider to be the correct answer, then indicate the correct answer by writing the word correct and drawing an arrow as follows. correct A B C –2– D 1 What is the role of the International Monetary Fund (IMF)? (A) To implement and advance global trade agreements (B) To settle industrial and trade disputes between members (C) To help poorer countries with their economic development (D) To maintain international financial stability in global financial markets 2 An increase in investment expenditure of $100m changes the equilibrium level of national income by $250m. What is the size of the Marginal Propensity to Consume? (A) 0.4 (B) 0.6 (C) 1.25 (D) 2.50 3 Which of the following is a disadvantage of a decentralised wage determination system? (A) An increase in income inequality (B) A reduction in the rate of structural change (C) A reduction in the accumulation of wealth (D) An increase in government control over wages 4 The table shows selected data for a nation. Year Export price index Import price index 1 100 105 2 107 115 3 116 118 4 120 124 In which year were fewer exports required to pay for the same volume of imports? (A) Year 1 (B) Year 2 (C) Year 3 (D) Year 4 –3– 5 The table shows selected data for an economy. Year Money gross Consumer price Unemployment domestic product (GDP) index (CPI) rate ($m) (%) 1 4000 100 6 2 4200 105 10 From Year 1 to Year 2, which statement is correct concerning this economy? (A) Real economic growth is zero and there is a need for expansionary policy. (B) Real economic growth is low and there is a need for expansionary policy. (C) Real economic growth is high and there is a need for contractionary policy. (D) Real economic growth is negative and there is a need for expansionary policy. 6 How does the impact of a tariff differ from that of an import quota? (A) A tariff disadvantages consumers, while a quota does not. (B) A tariff generates tax revenue to the government, while a quota does not. (C) A tariff encourages increased domestic production, while a quota does not. (D) A tariff affects the domestic price of a commodity, while a quota does not. 7 Which of the following is likely to cause a fall in the level of hidden unemployment? (A) A rise in the rate of unemployment (B) A rise in the labour force participation rate (C) A rise in the number of discouraged workers (D) A rise in the number of long-term unemployed –4– 8 The diagram shows the movement of the Lorenz curve for a nation over time. 100 Cumulative % of total income B 0 A Cumulative % of income units 100 Which of the following could explain the movement of the Lorenz curve from A to B? (A) A rise in the Gini coefficient (B) The removal of a tax on wealth (C) An increase in indirect taxes on necessities (D) An increase in transfer payments for low income earners 9 Which of the following is a feature of Australia’s decentralised wage system? (A) The automatic adjustment of wages in line with inflation (B) The involvement of unions in all Workplace Agreements (C) The removal of safety net clauses from Certified Agreements (D) The registration of Australian Workplace Agreements with the Employment Advocate –5– 10 The diagram shows a relationship between inflation and unemployment for an economy. Inflation % A B 0 Unemployment % Which of the following policies would move the economy from A to B? (A) Reduce interest rates and increase income tax rates. (B) Reduce interest rates and decrease income tax rates. (C) Increase interest rates and decrease income tax rates. (D) Increase interest rates and increase income tax rates. 11 What would be the effect on the Australian economy of recessions in Australia’s major trading partners? (A) Higher employment growth and lower export volumes (B) Higher employment growth and higher export volumes (C) Lower employment growth and lower export volumes (D) Lower employment growth and higher export volumes 12 Other things being equal, what will be the impact on the Australian economy of a decrease in domestic interest rates? (A) Economic activity should increase and the exchange rate should appreciate. (B) Economic activity should increase and the exchange rate should depreciate. (C) Economic activity should decrease and the exchange rate should appreciate. (D) Economic activity should decrease and the exchange rate should depreciate. –6– 13 The table shows selected data for an economy. National income components ($ million) Savings 50 Investment 30 Taxation 40 Exports 50 Government spending 20 Imports 30 Using the information in the table, which statement is correct for this economy? (A) There is a budget deficit. (B) The economy is in equilibrium. (C) There is a current account deficit. (D) Withdrawals are greater than injections. 14 Other things being equal, what will be the impact on the Australian economy of an appreciation of the Australian dollar against other currencies? (A) Export prices will rise, import prices will fall and the terms of trade will improve. (B) Export prices will rise, import prices will fall and the terms of trade will deteriorate. (C) Export prices will fall, import prices will rise and the terms of trade will improve. (D) Export prices will fall, import prices will rise and the terms of trade will deteriorate. 15 The table shows selected data for an economy which operates with a floating exchange rate. ($ billion) Item Balance on goods and services 16 Net transfers 2 Net income ? Capital account 17 Financial account 13 What is the value of Net income for this economy? (A) –$48 billion (B) –$30 billion (C) $12 billion (D) $30 billion –7– 16 The following diagram shows aggregate demand and aggregate supply curves for an economy. Price level AD2 AS AD1 AD1 0 AD2 AS Real GDP Which of the following could cause a shift of the aggregate demand curve from AD1 to AD2? (A) A decrease in the rate of income tax (B) A decrease in the general level of prices (C) An increase in the real level of national income (D) An increase in the general level of interest rates 17 The table shows international investment transactions for an economy. Year Equity investment abroad ($ billion) Foreign liabilities ($ billion) 1 90 150 2 250 300 From Year 1 to Year 2, which statement is correct for this economy? (A) The economy’s net foreign debt is increasing. (B) Equity investment as a proportion of foreign liabilities is increasing. (C) Foreign liabilities are increasing at a greater rate than equity investment. (D) The increase in equity investment will worsen the economy’s foreign debt. –8– 18 If a government budgets for a surplus and there is an unexpected increase in the level of economic activity, which of the following is likely to occur? (A) There will be an increase in tax revenues and an increase in the budget surplus. (B) There will be an increase in tax revenues and a decrease in the budget surplus. (C) There will be a decrease in tax revenues and an increase in the budget surplus. (D) There will be a decrease in tax revenues and a decrease in the budget surplus. 19 Price of $A in terms of $US S1 D1 S2 D2 0.75 0.70 D1 S1 0 D2 S2 Quantity of $A Assuming a floating exchange rate, which of the following actions by the Reserve Bank of Australia have caused the exchange rate to move from $US0.75 to $US0.70? (A) Buy Australian dollars and raise Australian interest rates. (B) Buy Australian dollars and lower Australian interest rates. (C) Buy United States dollars and lower Australian interest rates. (D) Sell United States dollars and raise Australian interest rates. 20 In which account in Australia’s Balance of Payments would Direct and Portfolio investment transactions be recorded? (A) The Capital account (B) The Current account (C) The Financial account (D) The Net incomes account –9– BLANK PAGE – 10 – BLANK PAGE – 11 – BLANK PAGE – 12 – © Board of Studies NSW 2004 2004 HI GHER SCHOOL CERTI FI CATE EXAMI NATI ON Economics Centre Number Section II 40 marks Attempt Questions 21–24 Allow about 1 hour and 15 minutes for this section Answer the questions in the spaces provided. Question 21 (10 marks) Please turn over 146 – 13 – Student Number Marks Question 21 (10 marks) The diagram shows the world market for a commodity after the introduction of a subsidy by a country which is a major world producer. World D price S1 S2 P1 P2 S1 0 (a) D S2 Q1 Q2 World quantity Explain why the supply curve shifts from S1 to S2 after the subsidy has been introduced. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 21 continues on page 15 – 14 – 2 Marks Question 21 (continued) (b) With reference to the diagram, analyse the impact of the subsidy on producers in countries where the subsidy has not been introduced. 4 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (c) Explain TWO benefits associated with a reduction in global protectionist policies. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 21 – 15 – 4 BLANK PAGE – 16 – © Board of Studies NSW 2004 2004 HI GHER SCHOOL CERTI FI CATE EXAMI NATI ON Economics Centre Number Section II (continued) Student Number Marks Question 22 (10 marks) The table gives selected data for an economy. (a) Year Working-age population Employed persons Unemployed persons Consumer price index 1 320 000 190 000 10 000 100 2 376 000 198 000 22 000 102 3 410 000 195 500 34 500 103 Identify the trend in the unemployment rate in this economy over the three-year period. 1 ............................................................................................................................... (b) Outline TWO possible causes of the fall in the participation rate for this economy. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 22 continues on page 18 147 – 17 – 2 Marks Question 22 (continued) (c) For this economy, briefly explain the relationship between the unemployment rate and the inflation rate. 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (d) Using the information in the table, explain how TWO government macroeconomic policies could be used to reduce unemployment in this economy. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 22 – 18 – © Board of Studies NSW 2004 4 2004 HI GHER SCHOOL CERTI FI CATE EXAMI NATI ON Economics Centre Number Section II (continued) Student Number Marks Question 23 (10 marks) The following information concerns environmental issues. Until recently, rapid industrialisation was such a high priority in almost every Asian country that the resulting environmental damage was regarded as a minor inconvenience. However, governments are finally seeing that massive pollution and deforestation hurt their economies and discourage foreign investment in the long run. The Kyoto Protocol, which gives incentives to all countries to cut their greenhouse gas emissions, looks set to give a big push to Asian clean-up efforts. Adapted from The Australian Financial Review Fairfax, 24 October 2003 (a) 2 Define the term renewable resource. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Distinguish between the private and social costs associated with the logging of rainforests. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 23 continues on page 20 148 – 19 – 3 Marks Question 23 (continued) (c) Discuss a possible conflict between the goals of economic growth and the preservation of the natural environment. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 23 – 20 – © Board of Studies NSW 2004 5 2004 HI GHER SCHOOL CERTI FI CATE EXAMI NATI ON Economics Growth Drivers: The Medium to Longer-Term Challenges to Maintain Growth Performance addressed to the Country Forum CFO Forum by Dr Martin Parkinson on the 6th of February 2004 Melbourne, ‘© Commonwealth of Australia reproduced with permission.’ Marks Question 24 (continued) (b) Describe TWO problems associated with structural change in the Australian economy. 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (c) Explain how deregulation may promote productivity growth in the Australian economy. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 24 – 22 – © Board of Studies NSW 2004 5 2004 HI GHER SCHOOL CERTI FI CATE EXAMI NATI ON Economics Section III 20 marks Attempt either Question 25 or Question 26 Allow about 35 minutes for this section Answer the question in a writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ use your knowledge and the economic information provided ■ apply economic terms, concepts, relationships and theory ■ present a sustained, logical and well-structured answer to the question Question 25 (20 marks) Analyse the effects of changes in the exchange rate of the Australian dollar (against other currencies) on the Australian economy. Daily Exchange Rate 0.80 0.75 0.70 0.65 Price of A$ in terms of US$ 0.60 0.55 0.50 0.45 02 Jan 01 02 Jan 02 02 Jan 03 02 Jan 04 Source: Reserve Bank of Australia, 2004 The main source of risk to the export outlook apparent in the recent period has been associated with the appreciation of the exchange rate, and particularly the rapid appreciation that took place during 2003 and into the early weeks of this year. Had it continued, this posed the risk of significantly dampening the effects of the global recovery on Australia’s export performance. But, with the exchange rate having drifted lower recently and the prospect of US interest rates starting to return to normal, this risk now seems less severe than a few months ago. [The Reserve Bank Board], following the two increases in the cash rate at the end of 2003 . . . considered at its subsequent monthly meetings whether there was a case to increase rates further . . . Adapted from Statement on Monetary Policy, © Reserve Bank of Australia, May 2004 OR 150 – 23 – In your answer you will be assessed on how well you: ■ use your knowledge and the economic information provided ■ apply economic terms, concepts, relationships and theory ■ present a sustained, logical and well-structured answer to the question Question 26 (20 marks) Analyse the causes of Australia’s on-going current account deficit and its effects on external stability. % 22 Balance of Payments per cent of GDP Imports 20 18 Exports 16 % Balance on goods and services 0 –2 –4 –6 Current account 1987 1989 1991 1993 1995 1997 1999 2001 2003 Source: Reserve Bank of Australia, 2004 If Australia is to reduce both its current account deficit and its net foreign debt then progress needs to be made simultaneously on two fronts. First, exports have to grow faster than imports. Second, there needs to be a corresponding increase in savings so that more of our investment is financed from domestic savings rather than by borrowing from overseas. Without an increase in savings, any income gain from a rise in exports will be lost to an increase in expenditure on imports. Excerpt from Research Note 40, from Parliamentary Library Merchandise Trade and Balance on goods and services, current account, ABSdata used with permission from the Australian Bureau of Statistics – 24 – Section IV 20 marks Attempt either Question 27 or Question 28 Allow about 35 minutes for this section Answer the question in a SEPARATE writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ use economic data ■ apply economic terms, concepts, relationships and theory ■ present a sustained, logical and well-structured answer to the question Question 27 (20 marks) Discuss the effectiveness of Australia’s monetary and fiscal policies in dealing with economic growth and inflation. OR Question 28 (20 marks) Discuss the impact of globalisation on one or more economies, with reference to economic development and environmental consequences. End of paper – 25 – BLANK PAGE – 26 – © Board of Studies NSW 2004 2005 H I G H E R S C H O O L C E R T I F I C AT E E X A M I N AT I O N Economics Total marks – 100 Section I General Instructions • Reading time – 5 minutes • Working time – 3 hours • Write using black or blue pen • Board-approved calculators may be used • Write your Centre Number and Student Number at the top of pages 9, 13, 15 and 17 Pages 2–8 20 marks • Attempt Questions 1–20 • Allow about 35 minutes for this section Section II Pages 9–18 40 marks • Attempt Questions 21–24 • Allow about 1 hour and 15 minutes for this section Section III Pages 19–20 20 marks • Attempt either Question 25 or Question 26 • Allow about 35 minutes for this section Section IV Page 21 20 marks • Attempt either Question 27 or Question 28 • Allow about 35 minutes for this section 145 Section I 20 marks Attempt Questions 1–20 Allow about 35 minutes for this section Use the multiple-choice answer sheet. Select the alternative A, B, C or D that best answers the question. Fill in the response oval completely. Sample: 2+4= (A) 2 A (B) 6 (C) 8 B C (D) 9 D If you think you have made a mistake, put a cross through the incorrect answer and fill in the new answer. A B C D If you change your mind and have crossed out what you consider to be the correct answer, then indicate the correct answer by writing the word correct and drawing an arrow as follows. correct A B C –2– D 1 A developing economy is experiencing a short-term collapse in the value of its currency. From which of the following institutions is it most likely to receive assistance? (A) The World Bank (B) The World Trade Organisation (C) The International Monetary Fund (D) The Organisation for Economic Cooperation and Development 2 Increases in which of the following indicate economic development? (A) Structural change and real incomes (B) Consumer Price Index and the value of the currency (C) Gross Domestic Product and the level of employment (D) Labour force participation rate and the level of employment 3 Which of the following describes an effect of globalisation? (A) There has been a greater divergence in world economic systems. (B) There has been an increase in the inequality of income distribution in developing economies. (C) There has been an increasing trend towards regulation of labour, financial and product markets. (D) The newly industrialised economies of the world have enjoyed economic growth, but no increase in international trade. 4 Which of the following represents a fiscal policy decision to restrict economic growth? (A) The raising of interest rates to slow down inflation (B) Actions by the Reserve Bank to support Australia’s currency (C) The operation of automatic built-in stabilisers during a recession (D) A decrease in government spending on infrastructure development –3– 5 Which of the following could be a cause of demand inflation? (A) An increase in the cost of labour (B) An increase in domestic interest rates (C) An increase in the level of consumer spending (D) An increase in import prices, resulting from a depreciating dollar 6 A multinational car manufacturer is forced by the government to install anti-pollution devices. Which of the following outcomes is a result of this action? (A) An increase in private costs and a reduction in negative externalities (B) An increase in private costs and an increase in negative externalities (C) An increase in social costs and a reduction in negative externalities (D) An increase in social costs and an increase in negative externalities The diagram illustrates a typical business cycle for an economy. Real GDP 7 A B 0 Time Which of the following describes the effect on the Federal Government’s budget as the economy moves from A to B? (A) An increase in tax revenue and an increase in transfer payments (B) An increase in tax revenue and a decrease in transfer payments (C) A decrease in tax revenue and an increase in transfer payments (D) A decrease in tax revenue and a decrease in transfer payments –4– 8 Which of the following is an example of a reform in a factor market? (A) Introduction of a quota on imported items (B) Expansion of government welfare programs (C) Removal of minimum wage levels for specific industries (D) Implementation of quality control testing for finished goods 9 Which of the following is a feature of a safety net in wage determination? (A) It is a part of all enterprise agreements. (B) It is included in certified agreements as negotiated by unions. (C) It protects employers against wage increases which exceed productivity. (D) It reduces the inequality of wages and income between skilled and unskilled workers. 10 Which of the following is the likely effect on Australia of a recession in the economies of all Australia’s major trading partners? (A) A reduction in Australia’s imports and a decrease in the current account deficit (B) A reduction in Australia’s exports and an increase in the current account deficit (C) A reduction in foreign investment into Australia and a decrease in the financial account surplus (D) An increase in foreign investment into Australia and a decrease in the financial account surplus 11 The table shows selected data for an economy. Year Change in real gross domestic product Government budget revenue ($bn) Government budget expenditure ($bn) Unemployment rate 1 2.1% 400 320 6.2% 2 3.5% 740 500 5.1% From Year 1 to Year 2, which of the following statements is correct for this economy? (A) The budget surplus is increasing and the economy is expanding. (B) The budget surplus is increasing and the economy is contracting. (C) The budget deficit is increasing and the economy is expanding. (D) The budget deficit is increasing and the economy is contracting. –5– 12 The table shows selected data for an economy over a one-year period. Initial change in investment expenditure ($m) Marginal propensity to consume (MPC) Marginal propensity to save (MPS) Change in equilibrium national income ($m) 400 ? ? 2000 According to the information in the table, what are the values of MPC and MPS? (A) MPC is 5.0 and MPS is 5.0 (B) MPC is 0.5 and MPS is 0.5 (C) MPC is 8.0 and MPS is 2.0 (D) MPC is 0.8 and MPS is 0.2 13 Which of the following is recorded as a debit item in the current account of the Australian Balance of Payments? (A) Australian financial aid to developing countries (B) The purchase by Australians of equities in an overseas company (C) Dividend payments from an overseas company to Australian shareholders (D) The purchase of equities in an Australian company by an overseas company 14 Which of the following measures the terms of trade for an economy? (A) The ratio of export income to import expenditure (B) The prices of exports compared to the prices of imports (C) The difference between export income and import expenditure (D) The volume of imported goods compared to the volume of exported goods 15 Which of the following is the likely effect of a fall in the level of Australia’s interest rates relative to overseas interest rates? (A) Increased capital outflow and downward pressure on the value of the $A (B) Increased capital outflow and upward pressure on the value of the $A (C) Increased capital inflow and downward pressure on the value of the $A (D) Increased capital inflow and upward pressure on the value of the $A –6– 16 Which of the following factors best illustrates the difference between monetary policy and fiscal policy? (A) Monetary policy is quicker to implement than fiscal policy, and is more effective in stimulating the economy than in slowing it down. (B) Monetary policy is quicker to implement than fiscal policy, and is more effective in slowing down the economy than in stimulating it. (C) Monetary policy is slower to implement than fiscal policy, and has a longer time lag than fiscal policy in bringing about changes. (D) Monetary policy is slower to implement than fiscal policy, and has a shorter time lag than fiscal policy in bringing about changes. 17 Which of the following actions could the Reserve Bank undertake to reduce economic activity in the Australian economy? (A) Buy government securities to decrease interest rates and appreciate the $A (B) Buy government securities to increase interest rates and appreciate the $A (C) Sell government securities to increase interest rates and appreciate the $A (D) Sell government securities to increase interest rates and depreciate the $A 18 The table shows selected data for an economy. Balance of Payments items $ billion ($bn) Exports 300 Imports 340 Net services –60 Net income –100 Net current transfers 80 According to the information in the table, which of the following statements is correct? (A) There is a deficit of $280bn on the capital and financial account. (B) There is a deficit of $200bn on the current account. (C) There is a surplus of $40bn on merchandise trade. (D) There is a surplus of $120bn on the capital and financial account. –7– 19 Which of the following is a feature of the natural rate of unemployment? (A) It varies inversely with the inflation rate. (B) It increases during times of economic downturn. (C) It occurs when the rate of cyclical unemployment is zero. (D) It is the total of frictional and seasonal unemployment rates. 20 The table shows population and labour force data for an economy for the month of June. Population Population of working age Employed persons Unemployed persons (million) (million) (million) (million) 30 15 9 3 Which of the following statements is true for this economy in June? (A) The participation rate is 50% and the unemployment rate is 20%. (B) The participation rate is 60% and the unemployment rate is 25%. (C) The participation rate is 60% and the unemployment rate is 20%. (D) The participation rate is 80% and the unemployment rate is 25%. –8– © Board of Studies NSW 2005 2005 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II 40 marks Attempt Questions 21–24 Allow about 1 hour and 15 minutes for this section Student Number Answer the questions in the spaces provided. Marks Question 21 (10 marks) The diagram illustrates the effect of a tariff on the product of a particular industry. The curve SS is the supply from domestic producers, and the curve DD is the demand from domestic consumers. Price $A D S 20 15 Tariff 10 World price D S 20 (a) 30 40 50 60 Quantity What is the domestic market price for this product after the imposition of this tariff? 1 $ ............................................................................................................................. (b) Calculate the amount of government revenue raised from this tariff. ............................................................................................................................... ............................................................................................................................... Question 21 continues on page 10 146 –9– 1 Marks Question 21 (continued) (c) Outline THREE methods of protection, other than tariffs, for domestic producers. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 21 continues on page 11 – 10 – 3 Marks Question 21 (continued) (d) Explain the economic effects of a reduction in the general level of protection for the Australian economy. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 21 – 11 – 5 BLANK PAGE – 12 – © Board of Studies NSW 2005 Marks Question 22 (continued) (c) Outline TWO features of Australian Workplace Agreements. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (d) Discuss arguments for and against the move to a more decentralised system of wage determination in Australia. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 22 – 14 – © Board of Studies NSW 2005 4 Marks Question 23 (continued) (d) Explain how Reserve Bank operations in the foreign exchange market and the domestic money market can influence the value of the $A. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 23 – 16 – © Board of Studies NSW 2005 5 2005 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Marks Question 24 (10 marks) (a) What does the Gini coefficient measure? 1 ............................................................................................................................... ............................................................................................................................... (b) What does a movement in the Gini coefficient from 0.60 to 0.50 indicate for income distribution? 1 ............................................................................................................................... ............................................................................................................................... (c) Distinguish between the terms income and wealth. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 24 continues on page 18 149 – 17 – 2 Marks Question 24 (continued) (d) Describe a possible social consequence of an increase in the inequality of income distribution for an economy. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (e) Explain how differences in gender and occupation can contribute to income inequality in Australia. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 24 – 18 – © Board of Studies NSW 2005 4 Section IV 20 marks Attempt either Question 27 or Question 28 Allow about 35 minutes for this section Answer the question in a SEPARATE writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ use economic data ■ apply economic terms, concepts, relationships and theory ■ present a sustained, logical and well-structured answer to the question Question 27 (20 marks) Outline the factors affecting Australia’s economic growth, and analyse the relationship between economic growth and changes in Australia’s unemployment rate. OR Question 28 (20 marks) Outline the features of globalisation, and analyse the impact of globalisation on the standard of living in the global economy. End of paper – 21 – BLANK PAGE – 22 – © Board of Studies NSW 2005 2006 H I G H E R S C H O O L C E R T I F I C AT E E X A M I N AT I O N Economics Total marks – 100 Section I General Instructions • Reading time – 5 minutes • Working time – 3 hours • Write using black or blue pen • Board-approved calculators may be used • Write your Centre Number and Student Number at the top of pages 9, 13, 15 and 17 Pages 2–8 20 marks • Attempt Questions 1–20 • Allow about 35 minutes for this section Section II Pages 9–18 40 marks • Attempt Questions 21–24 • Allow about 1 hour and 15 minutes for this section Section III Pages 19–20 20 marks • Attempt either Question 25 or Question 26 • Allow about 35 minutes for this section Section IV Page 21 20 marks • Attempt either Question 27 or Question 28 • Allow about 35 minutes for this section 145 Section I 20 marks Attempt Questions 1–20 Allow about 35 minutes for this section Use the multiple-choice answer sheet. Select the alternative A, B, C or D that best answers the question. Fill in the response oval completely. Sample: 2+4= (A) 2 A (B) 6 (C) 8 B C (D) 9 D If you think you have made a mistake, put a cross through the incorrect answer and fill in the new answer. A B C D If you change your mind and have crossed out what you consider to be the correct answer, then indicate the correct answer by writing the word correct and drawing an arrow as follows. correct A B C –2– D 1 Which of the following is a feature of a decentralised industrial relations framework? (A) An increase in the role of industrial tribunals (B) The indexation of wage increases to inflation (C) Greater involvement of unions in wage negotiations (D) Individual negotiations between employees and employers 2 Which international organisation is mainly responsible for monitoring and enforcing global multilateral trade agreements? (A) Association of South East Asian Nations (B) Asia Pacific Economic Co-operation (C) World Trade Organisation (D) International Monetary Fund 3 The table shows selected data for a nation. Year Money gross domestic product (GDP) ($m) Literacy level (%) Mortality rate per 1000 population Consumer price index (CPI) 1995 $4000 67 80 145 2005 $7550 79 55 170 According to the data, which statement correctly describes what this economy has experienced over the time period shown? (A) An increase in real GDP but a decline in living standards (B) An increase in real GDP and improved living standards (C) A decrease in real GDP and a decline in living standards (D) A decrease in real GDP but improved living standards 4 Which of the following indicates international convergence? (A) Increasing similarity of economic systems (B) Reductions in the international mobility of labour (C) Dismantling of internationally-based trade agreements (D) Widening gaps between developed and developing economies –3– 5 If an economy is experiencing high levels of demand inflation, what would be appropriate policy responses? (A) Increased government expenditure, decreased taxation and increased interest rates (B) Increased government expenditure, decreased taxation and decreased interest rates (C) Decreased government expenditure, increased taxation and increased interest rates (D) Decreased government expenditure, increased taxation and decreased interest rates 6 As a percentage of Gross Domestic Product, which of the following is a measure of external stability? (A) Capital inflow (B) The budget deficit (C) Household savings ratio (D) The current account deficit 7 The diagram shows the impact of a change in the quota for imported cars. D S1 S S1 S Price 0 D Quantity According to the diagram, what are the effects of a movement in the supply curve from SS to S1S1? (A) The quota has increased and local car producers face more competition. (B) The quota has increased and local car producers face less competition. (C) The quota has decreased and local car producers face more competition. (D) The quota has decreased and local car producers face less competition. –4– 8 Other things being equal, if an increase of $90m in investment expenditure resulted in an increase in national income of $225m, what is the value of the Marginal Propensity to Consume (MPC)? (A) 0.25 (B) 0.4 (C) 0.6 (D) 2.5 9 The table shows the relative weights allocated to the currency of Australia’s major trading partners. Currency Relative weights Year 1 Year 2 Japanese Yen 18.7 16.1 United States Dollar 15.8 17.2 European Euro 12.4 10.7 5.3 7.0 UK Pound Sterling Which of the following is a possible explanation for the movement in the relative weights of the currencies of Australia’s trading partners? (A) A reduction in goods imported to Australia from the UK (B) An increase in the volume of Australia’s trade with Japan (C) The implementation of a free trade agreement between Australia and Europe (D) An increase in Australia’s demand for traded commodities from the United States 10 What is an economic benefit for an economy of an unequal distribution of income and wealth? (A) An increase in social division (B) An increase in the household debt ratio (C) An increased incentive to work longer hours (D) An increased level of government welfare spending –5– 11 Which of the following could explain a movement in Australia’s Terms of Trade index from 110 to 106? (A) A rise in export prices relative to import prices (B) A rise in import prices relative to export prices (C) A fall in the quantity of goods imported relative to goods exported (D) A fall in the quantity of goods exported relative to goods imported 12 The table shows selected data for an economy. Year Money GDP ($bn) CPI 1 600.0 100 2 750.0 110 3 820.0 125 4 900.0 130 According to the information in the table, what is the real GDP ($bn) in Year 3 compared to the base year? (A) $656.0 (B) $721.6 (C) $931.8 (D) $1025.0 13 Under a floating exchange rate system, what would be the likely effect of a fall in Australia’s inflation rate relative to the average rate of inflation of Australia’s major trading partners? (A) A rise in Australia’s interest rates (B) A decrease in the supply of foreign currency (C) A deterioration in the balance on current account (D) An increase in the demand for the Australian dollar 14 Which of the following methods could be used by the Federal Government to finance a budget deficit? (A) Borrowing funds from the Reserve Bank of Australia (B) Purchasing second-hand government securities from overseas markets (C) Increasing the level of government taxation and reducing government spending (D) Buying Commonwealth government securities from the domestic financial market –6– 15 Other things being equal, what would be the impact of an increase in net capital inflow on the Australian currency? (A) There would be an increase in the demand for the Australian dollar and an appreciation of the currency. (B) There would be a decrease in the demand for the Australian dollar and a depreciation of the currency. (C) There would be an increase in the supply of the Australian dollar and an appreciation of the currency. (D) There would be a decrease in the supply of the Australian dollar and a depreciation of the currency. 16 Which of the following is a reason for market failure in environmental management? (A) Environmental resources are renewable and therefore difficult to cost. (B) The price mechanism does not always take into account social costs and benefits of production. (C) The market can only take into account public goods and services and not private goods and services. (D) Well-defined property rights do not protect individual owners of environmental resources. 17 The diagram shows aggregate demand and aggregate supply curves for a nation. AD AS AS1 Price level AS AS1 0 AD Real GDP What could cause a shift of the aggregate supply curve from AS to AS1? (A) A decrease in the cost of labour (B) A decrease in domestic subsidies (C) An increase in the level of domestic interest rates (D) An increase in rates of excise duties on production –7– 18 What would decrease as a result of an improvement in the international business cycle? (A) Cyclical unemployment (B) Foreign investment (C) Global inflation (D) Export receipts 19 Which of the following would be recorded as a debit item in the Capital and Financial account of Australia’s Balance of Payments? (A) Interest repaid by Australian firms on overseas loans (B) Foreign aid from the Australian government for road building in Bali (C) Dividends received by Australian shareholders for overseas investments (D) Taxation revenue collected by the Australian government from foreign-based firms 20 The graph shows the movement of the Gini coefficient for a hypothetical economy. 0.305 0.300 Gini coefficient 0.295 0.290 0 2000 2001 2002 2003 Year 2004 2005 2006 Which of the following government actions could be responsible for the trend shown since 2003? (A) A greater use of indirect taxes (B) An increase in welfare payments (C) A reduction in minimum award wages (D) A reduction in the marginal tax rate for high income earners –8– © Board of Studies NSW 2006 2006 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II 40 marks Attempt Questions 21–24 Allow about 1 hour and 15 minutes for this section Student Number Answer the questions in the spaces provided. Marks Question 21 (10 marks) The following information concerns employment issues in Australia. Employment growth in Australia was very strong through 2004–05 due to an increasingly efficient labour market and a more flexible wage system. This led to a steady fall in the unemployment rate to the lowest level in 28 years in 2005. More people are being encouraged to participate in the workforce. If more people are able to find work then this will lead to higher incomes and better participation in mainstream economic life. Employment growth, however, is forecast to slow through 2006–07 in response to slower GDP growth through late 2005. Adapted from the Australian Government Budget Papers 2005–06 Copyright Commonwealth of Australia, reproduced by permission (a) According to the Budget Papers, what is ONE reason for Australia’s unemployment rate in 2004–05? 1 ............................................................................................................................... ............................................................................................................................... (b) Distinguish between cyclical and hidden unemployment. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 21 continues on page 10 146 –9– 2 Marks Question 21 (continued) (c) Identify ONE cause of an increase in the labour force participation rate, and briefly explain TWO economic effects of this increase. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 21 continues on page 11 – 10 – 3 Marks Question 21 (continued) (d) Account for the higher than average rates of unemployment experienced by TWO groups in the Australian economy. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 21 – 11 – 4 BLANK PAGE – 12 – © Board of Studies NSW 2006 2006 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Marks Question 22 (10 marks) The table shows information relating to the annual budget for a hypothetical economy. Year 2005 ($ millions) % change on previous year Social security/welfare 62,000 –18.0% Health 25,000 +3.0% Essential infrastructure 10,000 +1.4% Income taxes 95,000 +9.8% Company taxes 20,000 +15.0% Expenditure (actual) Revenue (actual) (a) Calculate the budget surplus for this economy. 1 ........................................................................................................... ($ millions) (b) Quoting evidence from the table, outline TWO factors that have influenced this budget outcome. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 22 continues on page 14 147 – 13 – 2 Marks Question 22 (continued) (c) Outline how a government can use fiscal policy to alter the level of income distribution. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (d) Explain how fiscal policy could be used by a government to reduce a deficit on the current account. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 22 – 14 – © Board of Studies NSW 2006 5 2006 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Marks Question 23 (10 marks) (a) Distinguish between a factor market and a product market. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Using ONE example from the Australian economy, briefly explain how a market or industry has been deregulated. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 23 continues on page 16 148 – 15 – 3 Marks Question 23 (continued) (c) Identify TWO microeconomic reforms, and discuss the impact of each reform on productivity and international competitiveness in the Australian economy. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 23 – 16 – © Board of Studies NSW 2006 5 2006 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Marks Question 24 (10 marks) The table shows selected data for an economy that uses a floating exchange rate system. Balance of payments items $ billion Exports 110 Imports 130 Net services 15 Net incomes –25 Capital account 4 Financial account (a) 26 Calculate the balance on current account for this economy. 1 .............................................................................................................. ($ billion) (b) Quoting evidence from the table, outline TWO factors influencing the balance on current account. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 24 continues on page 18 149 – 17 – 2 Marks Question 24 (continued) (c) Briefly explain the relationship between the current account and the capital and financial account under a floating exchange rate system. 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (d) Explain how a rise in domestic interest rates for an economy could affect TWO components of its Balance of Payments. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 24 – 18 – © Board of Studies NSW 2006 4 2006 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Section III 20 marks Attempt either Question 25 or Question 26 Allow about 3 5 minutes for this section Answer the question in a writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: use your knowledge and the economic information provided apply economic terms, concepts, relationships and theory present a sustained, logical and well-structured answer to the question Question 25 (20 marks) Analyse the impact of reduced levels of protection on the global economy. The International Monetary Fund (IMF) has estimated that world income would increase by at least US$250bn if agricultural protection were abolished, with both rich and poor countries benefiting from increased trade. Some groups in developing and developed countries, however, are opposed to reduced levels of protection, for example, food importers fear higher prices if agricultural export subsidies are removed. Awaiting Copyright Clearance Source: Adapted from World Trade Organisation, Outlook 2006 OR 150 – 19 – In your answer you will be assessed on how well you: ■ use your knowledge and the economic information provided ■ apply economic terms, concepts, relationships and theory ■ present a sustained, logical and well-structured answer to the question Question 26 (20 marks) Analyse the impacts of macroeconomic and microeconomic policies on the economic performance of the Australian economy. The Australian government has at its disposal a combination of macro and micro policies that it can implement to achieve its economic objectives, which includes price stability, full employment and the promotion of economic prosperity. Monetary policy primarily aims to achieve price stability, while the government’s current fiscal policy of maintaining surpluses aims to promote external stability. Selected Annual Economic Data for the Australian Economy Key economic indicators 2004 2005 2006 est Real GDP growth rate (%) 3.0 2.6 3.2 Consumer price index 2.3 2.7 3.1 Unemployment rate (%) 5.6 5.1 5.0 –3.0 –2.2 –1.3 1.0 1.0 0.9 Current account balance (% GDP) –6 .4 –5.8 –5.2 Foreign debt (% GDP) 51.1 48.3 52.1 Household saving rate (% GDP) Budget balance (% GDP) RBA cash rate (%) 5.25 5.25 5.5 Source: Adapted from Economic Outlook 2005–2006, OECD – 20 – Section IV 20 marks Attempt either Question 27 or Question 28 Allow about 35 minutes for this section Answer the question in a SEPARATE writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ use economic data ■ apply economic terms, concepts, relationships and theory ■ present a sustained, logical and well-structured answer to the question Question 27 (20 marks) Outline the causes of an increase in demand for the Australian dollar, and discuss the impacts on the Australian economy of a sustained appreciation of the Australian currency. OR Question 28 (20 marks) Outline the arguments for ecologically sustainable development, and discuss the likely impacts of an increase in the rate of Australia’s economic growth on the environment. End of paper – 21 – BLANK PAGE – 22 – © Board of Studies NSW 2006 2007 H I G H E R S C H O O L C E R T I F I C AT E E X A M I N AT I O N Economics Total marks – 100 Section I General Instructions • Reading time – 5 minutes • Working time – 3 hours • Write using black or blue pen • Board-approved calculators may be used • Write your Centre Number and Student Number at the top of pages 9, 13, 15 and 17 Pages 2–8 20 marks • Attempt Questions 1–20 • Allow about 35 minutes for this section Section II Pages 9–20 40 marks • Attempt Questions 21–24 • Allow about 1 hour and 15 minutes for this section Section III Pages 21–22 20 marks • Attempt either Question 25 or Question 26 • Allow about 35 minutes for this section Section IV Page 23 20 marks • Attempt either Question 27 or Question 28 • Allow about 35 minutes for this section 145 Section I 20 marks Attempt Questions 1–20 Allow about 35 minutes for this section Use the multiple-choice answer sheet for Questions 1–20. 1 What would limit the globalisation process among nations? (A) Increases in the number of free trade agreements (B) Increases in the flow of direct foreign investment (C) Increases in the volume of trade flows (D) Increases in protection levels 2 Which of the following people are not included in the Australian labour force for statistical purposes? (A) People who are injured and on leave receiving workers compensation (B) People over 15 years of age but only working one hour per week (C) Self-employed people working in family run businesses (D) Full-time students over 15 years of age 3 An increase in which of the following would shift the aggregate supply curve to the right? (A) Wage rates (B) Immigration (C) Interest rates (D) Energy prices 4 Which economic objectives often conflict with one another? (A) Economic growth and external balance (B) Economic growth and full employment (C) Low inflation and international competitiveness (D) Low unemployment and a more equitable distribution of income –2– 5 The diagram shows the effects of a tariff. The curve SS is the supply from domestic producers and the curve DD is the demand from domestic consumers. The duty free price is $15 and the government imposed tariff is $5. Price (per unit) D S 25 20 15 S 0 D 20 30 40 50 60 Quantity Which statement is correct? (A) The government receives $100 in tariff revenue and domestic production of this product increases. (B) The government receives $100 in tariff revenue and domestic production of this product decreases. (C) The government receives $50 in tariff revenue and domestic production of this product increases. (D) The government receives $50 in tariff revenue and domestic production of this product decreases. 6 What is a possible reason for the unemployment rate remaining high, despite increased levels of economic activity? (A) Increased levels of aggregate supply (B) Decreased levels of labour productivity (C) Increased rates of hidden unemployment (D) Increased labour force participation rates 7 What might lead to a reduction of a budget surplus? (A) An increase in tax rates (B) An increase in economic activity (C) An increase in transfer payments (D) Privatisation of a public enterprise –3– 8 Other things being equal, what could be a likely consequence if the Reserve Bank of Australia lowered interest rates? (A) There would be an increase in capital outflows, the supply of the Australian dollar would increase and this could lead to a depreciation of the currency. (B) There would be an increase in capital inflows, the demand for the Australian dollar would increase and this could lead to an appreciation of the currency. (C) There would be an increase in capital outflows, the supply of the Australian dollar would decrease and this could lead to a depreciation of the currency. (D) There would be an increase in capital inflows, the demand for the Australian dollar would decrease and this could lead to an appreciation of the currency. 9 The diagram shows the relationship between inflation and unemployment for a hypothetical economy. B Inflation (%) A Unemployment (%) What would move the economy from A to B? (A) Increased levels of interest rates and increased income tax rates (B) Increased levels of capital expenditure and decreased income tax rates (C) Decreased levels of consumer expenditure and decreased levels of exports (D) Decreased levels of government expenditure and increased levels of imports –4– 10 The table shows selected data for a hypothetical economy. Year Consumer price index (CPI) Total population (’000) Number unemployed (’000) Labour force (’000) 1 100 3000 80 1000 2 106 3100 70 1100 3 118 3500 60 1200 From Year 2 to Year 3 which statement is correct for this economy? (A) The inflation rate has increased to 12% and the unemployment rate has decreased. (B) The inflation rate has increased to 12% and the unemployment rate has increased. (C) The inflation rate has increased to 11.3% and the unemployment rate has decreased. (D) The inflation rate has increased to 11.3% and the unemployment rate has increased. 11 The diagram shows the demand for and supply of Australian dollars. Price of $A in terms of foreign currencies 0.80 D S D1 0.75 D 0 S D1 Q1 Q0 Quantity of $A Other things being equal, what would be the effects of a movement of the demand curve for Australian dollars from DD to D1 D1 ? (A) Australia’s international competitiveness would decrease and capital inflow would be encouraged as domestic assets are less expensive. (B) Australia’s international competitiveness would decrease and capital outflow would be encouraged as domestic assets are more expensive. (C) Australia’s international competitiveness would increase and capital inflow would be encouraged as domestic assets are less expensive. (D) Australia’s international competitiveness would increase and capital outflow would be encouraged as domestic assets are more expensive. –5– 12 The Marginal Propensity to Consume (MPC) for an economy is 0.8. An increase in investment leads to an increase in national income of $250m. Other things being equal, what is the value of the increase in investment? (A) $50m (B) $150m (C) $200m (D) $312.5m 13 Which of the following could be recorded as a credit in the current account of the Australian balance of payments? (A) Expenditure on imports (B) Interest paid to Australian lenders (C) Dividends paid to foreign investors (D) Foreign aid from the Australian government for capital works in Thailand 14 The table shows selected data for a hypothetical economy. Year Export price index Import price index 1 100 100 2 110 105 3 130 140 Which statement is correct for this economy? (A) In Year 2 import prices rose faster than export prices. (B) In Year 3 export prices rose faster than import prices. (C) In Year 3 a given volume of exports will buy a larger volume of imports. (D) In Year 3 a given volume of exports will buy a smaller volume of imports. –6– 15 Which statement best illustrates the difference between the effects of a tariff on imports and a subsidy on domestic production? (A) A tariff increases the price of the imported good and a subsidy may decrease the supply of the domestic good. (B) A tariff increases the price of the imported good and a subsidy may increase the supply of the domestic good. (C) A tariff decreases the price of the imported good and a subsidy may increase the supply of the domestic good. (D) A tariff decreases the price of the imported good and a subsidy may decrease the supply of the domestic good. 16 If a major trading partner of Australia experienced a significant appreciation of its currency, what would be the likely effect in Australia? (A) International competitiveness with this country would decline. (B) Imported inflation from this country would decline. (C) Imports from this country would be less expensive. (D) Terms of trade with this country would decline. 17 Which policy is consistent with the preservation of the natural environment? (A) Tax incentives that encourage increased coal production (B) Lower tariffs on imported cars with larger engine capacities (C) Water prices that increase with the amount of water consumed (D) A subsidy to the forestry industries that is directly proportional to the number of trees felled 18 Which statement best describes the operation of monetary policy in comparison to the operation of fiscal policy? (A) Monetary policy is slower to implement and is less effective in controlling inflation. (B) Monetary policy is faster to implement and is more effective in controlling inflation. (C) Fiscal policy is slower to implement but is more effective in controlling inflation. (D) Fiscal policy is faster to implement but is less effective in controlling inflation. –7– 19 What is a possible benefit to the Australian economy of micro economic reform? (A) Increases in social security payments (B) Increases in tariff protection for Australian producers (C) Increases in the market share of dominant firms in Australian markets (D) Increases in household savings through superannuation and tax incentives 20 Other things being equal, what will be the impact of an increase in domestic interest rates? (A) Economic activity decreases and the exchange rate depreciates. (B) Economic activity decreases and the exchange rate appreciates. (C) Economic activity increases and the exchange rate depreciates. (D) Economic activity increases and the exchange rate appreciates. –8– © Board of Studies NSW 2007 2007 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II 40 marks Attempt Questions 21–24 Allow about 1 hour and 15 minutes for this section Student Number Answer the questions in the spaces provided. Marks Question 21 (10 marks) (a) 1 What does the Lorenz curve measure? ............................................................................................................................... ............................................................................................................................... The diagram shows a Lorenz curve for an economy. Cumulative proportion of total income (%) 100 80 60 A B 40 Lorenz ccuurve 20 0 0 20 40 60 80 100 Cumulative proportion of persons ranked by income (%) (b) State the formula for the Gini coefficient using the areas denoted by A and B. ............................................................................................................................... ............................................................................................................................... Question 21 continues on page 10 146 –9– 1 Marks Question 21 (continued) The table shows Gini coefficient data for Australia. (c) Year Gini coefficient (pre-tax) Gini coefficient (after-tax) 1970 0.310 0.250 1980 0.278 0.201 1990 0.338 0.254 2000 0.383 0.279 Use the pre-tax Gini coefficient data to identify the changes over time for income inequality. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (d) Briefly explain why the after-tax Gini coefficient is lower than the pre-tax Gini coefficient. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 21 continues on page 11 – 10 – 2 Marks Question 21 (continued) (e) Discuss how TWO taxation changes have affected the distribution of income in Australia. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 21 – 11 – 4 BLANK PAGE – 12 – © Board of Studies NSW 2007 2007 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Marks Question 22 (10 marks) (a) Outline TWO causes of inflation in Australia. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Explain the process the Reserve Bank uses to tighten monetary policy in Australia. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 22 continues on page 14 147 – 13 – 3 Marks Question 22 (continued) (c) Analyse the effects of a tightening of monetary policy on the level of economic activity in Australia. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 22 – 14 – © Board of Studies NSW 2007 5 2007 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Marks Question 23 (10 marks) (a) Outline TWO economic indicators of the globalisation process. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Explain why globalisation has increased international financial flows. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 23 continues on page 16 148 – 15 – 3 Marks Question 23 (continued) (c) Explain the economic reasons for differences in the standard of living between two nations. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 23 – 16 – © Board of Studies NSW 2007 5 2007 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Marks Question 24 (10 marks) (a) 2 Define private costs and social costs. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Describe TWO essential characteristics of a public good. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 24 continues on page 18 149 – 17 – 2 Marks Question 24 (continued) (c) Discuss ONE economic method that a government may use to reduce pollution. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 24 continues on page 19 – 18 – 3 Marks Question 24 (continued) The recent drought experience in Australia highlights the degree of market failure in the allocation of scarce resources. For example, current water prices do not reflect real economic or social costs. (d) Explain how market failure causes the misallocation of scarce resources in Australia. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 24 – 19 – 3 BLANK PAGE – 20 – © Board of Studies NSW 2007 2007 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Section III 20 marks Attempt either Question 25 or Question 26 Allow about 35 minutes for this section Answer the question in a writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: use your knowledge and the economic information provided apply economic terms, concepts, relationships and theory present a sustained, logical and well-structured answer to the question Question 25 (20 marks) Discuss the impact of sustained fiscal surpluses on resource use and economic activity in the Australian economy. The federal budget has moved from deficit to surplus. The on-going savings have changed the government debt burden and allowed changes in government spending and taxation. Australian Government Budget Indicators Year Fiscal balance Net government debt $ billion % of GDP $ billion % of GDP 2000–2001 5.6 0.8 42.7 6.2 2001–2002 –3.4 –0.5 38.0 5.2 2002–2003 4.7 0.6 29.7 3.8 2003–2004 4.8 0.6 23.4 2.8 2004–2005 10.8 1.2 11.5 1.3 2005–2006 16.0 1.7 –4.8 –0.5 Australian Government Budget Paper, no. 1, 2006–07, Statement 13 Copyright Commenweath of Australia OR 150 – 21 – In your answer you will be assessed on how well you: ■ use your knowledge and the economic information provided ■ apply economic terms, concepts, relationships and theory ■ present a sustained, logical and well-structured answer to the question Question 26 (20 marks) Discuss the economic implications for the Australian economy of Australia’s continuing current account deficits. There are opposing views about the effect of Australia’s continuing current account deficit. While some argue that Australians are spending beyond their means, others believe the current account deficit reflects Australia’s increasing productive capacity. Australian household savings ratio 20.0 15.0 Per cent 10.0 5.0 0.0 –5.0 –10.0 1990 1995 – 22 – 2000 2005 Section IV 20 marks Attempt either Question 27 or Question 28 Allow about 35 minutes for this section Answer the question in a SEPARATE writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ use economic data ■ apply economic terms, concepts, relationships and theory ■ present a sustained, logical and well-structured answer to the question Question 27 (20 marks) Explain how Australia’s labour market policies have affected work practices and employment. OR Question 28 (20 marks) For an economy other than Australia, explain how government development strategies have responded to the process of globalisation. End of paper – 23 – BLANK PAGE – 24 – © Board of Studies NSW 2007 2008 H I G H E R S C H O O L C E R T I F I C AT E E X A M I N AT I O N Pages 2–8 • Attempt Questions 1–20 • Allow about 35 minutes for this section • Reading time – 5 minutes • Working time – 3 hours • Write using black or blue pen • Board-approved calculators may be used • Write your Centre Number and Student Number at the top of pages 9, 11, 13 and 15 Pages 9–17 • Attempt Questions 21–24 • Allow about 1 hour and 15 minutes for this section Pages 19–20 • Attempt either Question 25 or Question 26 • Allow about 35 minutes for this section Page 21 • Attempt either Question 27 or Question 28 • Allow about 35 minutes for this section 145 Use the multiple-choice answer sheet for Questions 1–20. 1 Which of the following best characterises a developing economy? (A) Low levels of income inequality (B) High Human Development Index (C) Stability and low levels of corruption (D) High dependence on agricultural production 2 What would be the most likely effect of the Reserve Bank of Australia purchasing government securities? (A) A decrease in liquidity and a decrease in interest rates (B) An increase in liquidity and a decrease in interest rates (C) A decrease in liquidity and an increase in interest rates (D) An increase in liquidity and an increase in interest rates 3 Which of the following describes a public good? (A) A rival good which is excludable (B) A rival good which is non-excludable (C) A non-rival good which is excludable (D) A non-rival good which is non-excludable 4 What has contributed to Australia’s persistent current account deficit? (A) Ongoing federal budget surpluses (B) Australia’s low national savings rate (C) The high level of diversification of Australia’s exports (D) A reduction in dividend payments to foreign investors –2– The table shows selected data for an economy. Balance of payments items $ billion ($bn) Exports 400 Imports 460 Net services –50 Net income –110 Net current transfers 70 According to the data, which statement is correct for an economy with a floating exchange rate? (A) There is a surplus of $150bn on the capital and financial account. (B) There is a deficit of $150bn on the capital and financial account. (C) There is a surplus of $290bn on the current account. (D) There is a deficit of $290bn on the current account. 6 Which of the following is an economic argument against protection? (A) There is an increased risk of dumping of foreign products. (B) Infant industries are shielded from foreign competition. (C) Unemployment increases in the short term. (D) Resources are misallocated. 7 What would be the initial impact of an increase in aggregate demand when an economy is at its natural rate of unemployment? (A) An increase in unemployment and an increase in prices (B) An increase in unemployment and a decrease in prices (C) A decrease in unemployment and an increase in prices (D) A decrease in unemployment and a decrease in prices –3– 8 What would be the most likely effect of a move to a more decentralised system of wage determination? (A) Reduced labour mobility (B) Reduced income inequality (C) Reduced inflationary pressure (D) Reduced international competitiveness 9 The diagram shows the impact of a change in trade policy on the domestic market. Domestic price (per unit) D S P2 (World price) P1 0 S D Quantity Which of the following explains the increase in domestic price from P1 to P2? (A) A reduction in tariffs (B) Relaxation of local content rules (C) The introduction of an import quota (D) Increased subsidies paid to domestic producers Which of the following may cause an appreciation of the Australian dollar? (A) Australia’s interest rates increase relative to overseas interest rates. (B) Australian investors purchase a foreign owned firm. (C) World commodity prices decrease. (D) Imports into Australia increase. –4– The diagram shows the Lorenz curve for an economy. 100 Cumulative proportion of national income 50 (%) 0 0 50 100 Cumulative proportion of households ranked by income (%) What proportion of national income is received by the poorest 50% of households? (A) 15% (B) 35% (C) 50% (D) 80% 12 How could the Australian government finance a budget deficit while maintaining external stability? (A) By increasing domestic income tax rates (B) By selling bonds to international investors (C) By reducing the level of government expenditure (D) By borrowing funds from the domestic private sector –5– The table shows population and employment data for two countries, A and B. Employed Unemployed (million) Working age population (million) (million) (million) A 120 70 35 5 B 90 50 26 4 Country Population Which statement is correct? (A) Country A has a higher participation rate and a higher unemployment rate than Country B. (B) Country A has a higher participation rate but a lower unemployment rate than Country B. (C) Country B has a higher participation rate and a higher unemployment rate than Country A. (D) Country B has a higher participation rate but a lower unemployment rate than Country A. 14 Which of the following is a feature of market failure? (A) It is not easy to price public goods or ration their use. (B) Property rights are clearly identifiable and enforceable. (C) The equilibrium price for resource usage takes into consideration social costs. (D) An increase in negative externalities is directly paid for by the producer or consumer. –6– An economy is a net importer of commodities and a net exporter of manufactured goods. Which of the following will lead to a deterioration in its terms of trade? (A) The volume of manufactured exports increases relative to the volume of commodity imports. (B) The volume of manufactured exports decreases relative to the volume of commodity imports. (C) The prices for commodities increase relative to prices for manufactured goods on world markets. (D) The prices for manufactured goods increase relative to commodity prices on world markets. 16 Which of the following contributes to wage decentralisation in Australia? (A) The operation of the Australian Industrial Relations Commission (AIRC) (B) The abolition of Australian Workplace Agreements (AWAs) (C) The annual adjustment of the minimum wage (D) The practice of enterprise bargaining 17 Which of the following would increase Australia’s Gini coefficient? (A) An increase in the Goods and Services Tax (GST) rate (B) An increase in the top marginal tax rate (C) An increase in welfare payments (D) An increase in public housing 18 Which of the following would reduce frictional unemployment? (A) Decreasing government expenditure on training and development (B) Improving the effectiveness of employment agencies (C) Reducing the minimum school leaving age (D) Encouraging welfare recipients to work –7– The diagram shows the aggregate demand and aggregate supply curves for an economy. Price level AS1 AD AS1 AS0 AD AS0 Real GDP Other things being equal, which of the following will shift the aggregate supply curve from AS 0 to AS 1? (A) Lower tax rates (B) Decreased interest rates (C) Reduced skilled migrant intake (D) Appreciation of the exchange rate 20 Which statement about externalities is correct? (A) In the presence of negative externalities, private costs are greater than social costs. (B) In the presence of negative externalities, social costs are greater than private costs. (C) In the presence of positive externalities, private benefits are greater than social benefits. (D) In the presence of positive externalities, private costs are greater than private benefits. –8– © 2008 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Centre Number Student Number Answer the questions in the spaces provided. (10 marks) (a) Calculate the simple multiplier for an economy in which the MPS 0.25. ............................................................................................................................... ............................................................................................................................... (b) How does the multiplier process increase national income? ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (c) Outline ONE effect of economic growth on an economy. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 146 –9– Question 21 (continued) (d) Explain how ONE domestic influence and ONE global influence affect Australia’s economic growth. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... – 10 – © 2008 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Centre Number Student Number (10 marks) (a) Define gross world product. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Outline ONE positive and ONE negative impact of globalisation on the environment. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (c) Describe ONE impact of transnational corporations (TNCs) on a country other than Australia. Name of country: ............................................................................................ ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 147 – 11 – Question 22 (continued) (d) Evaluate the effectiveness of ONE strategy that has been used to promote economic development in a country other than Australia. Name of country: ............................................................................................ ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... – 12 – © 2008 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Centre Number Student Number (10 marks) (a) What is meant by the term structural change? ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Why might a government implement microeconomic reform? ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (c) Describe ONE limitation of microeconomic reform. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 148 – 13 – Question 23 (continued) (d) Examine the economic effects of financial market deregulation OR labour market deregulation in Australia. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... – 14 – © 2008 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Centre Number Student Number (10 marks) (a) Define foreign direct investment (FDI). ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 149 – 15 – Question 24 (continued) (b) The table shows current account data for Australia. Australia’s current account balance 2006–07 ($m) Balance on Goods and Services Income Credits Debits Net Income –12 033 32 873 – 79 585 – 46 712 Net current transfers – 444 Balance on the current account – 59 189 Balance of Payments and International Investment Position; Catalogue #5302.0, August 2007, ABS data used with permission from the Australian Bureau of Statistics Source: Australian Bureau of Statistics Using the data, briefly explain how Net Income affects the current account balance. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... – 16 – Question 24 (continued) (c) Analyse TWO possible economic consequences of foreign debt for an economy. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... – 17 – BLANK PAGE – 18 – © 2008 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Answer the question in a writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: use your knowledge and the economic information provided apply economic terms, concepts, relationships and theory present a sustained, logical and well-structured answer to the question (20 marks) Discuss the influence of international organisations and contemporary trading blocs and agreements in promoting globalisation. In your answer, use the economic information provided. “Essentially, the WTO is a place where member governments go to try to sort out the trade problems they face with each other.” “The IMF’s primary purpose is to ensure the stability of the international monetary system – the system of exchange rates and international payments that enables countries . . . to buy goods and services from each other.” “Trading blocs can act either as ‘stepping stones’ or ‘stumbling blocks’ to global free trade.” “Multilateral and bilateral trade agreements can influence participating countries in different ways.” 150 – 19 – In your answer you will be assessed on how well you: use your knowledge and the economic information provided apply economic terms, concepts, relationships and theory present a sustained, logical and well-structured answer to the question (20 marks) Discuss the effects of an appreciation of the Australian dollar on Australia’s internal and external stability. In your answer, use the economic information provided. Year Trade weighted index Current account (% of GDP) Inflation (%) Unemployment Rate (%) 2001 49.7 –2.6 6.0 6.4 2002 52.3 –2.6 2.9 6.6 2003 59.4 –5.1 3.1 6.1 2004 59.1 –5.6 2.4 5.6 2005 64.5 –6.2 2.4 5.1 2006 62.2 –5.6 3.2 4.9 2007 68.9 –5.8 2.9 4.2 Source: Australian Bureau of Statistics, 2007 Australian Economic Indicators, August and RBA(2007), Bulletin, August 2007, ABS Cat. 1350.0 & 5302.0 & ABS CPI Cat. 6401.0 Dec 2007, ABS data used with permission from the Australian Bureau of Statistics – 20 – Answer the question in a SEPARATE writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ use economic data ■ apply economic terms, concepts, relationships and theory ■ present a sustained, logical and well-structured answer to the question (20 marks) Evaluate the effectiveness of fiscal policy in achieving Australia’s economic objectives. (20 marks) Evaluate the effectiveness of monetary policy in achieving Australia’s economic objectives. – 21 – BLANK PAGE – 22 – © 2009 H I G H E R S C H O O L C E R T I F I C AT E E X A M I N AT I O N Economics Total marks – 100 Section I General Instructions • Reading time – 5 minutes • Working time – 3 hours • Write using black or blue pen • Board-approved calculators may be used • Write your Centre Number and Student Number at the top of pages 9, 11, 13 and 15 Pages 2–8 20 marks • Attempt Questions 1–20 • Allow about 35 minutes for this section Section II Pages 9–17 40 marks • Attempt Questions 21–24 • Allow about 1 hour and 15 minutes for this section Section III Pages 19–20 20 marks • Attempt either Question 25 or Question 26 • Allow about 35 minutes for this section Section IV Page 21 20 marks • Attempt either Question 27 or Question 28 • Allow about 35 minutes for this section 145 Section I 20 marks Attempt Questions 1–20 Allow about 35 minutes for this section Use the multiple-choice answer sheet for Questions 1–20. 1 How can the government decrease inflationary pressures in the Australian economy? (A) By increasing taxation (B) By budgeting for a deficit (C) By depreciating the Australian dollar (D) By increasing government expenditure 2 How are the foreign company dividends paid to Australian investors recorded on Australia’s Balance of Payments? (A) As a debit on the current account (B) As a credit on the current account (C) As a debit on the capital and financial account (D) As a credit on the capital and financial account 3 Which indicators are used to calculate the Human Development Index (HDI)? (A) Population growth, per capita GDP, life expectancy (B) Population growth, infant mortality rate, malnutrition (C) Life expectancy, educational attainment, per capita GDP (D) Current account balance, infant mortality rate, educational attainment 4 Which action by the Reserve Bank would stimulate the economy in an economic downturn? (A) Selling government securities in the cash market (B) Buying government securities in the cash market (C) Selling foreign currencies on the foreign exchange market (D) Buying foreign currencies on the foreign exchange market –2– 5 The table shows data for a nation’s terms of trade. Year 1 2 3 Export Price Index 100 110 115 Import Price Index 100 106 110 Which of the following statements about this nation’s terms of trade is correct? (A) They improved from Year 1 through to Year 3. (B) They deteriorated from Year 1 through to Year 3. (C) They deteriorated from Year 1 to Year 2 and then improved from Year 2 to Year 3. (D) They improved from Year 1 to Year 2 and then deteriorated from Year 2 to Year 3. 6 The table shows selected data for an economy. Year 1 2 3 Consumer Price Index (CPI) 120 130 135 Terms of Trade Index 110 100 98 Given the changes in the data from Year 1 to Year 2 and from Year 2 to Year 3, what can be concluded about this economy? (A) The inflation rate has decreased and the volume of exports has fallen. (B) The inflation rate has increased and the economy is less internationally competitive. (C) The inflation rate has increased and the price of exports has increased at a faster rate than the price of imports. (D) The inflation rate has decreased and the price of exports has decreased at a faster rate than the price of imports. 7 Which of the following statements best describes the implementation and impact of economic policies? (A) Microeconomic policy is quickly implemented through the annual budget. (B) Microeconomic policy shifts the aggregate demand curve to improve productivity. (C) Monetary policy is quicker to implement than fiscal policy but takes longer to affect economic activity. (D) Monetary policy is slower to implement than fiscal policy and is quicker to affect economic activity. –3– 8 The table shows selected data for an economy. Real GDP ($bn) Net foreign liabilities ($bn) Net foreign debt ($bn) 1120 780 550 What is the value of net foreign equity as a percentage of real GDP? (A) 20.5% (B) 30.3% (C) 49.1% (D) 69.6% 9 Which of the following is most likely to improve Australia’s international competitiveness? (A) Implementation of structural change (B) An increase in domestic interest rates (C) An improvement in the terms of trade (D) An increase in the value of the Australian dollar 10 The graph shows the impact of the introduction of a tariff. Domestic price (per unit) D S E P1 P G F H S 0 D Q Q2 Q3 Q1 Quantity Which of the following describes the impact of introducing this tariff? (A) Government revenue increased by the rectangle GHQ3Q2. (B) Resource allocation improved as the demand for imported products contracted from QQ1 to Q2 Q3 . (C) Consumers’ real income improved as the supply of locally made products expanded from Q to Q2. (D) Resources were reallocated from importers to local producers as imports fell from QQ1 to Q2 Q3 . –4– 11 What is the most likely impact of an appreciation of the Australian dollar? (A) Lower import prices and an increase in net foreign debt (B) Higher export prices and a deterioration of the terms of trade (C) An improvement in the current account deficit and an increase in inflation (D) A decrease in capital inflows and a decline in international competitiveness 12 The table shows selected data for an economy. Year Nominal GDP ($bn) Consumer Price Index (CPI) Human Development Index (HDI) 1 6000 130 0.61 2 6800 150 0.76 According to the data, which statement is correct for this economy? (A) Real GDP has increased and the quality of life has improved. (B) Real GDP has increased and the quality of life has declined. (C) Real GDP has decreased and the quality of life has improved. (D) Real GDP has decreased and the quality of life has declined. 13 The table shows the Gini coefficient for Country A and Country B over three years. Year 1 2 3 Country A 0.40 0.60 0.65 Country B 0.90 0.75 0.70 Which statement is correct given the data in the table? (A) The Lorenz curve for Country A is moving closer to the line of equality. (B) The Lorenz curve for Country B is moving away from the line of equality. (C) The Lorenz curve for Country A is further away from the line of equality than the Lorenz curve for Country B. (D) The Lorenz curve for Country B is further away from the line of equality than the Lorenz curve for Country A. –5– 14 The graph shows aggregate demand and aggregate supply curves for an economy. Price level AD AS0 AS0 AS1 AD AS1 0 Real GDP Other things being equal, which of the following is most likely to shift the aggregate supply curve from AS0 to AS1? (A) Deregulating labour markets (B) Regulating financial markets (C) Increasing the rate of company taxation (D) Reducing tax incentives for research and development 15 Which of the following is most likely to occur when the Australian government finances a budget deficit by borrowing from overseas? (A) Domestic interest rates will rise. (B) The money supply will decrease. (C) The current account deficit will rise. (D) The Australian dollar will depreciate. 16 Which of the following occurs when the marginal propensity to consume (MPC) increases? (A) The value of the multiplier increases and the equilibrium level of income falls. (B) The value of the multiplier increases and the equilibrium level of income rises. (C) The value of the multiplier decreases and the equilibrium level of income rises. (D) The value of the multiplier decreases and the equilibrium level of income falls. –6– 17 The graph shows the demand and supply for Australian dollars ($A). $US / $A S0 S1 0.80 0.70 S0 D0 S1 0 Q of $A Which of the following would cause the supply curve to shift from S0 to S1? (A) Increased demand for foreign assets by Australians (B) Decreased demand for foreign imports by Australians (C) Decreased demand for Australian assets by foreigners (D) Increased demand for Australian exports by foreigners 18 The table shows selected data for an economy. Year Y ($m) C ($m) 1 400 100 2 500 150 3 600 200 4 ? 300 What would be the new equilibrium level of income (Y) in Year 4, if consumption (C) in this economy increases to $300m in Year 4 and the MPC remains constant? (A) $200 m (B) $600 m (C) $700 m (D) $800 m –7– 19 How would the size of the labour force and the rate of unemployment be affected if people retrenched from their jobs did not actively seek employment? (A) The labour force would be smaller and the unemployment rate would be lower. (B) The labour force would be smaller and the unemployment rate would be higher. (C) There would be no change in the labour force and the unemployment rate would be higher. (D) The labour force would be smaller and there would be no change in the unemployment rate. 20 Which of the following is a feature of a decentralised labour market? (A) A more flexible dispute resolution process to address wage claims (B) Minimum wage levels automatically adjusted to changes in the cost of living (C) Bargaining between unions and government to set pay and working conditions (D) Collective bargaining to set national benchmarks for pay and working conditions –8– © Board of Studies NSW 2009 2009 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II Student Number 40 marks Attempt Questions 21–24 Allow about 1 hour and 15 minutes for this section Answer the questions in the spaces provided. Question 21 (10 marks) The table shows Consumer Price Index (CPI) data by expenditure group for an economy. Expenditure group Food Housing Health (a) Weighting factor in CPI by expenditure CPI (%) group 15 20 5 120 110 150 Which expenditure group contributed most to the inflation rate? 1 ............................................................................................................................... (b) Distinguish between demand inflation and cost inflation. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 21 continues on page 10 146 –9– 2 Question 21 (continued) (c) Explain how a depreciation of the Australian dollar affects inflation in Australia. 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (d) Explain ONE positive and ONE negative effect of inflation on an economy. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 21 – 10 – © Board of Studies NSW 2009 4 2009 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Question 22 (10 marks) (a) The table shows information relating to the annual budgets for an economy. Budget items Year 1 ($bn) Year 2 ($bn) Revenue Income taxes Goods and services tax Excise duty 123 43 7 110 45 7 Expenditure Defence Health Social security/welfare 17 44 97 20 39 115 Assume that tax rates and social security benefit rates remain unchanged from Year 1 to Year 2. (i) Calculate the value of the budget outcome for both Year 1 and Year 2. 2 ................................................................................................................... ................................................................................................................... (ii) Using the data from the table, identify ONE discretionary and ONE non-discretionary item that has contributed to the change in the budget outcome from Year 1 to Year 2. ................................................................................................................... ................................................................................................................... Question 22 continues on page 12 147 – 11 – 2 Question 22 (continued) (iii) Outline how ONE non-discretionary change in the table on the previous page could affect the distribution of income. 2 ................................................................................................................... ................................................................................................................... ................................................................................................................... ................................................................................................................... ................................................................................................................... ................................................................................................................... (b) Examine the likely impact on the economy if the government finances a budget deficit by borrowing from the domestic private sector. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 22 – 12 – © Board of Studies NSW 2009 4 2009 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Question 23 (10 marks) (a) 1 Give ONE example of a public good. ............................................................................................................................... (b) Outline ONE characteristic of a public good. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (c) Briefly explain the relationship between economic growth and the environment. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 23 continues on page 14 148 – 13 – 3 Question 23 (continued) (d) Explain the positive and negative externalities that could arise if the government built a new airport in the Sydney region. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 23 – 14 – © Board of Studies NSW 2009 4 2009 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Question 24 (10 marks) (a) The diagram shows the equilibrium price, P0 , and quantity, Q0 , in a domestic economy in which local producers are protected by a subsidy. P S0 D0 P0 S0 0 D0 Q0 Q On the diagram above draw the new equilibrium which results when the subsidy to local producers is removed. Label the new equilibrium price and quantity P1 and Q1 . Question 24 continues on page 16 149 – 15 – 2 Question 24 (continued) (b) Briefly explain the impact on global trade flows of EITHER one contemporary trading bloc OR one international organisation. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 24 continues on page 17 – 16 – 3 Question 24 (continued) (c) The government of a country that trades with Australia reduces subsidy payments to its farmers. Discuss the economic impact of this action on BOTH economies. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 24 – 17 – 5 BLANK PAGE – 18 – © Board of Studies NSW 2009 2009 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Section III 20 marks Attempt either Question 25 or Question 26 Allow about 35 minutes for this section Answer the question in a writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: use your knowledge and the economic information provided apply economic terms, concepts, relationships and theory present a sustained, logical and well-structured answer to the question Question 25 (20 marks) Discuss the impact of microeconomic policies on Australia’s economic performance. In your answer, you should refer to the economic information provided. Microeconomic reforms in Australia have improved productivity and reduced prices in Australian infrastructure services. These changes raised the average income of Australian households, helped reduce inflation through the development of competitive markets and created employment opportunities in expanding industries. Adapted from Productivity Commission January 2008, Extract from Distribution Effects of Changes in Australian Infrastructure Industries during the 1990s by G Verikos & XG Zhang, Productivity Commissions, January 2008, © Commonwealth of Australia reproduced by permission Annual average growth rate of labour productivity (%) Australia OECDa EUb 1960–1970 3.1 4.6 5.4 1970–1980 1.8 2.9 3.8 1980–1990 1.1 2.0 2.1 1990–2000 2.3 1.9 1.9 2000–2007 1.7 1.7 1.2 Adapted Graph- Labour Productivity, Annual average growth rate, http://www.pc.gov.au/research/productivity/estimates-trends/international-comparisons, © Commonwealth of Australia reproduced by permission a b OECD: Organisation for Economic Cooperation and Development EU: European Union Data source: The Conference Board and Groningen Growth and Development Centre, Total Economy Database, September 2008. 150 OR – 19 – In your answer you will be assessed on how well you: use your knowledge and the economic information provided apply economic terms, concepts, relationships and theory present a sustained, logical and well-structured answer to the question Question 26 (20 marks) With reference to Australia and at least ONE other economy, discuss the impact of globalisation on development and the distribution of global wealth. In your answer, you should refer to the economic information provided. 9% 14% 7% 9% 3% 4% 8% Awaiting Copyright 8% 2% 3% 6% 2% Awaiting Copyright – 20 – Section IV 20 marks Attempt either Question 27 or Question 28 Allow about 35 minutes for this section Answer the question in a SEPARATE writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ use economic data ■ apply economic terms, concepts, relationships and theory ■ present a sustained, logical and well-structured answer to the question Question 27 (20 marks) Analyse the federal government’s macroeconomic policy mix to address inflation and unemployment in the Australian economy. OR Question 28 (20 marks) Analyse the impact of changes in the global economy on Australia’s economic growth and external stability. End of paper – 21 – BLANK PAGE – 22 – © Board of Studies NSW 2009 2010 H I G H E R S C H O O L C E R T I F I C AT E E X A M I N AT I O N Economics Total marks – 100 Section I General Instructions • Reading time – 5 minutes • Working time – 3 hours • Write using black or blue pen • Board-approved calculators may be used • Write your Centre Number and Student Number at the top of pages 9, 11, 13 and 15 Pages 2–8 20 marks • Attempt Questions 1–20 • Allow about 35 minutes for this section Section II Pages 9–17 40 marks • Attempt Questions 21–24 • Allow about 1 hour and 15 minutes for this section Section III Pages 19–20 20 marks • Attempt either Question 25 or Question 26 • Allow about 35 minutes for this section Section IV Page 21 20 marks • Attempt either Question 27 or Question 28 • Allow about 35 minutes for this section 1120 Section I 20 marks Attempt Questions 1–20 Allow about 35 minutes for this section Use the multiple-choice answer sheet for Questions 1–20. 1 Which of the following economic objectives can best be achieved simultaneously with economic growth? (A) Price stability (B) External balance (C) Increasing employment (D) Environmental sustainability 2 Which of the following microeconomic reforms is most likely to relate to a product market? (A) Deregulation of the labour market (B) Reduction in marginal income tax rates (C) Deregulation of the Australian financial system (D) Introduction of the National Competition Policy 3 The table shows selected data for an economy. Balance of Payments items Exports Imports Net services Net income Net current transfers Capital transfers Reserve Assets $ billion ($bn) 500 540 −70 −115 85 30 −20 According to the information in the table, which statement is correct for the economy if it has a floating exchange rate? (A) There is a deficit of $225bn on the balance of goods and services. (B) There is a surplus of $140bn on the capital and financial account. (C) There is a surplus of $950bn on the current account. (D) There is a deficit of $10bn on the capital account. –2– 4 The graph shows an economy in equilibrium at We. Wage D0 S0 W1 We D0 S0 0 Qe Labour What will be the impact if the government set a minimum wage of W1? (A) The demand for labour will increase. (B) The labour force participation rate will fall. (C) There will be an increase in unemployment. (D) Firms will demand less labour at every wage rate. 5 Which of the following policies would lead to a rise in the natural rate of unemployment? (A) An increase in official interest rates (B) A reduction in government expenditure (C) A decreased emphasis on wage decentralisation (D) A reduction in protection of manufacturing industries 6 Which international organisation is responsible for maintaining international financial stability? (A) World Bank (B) World Trade Organisation (C) International Monetary Fund (D) Organisation for Economic Cooperation and Development –3– 7 The table shows Consumer Price Index (CPI) data by expenditure group for an economy. Expenditure Group Weighting factor in CPI (%) CPI by expenditure group (base year = 100) Food 30 110 Health 10 130 Housing 15 125 Clothing 20 120 According to the data, which CPI expenditure group contributes most to the inflation rate? (A) Food (B) Health (C) Housing (D) Clothing 8 Which of the following is most likely to increase Australia’s international competitiveness? (A) Structural change and higher interest rates in Australia (B) Lower labour costs and improved infrastructure in Australia (C) Lower inflation in Australia and reduced import quotas on foreign cars (D) Productivity growth in Australia and appreciation of the Australian dollar 9 Which of the following government policies is most likely to reduce the size of a negative externality? (A) Reduction in petrol excise (B) Abolition of national park entry fees (C) Lowering rebates on sustainable energy sources (D) Reducing tax concessions on car parking spaces in the city –4– 10 The graph shows that the Australian economy has moved from point X to point Y. X Y GDP Time Which policy mix is the most appropriate for this economy? (A) The Reserve Bank buys government securities and the Federal Government implements an expansionary budget. (B) The Reserve Bank sells government securities and the Federal Government implements an expansionary budget. (C) The Reserve Bank buys government securities and the Federal Government implements a contractionary budget. (D) The Reserve Bank sells government securities and the Federal Government implements a contractionary budget. 11 Which of the following policies is most likely to result in a decrease in demand inflation and an increase in cost inflation? (A) A decrease in non-discretionary government expenditure and loose monetary policy (B) An increase in non-discretionary government expenditure and increased import tariffs (C) An increase in discretionary government expenditure and a reduction in subsidies to producers (D) A decrease in discretionary government expenditure and a depreciation of the domestic currency –5– 12 The table shows selected data for a hypothetical economy. Year C S I 1 100 50 400 2 200 150 400 3 300 250 400 What is the value of the multiplier? (A) 0.2 (B) 0.5 (C) 1.0 (D) 2.0 13 Which of the following is most likely to occur when a budget deficit is funded by selling new government securities? (A) Money supply will increase. (B) Current account deficit will rise. (C) Private sector borrowing costs will rise. (D) Private sector investment levels will increase. 14 Which of the following is most likely to shift both the aggregate demand and aggregate supply curve to the right? (A) An increase in investment and a reduction in subsidies to producers (B) An increase in the budget deficit and a decrease in the cost of labour (C) An increase in the productivity of labour and an increase in interest rates (D) An increase in the budget surplus and an increase in the cost of raw materials 15 Which statement best describes public goods? (A) They are provided at zero marginal costs. (B) Property rights tend to be easily defined. (C) Their price incorporates social costs. (D) They are non-rival and excludable. –6– 16 Which scenario best demonstrates the benefits of a fixed exchange rate system? (A) A country experiencing a recession fixes its currency to that of a country in which interest rates are low. (B) A country experiencing a boom fixes its currency to that of a country experiencing a recession. (C) A country experiencing a recession fixes its exchange rate above the equilibrium rate. (D) A country experiencing a boom fixes its exchange rate below the equilibrium rate. 17 The table shows the human development index (HDI) values for two countries. Country A B HDI 0.3 0.9 Which statement is most consistent with the HDI data given? (A) Adult literacy rates are higher in Country A than in Country B. (B) The level of urbanisation is greater in Country A than Country B. (C) The population growth rate in Country A is higher than in Country B. (D) Public institutions are more developed in Country A than in Country B. 18 The table shows selected data on the composition of Australia’s GDP by industry. Industry Agriculture Mining Manufacturing Services 1950 (% GDP) 40 30 20 10 2008 (% GDP) 5 5 10 80 Which of the following is most likely to explain the trends in the table? (A) A decline in rural population and increased global demand for commodities (B) Greater financial integration and reduced levels of protection for Australian manufacturers (C) The deterioration of tourism infrastructure and the discovery of new mineral deposits outside Australia (D) The rise of efficient manufacturers in developing economies and an increase in the demand for agricultural products –7– The diagram refers to the distribution of income and wealth in a hypothetical economy. Cumulative proportion of income and wealth (%) 19 100 80 60 40 Income 20 Wealth 0 0 20 40 60 80 100 Cumulative proportion of persons ranked by income and wealth (%) According to the diagram, which statement is correct for this economy? (A) Wealth has a higher Gini coefficient than income and the distribution of wealth is more unequal than the distribution of income. (B) Income has a higher Gini coefficient than wealth and the distribution of income is more unequal than the distribution of wealth. (C) Wealth has a lower Gini coefficient than income and the distribution of wealth is more unequal than the distribution of income. (D) Income has a higher Gini coefficient than wealth and the distribution of income is more equal than the distribution of wealth. 20 What would be the likely impact on an economy if the government increased quotas on imported cars? (A) The domestic price of cars would increase. (B) The market share of domestic producers would decline. (C) The supply of cars in the domestic market would decrease. (D) Foreign producers would find it more difficult to access the domestic market. –8– © Board of Studies NSW 2010 2010 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II 40 marks Attempt Questions 21–24 Allow about 1 hour and 15 minutes for this section Student Number Answer the questions in the spaces provided. These spaces provide guidance for the expected length of response. Question 21 (10 marks) (a) The table shows data for a nation’s terms of trade. Year Export Price Index Import Price Index 1 100 100 2 92 115 3 96 116 Using the information in the table, calculate the terms of trade for this nation in Year 2 and identify the trend from Year 2 to Year 3. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Why has there been an increase in Australia’s service exports in the last two decades? ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 21 continues on page 10 1121 –9– 2 Question 21 (continued) (c) Why has the value of Australia’s imports from Asia increased in the last two decades? 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (d) Explain why Australia is consistently a net importer of capital. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 21 – 10 – © Board of Studies NSW 2010 4 2010 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Question 22 (10 marks) (a) Distinguish between a newly industrialised country (NIC) and a transition economy. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Briefly explain why the world economy is experiencing international convergence. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 22 continues on page 12 1122 – 11 – 3 Question 22 (continued) (c) Explain the role of trade and investment in promoting the globalisation process in an economy other than Australia. Name of economy: ........................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 22 – 12 – © Board of Studies NSW 2010 5 2010 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Question 23 (10 marks) (a) The table shows employment data for a hypothetical economy. Year Employed Persons Unemployed Persons Working Age Population 1 510 000 90 000 1 000 000 2 600 000 150 000 1 100 000 (i) Calculate the change in the unemployment rate from Year 1 to Year 2. 1 ................................................................................................................... (ii) With reference to the table, outline the cause of the change in the unemployment rate from Year 1 to Year 2. ................................................................................................................... ................................................................................................................... ................................................................................................................... ................................................................................................................... Question 23 continues on page 14 1123 – 13 – 2 Question 23 (continued) (b) Briefly explain the effects of long-term unemployment on the Australian economy. 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (c) Explain how fiscal policy can be used to increase the labour force participation rate. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 23 – 14 – © Board of Studies NSW 2010 4 2010 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Question 24 (10 marks) (a) 2 The graph shows the market for $A in terms of $US. $US $A D0 S0 E0 D0 S0 0 Q0 Q of $A The market is initially in equilibrium at an exchange rate E0 and a quantity of $A at Q0. On the diagram, draw the new equilibrium which results if there is a reduced demand for foreign assets by Australian investors. Label the new equilibrium exchange rate and quantity, E1 and Q1. Question 24 continues on page 16 1124 – 15 – Question 24 (continued) (b) The table shows the value of Australia’s currency against Country A and Country B, under a floating exchange rate. Year Country A Currency units/$A Country B Currency units/$A 1 0.90 0.70 2 0.80 0.75 3 0.70 0.80 Briefly explain the trends in Australia’s exchange rate with Country A and Country B. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 24 continues on page 17 – 16 – 3 Question 24 (continued) (c) Explain the possible impacts of loose monetary policy on the value of the exchange rate and on economic growth in Australia. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 24 – 17 – 5 BLANK PAGE – 18 – © Board of Studies NSW 2010 2010 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Section III 20 marks Attempt either Question 25 or Question 26 Allow about 35 minutes for this section Answer the question in a writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ demonstrate knowledge and understanding relevant to the question ■ use the information provided ■ apply relevant economic terms, concepts, relationships and theory ■ present a sustained, logical and cohesive response Question 25 (20 marks) Discuss the economic concerns that the Australian Government takes into account when formulating policies to manage the environment. In your response, you should refer to the economic information provided. Awaiting copyright OR 1125 – 19 – In your answer you will be assessed on how well you: ■ demonstrate knowledge and understanding relevant to the question ■ use the information provided ■ apply relevant economic terms, concepts, relationships and theory ■ present a sustained, logical and cohesive response Question 26 (20 marks) Discuss the consequences for Australia of an unequal distribution of income and wealth, and the policies that can be used to address this issue. In your response, you should refer to the economic information provided. Awaiting copyright Source: ABS, 2007, Household and Income Distribution 2005–2006. – 20 – Section IV 20 marks Attempt either Question 27 or Question 28 Allow about 35 minutes for this section Answer the question in a SEPARATE writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ demonstrate knowledge and understanding relevant to the question ■ apply relevant economic information, terms, concepts, relationships and theory ■ present a sustained, logical and cohesive response Question 27 (20 marks) Analyse the causes and effects of fluctuations in Australia’s external stability. OR Question 28 (20 marks) Analyse the effects of protectionist trade policies on the Australian economy. End of paper – 21 – BLANK PAGE – 22 – © Board of Studies NSW 2010 2011 H I G H E R S C H O O L C E R T I F I C AT E E X A M I N AT I O N Economics Total marks – 100 Section I General Instructions • Reading time – 5 minutes • Working time – 3 hours • Write using black or blue pen Black pen is preferred • Board-approved calculators may be used • Write your Centre Number and Student Number at the top of pages 9, 11, 13 and 15 Pages 2–8 20 marks • Attempt Questions 1–20 • Allow about 35 minutes for this section Section II Pages 9–16 40 marks • Attempt Questions 21–24 • Allow about 1 hour and 15 minutes for this section Section III Pages 17–18 20 marks • Attempt either Question 25 or Question 26 • Allow about 35 minutes for this section Section IV Page 19 20 marks • Attempt either Question 27 or Question 28 • Allow about 35 minutes for this section 1120 Section I 20 marks Attempt Questions 1–20 Allow about 35 minutes for this section Use the multiple-choice answer sheet for Questions 1–20. 1 Which of the following is most likely to slow the process of globalisation? (A) Higher labour mobility (B) Lower costs of communication (C) An increase in the world price of oil (D) A reduction in export subsidies by advanced economies 2 Which of the following is most likely to reduce income inequality? (A) An increase in the minimum wage (B) A decrease in unemployment benefits (C) Decentralisation of the wage determination system (D) Lower government funding for education and training 3 Which of the following policies would be most likely to reduce an economy’s non-accelerating inflation rate of unemployment (NAIRU)? (A) Expansionary fiscal policy (B) Contractionary monetary policy (C) Policies that increase factor market competition (D) Policies that decrease product market competition –2– 4 The table shows selected data for an economy. $ billion ($bn) Component Government spending 30 Investment 25 Saving 30 Exports 30 Taxation 20 Imports 35 Which of the following statements is true for this economy? (A) The economy is contracting. (B) Injections exceed withdrawals. (C) Withdrawals exceed injections. (D) The economy is in equilibrium. 5 The graph shows aggregate demand and aggregate supply for an economy. AS1 Price level AS0 AD 0 Real GDP All other things being equal, which of the following is most likely to shift the aggregate supply curve from AS0 to AS1? (A) An increase in unit labour costs (B) A decline in inflationary expectations (C) An increase in the economy’s national income (D) An appreciation of the economy’s exchange rate –3– 6 Which of the following combinations is most likely to reduce Australia’s export volumes? (A) The Australian dollar depreciates and there is a recession in the US economy. (B) The Australian dollar appreciates and there is a recession in the US economy. (C) The Australian dollar depreciates and there is an expansion in the US economy. (D) The Australian dollar appreciates and there is an expansion in the US economy. 7 The table shows data for a nation’s terms of trade. Year Export Price Index Import Price Index 1 110 100 2 105 100 All other things being equal, which of the following policy actions is most likely to reduce the economic impact of the change in the nation’s terms of trade? (A) The Reserve Bank increases interest rates. (B) The Government increases income tax rates. (C) The Government increases discretionary expenditure. (D) The Reserve Bank intervenes to increase the value of the currency. 8 All other things being equal, households that are most likely to benefit from an increase in the Consumer Price Index are those (A) with assets. (B) on fixed incomes. (C) with bank deposits. (D) on the Age Pension. 9 Which of the following is an economic cost of a rise in the Gini coefficient? (A) An increase in economic growth (B) An increase in the mobility of labour (C) An increase in risk-taking by entrepreneurs (D) An increase in government welfare support –4– 10 The graph shows the demand for and supply of Australian dollars. S1 $A in terms of $US S0 0.70 0.60 D 0 Q1 Q0 Quantity of $A Which of the following is the most likely reason for the shift in the supply curve from S0 to S1? (A) An increase in foreign imports into Australia (B) An increase in foreign financial investment in Australia (C) A reduction in the net income deficit on the current account (D) A decline in the international competitiveness of Australian firms 11 What is the most likely impact of a rise in the level of Australia’s interest rates relative to overseas interest rates? (A) An increase in foreign investment in Australia and a depreciation of the $A (B) An increase in foreign investment in Australia and an appreciation of the $A (C) A decrease in foreign investment in Australia and a depreciation of the $A (D) A decrease in foreign investment in Australia and an appreciation of the $A 12 What is the impact of an economic expansion on government revenues and expenditure? (A) Both progressive taxation receipts and unemployment benefit payments increase. (B) Both progressive taxation receipts and unemployment benefit payments decrease. (C) Progressive taxation receipts decrease and unemployment benefit payments increase. (D) Progressive taxation receipts increase and unemployment benefit payments decrease. –5– 13 The table shows national accounts data for Consumption (C) and National Income (Y) in $ billion for an economy. Year C ($bn) Y ($bn) 1 110 150 2 200 300 What is the new equilibrium level of income (Y) in Year 3 if investment increases by $40bn? (A) $360bn (B) $367bn (C) $400bn (D) $420bn 14 In which of these situations are the net foreign liabilities of an economy most likely to increase? (A) Current account deficit and currency appreciation (B) Current account deficit and currency depreciation (C) Current account surplus and currency appreciation (D) Current account surplus and currency depreciation 15 The table shows Balance of Payments data for a hypothetical economy with a floating exchange rate. Balance of Payments (BoP) Net Goods –15 Net Services 5 Net Income –50 Capital Account 5 Net Current Transfers 5 What is the value of the Financial Account? (A) $45bn (B) $50bn (C) $55bn $ billion ($bn) (D) $60bn –6– 16 Which is the most appropriate macroeconomic policy mix if the Australian economy is experiencing inflationary pressures? (A) A decrease in taxation and the sale of government securities by the Reserve Bank (B) A decrease in government spending and the sale of government securities by the Reserve Bank (C) An increase in taxation and the purchase of government securities by the Reserve Bank (D) An increase in government spending and the purchase of government securities by the Reserve Bank 17 The following graph shows the effect of a tariff on the price and quantity of imported shirts. Assume that the world price of shirts is $10 and that the tariff is $5 per shirt. S Price $15 $10 D 0 100 200 300 400 Quantity By what amount does the revenue of foreign producers of shirts decrease as a result of the tariff? (A) $500 (B) $1000 (C) $1500 (D) $2000 –7– 18 The table shows the gross domestic product per capita (GDP/Capita) and the Human Development Index (HDI) values for two countries. Country GDP/Capita HDI A $3000 0.9 B $5000 0.7 What can be correctly inferred from the data in the table? (A) Country A has a lower Gini coefficient than Country B. (B) Country A has a higher Gini coefficient than Country B. (C) Country A has a lower life expectancy and lower educational attainment than Country B. (D) Country A has a higher life expectancy and higher educational attainment than Country B. 19 Which of the following methods of financing an expansionary fiscal policy will be more likely to result in higher inflation? (A) Selling government assets (B) Borrowing from the Reserve Bank (C) Issuing government securities for sale in the domestic market (D) Issuing government securities for sale to foreign investors in a foreign currency 20 An industry that generates pollution incurs both private and social costs. What will happen to the quantity and equilibrium price when BOTH private and social costs are taken into account? (A) Both output and price will fall. (B) Both output and price will rise. (C) Output will fall and the price will rise. (D) Output will rise and the price will fall. –8– © Board of Studies NSW 2011 2011 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II 40 marks Attempt Questions 21–24 Allow about 1 hour and 15 minutes for this section Student Number Answer the questions in the spaces provided. These spaces provide guidance for the expected length of response. Question 21 (10 marks) (a) Outline the role of the World Trade Organisation. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Explain ONE disadvantage of bilateral trade agreements. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 21 continues on page 10 1121 –9– 3 Question 21 (continued) (c) For an economy other than Australia, analyse the strategies used by the government in response to the international business cycle. Name of economy: .......................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 21 – 10 – © Board of Studies NSW 2011 5 2011 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Question 22 (10 marks) (a) The table shows current account data for an economy. Component (i) Year 1 ($bn) Year 2 ($bn) Exports of goods and services 250 300 Imports of goods and services 275 350 Net Income –50 –60 Net Current Transfers –5 –5 Calculate the change in the current account balance from Year 1 to Year 2. 2 ................................................................................................................... ................................................................................................................... ................................................................................................................... ................................................................................................................... (ii) Outline ONE factor that may have caused the change in the Net Income component of the current account. 2 ................................................................................................................... ................................................................................................................... ................................................................................................................... ................................................................................................................... (iii) Outline ONE factor that may have caused the change in the Imports component of the current account. ................................................................................................................... ................................................................................................................... ................................................................................................................... ................................................................................................................... 1122 Question 22 continues on page 12 – 11 – 2 Question 22 (continued) (b) Why does Australia have a persistently high current account deficit? ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 22 – 12 – © Board of Studies NSW 2011 4 2011 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Question 23 (10 marks) (a) The table shows employment data for a hypothetical economy. 1 (Millions) Employed persons ................................................... 9.5 Unemployed persons .............................................. 0.5 Working age population...................................... 15.0 Total population .................................................... 22.0 Calculate the participation rate for this economy. ............................................................................................................................... ............................................................................................................................... (b) What is the difference between an award and an enterprise agreement? ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 23 continues on page 14 1123 – 13 – 2 Question 23 (continued) (c) Explain how ONE labour market policy may influence the level of structural unemployment. 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (d) Explain the advantages of a decentralised system of wage determination on the level of economic activity. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 23 – 14 – © Board of Studies NSW 2011 4 2011 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II (continued) Student Number Question 24 (10 marks) (a) 2 Define a public good. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) How may market failure affect the preservation of the natural environment? ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 24 continues on page 16 1124 – 15 – 3 Question 24 (continued) (c) How can regulations and market-based policies be used to manage the natural environment? ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 24 – 16 – © Board of Studies NSW 2011 5 2011 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Section III 20 marks Attempt either Question 25 or Question 26 Allow about 35 minutes for this section Answer the question in a writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ demonstrate knowledge and understanding relevant to the question ■ use the information provided ■ apply relevant economic terms, concepts, relationships and theory ■ present a sustained, logical and cohesive response Question 25 (20 marks) How does fiscal policy affect economic activity and income distribution in the Australian economy? In your response you should refer to the economic information provided below. Of course fiscal policy has always been with us; what has returned in the past couple of years is the use of active discretionary fiscal policy as a counter-cyclical tool. DAVID GRUEN, 2009 Source: The Treasury - Adapted speech by Dr David Gruen, Australian Business Economists Annual Forecasting Conference 2009, The Return of Fiscal Policy - 8 December 2009 Australian Government Budget Balance $bn 40 Underlying budget balances ($bn) Actual balances to 2009–10 Government forecasts from 2010–11 20 0 –20 –40 –60 04 / 05 05 / 06 06 / 07 07 / 08 08 / 09 09 / 10 Fiscal year OR 1125 – 17 – 10 / 11 11 / 12 12 / 13 13 / 14 In your answer you will be assessed on how well you: ■ demonstrate knowledge and understanding relevant to the question ■ use the information provided ■ apply relevant economic terms, concepts, relationships and theory ■ present a sustained, logical and cohesive response Question 26 (20 marks) How does monetary policy affect inflation and unemployment in the Australian economy? In your response you should refer to the economic information provided below. An important feature of inflation-targeting frameworks is that they are forward looking. We know that it takes time for changes in monetary policy to have their full effect on the economy. PHILIP LOWE, 2010 Source: Reserve Bank of Australia - Adapted speech by Philip Lowe, Address to Australian Business Economics Annual Forecasting Conference Dinner, Sydney, 8 December 2010 Australian Interest Rates and Inflation % 8 7 6 5 4 3 2 1 0 June 2005 Dec 2005 June 2006 Dec 2006 June 2007 Dec 2007 June 2008 Dec 2008 June 2009 Dec 2009 June 2010 Dec 2010 Underlying CPI inflation (% annual change) Reserve Bank Cash Rate (%) – 18 – Section IV 20 marks Attempt either Question 27 or Question 28 Allow about 35 minutes for this section Answer the question in a SEPARATE writing booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ demonstrate knowledge and understanding relevant to the question ■ apply relevant economic information, terms, concepts, relationships and theory ■ present a sustained, logical and cohesive response Question 27 (20 marks) Discuss the effects of microeconomic reform on product and factor markets in the Australian economy. OR Question 28 (20 marks) Discuss the impact of changes in the domestic and global economy on Australia’s exchange rate. End of paper – 19 – BLANK PAGE – 20 – © Board of Studies NSW 2011 2012 H I G H E R S C H O O L C E R T I F I C AT E E X A M I N AT I O N Economics Total marks – 100 Section I Pages 2–8 20 marks • Attempt Questions 1–20 • Allow about 35 minutes for this section General Instructions • Reading time – 5 minutes • Working time – 3 hours • Write using black or blue pen Black pen is preferred • Board-approved calculators may be used Section II Pages 9–19 40 marks • Attempt Questions 21–24 • Allow about 1 hour and 15 minutes for this section Section III Pages 21–22 20 marks • Attempt either Question 25 or Question 26 • Allow about 35 minutes for this section Section IV Page 23 20 marks • Attempt either Question 27 or Question 28 • Allow about 35 minutes for this section 1120 Section I 20 marks Attempt Questions 1–20 Allow about 35 minutes for this section Use the multiple-choice answer sheet for Questions 1–20. 1 Which of the following is classified as a trading bloc? (A) United Nations (UN) (B) European Union (EU) (C) Group of Twenty (G20) (D) Organisation for Economic Cooperation and Development (OECD) 2 What was one of the objectives of the national wage system established by the Fair Work Act 2009? (A) To reduce the number of awards (B) To replace enterprise agreements (C) To reduce the national minimum wage (D) To remove the safety net protection for low paid workers 3 Which of the following is most likely to occur as a country becomes more economically developed? (A) Education levels decrease (B) Labour productivity increases (C) Reliance on foreign aid increases (D) Agricultural production as a share of GDP increases 4 What are the Reserve Bank of Australia’s main objectives in implementing monetary policy? (A) Price stability and full employment (B) Price stability and a reduction in national debt (C) Full employment and an increase in national savings (D) Full employment and a more equal distribution of income –2– 5 The table shows selected data for an economy. Year Real GDP ($bn) Consumer Price Index Unemployment rate (%) 1 4000 100 5 2 3900 101 8 For Year 2, which policy mix is most appropriate for policy makers focused ONLY on employment outcomes? (A) Expansionary fiscal policy and expansionary monetary policy (B) Contractionary fiscal policy and expansionary monetary policy (C) Expansionary fiscal policy and contractionary monetary policy (D) Contractionary fiscal policy and contractionary monetary policy 6 The table shows employment data for an economy. Year 1 Year 2 Part-time employed persons 200 000 210 000 Full-time employed persons 600 000 640 000 Unemployed persons 100 000 110 000 1500 000 1570 000 Working age population Based on the data in the table, what is the change in the labour force between Year 1 and Year 2? (A) 40 000 (B) 50 000 (C) 60 000 (D) 70 000 –3– 7 The table shows selected data for an economy. $ billion ($bn) Components of National Income Savings 40 Government expenditure 50 Exports 80 Taxation 60 Investment 40 Imports 70 Based on the information in the table, which of the following is correct? (A) There is a trade deficit. (B) There is a budget surplus. (C) Injections are greater than leakages. (D) Leakages are greater than injections. 8 9 The unemployment rate rises from 4% to 6%. What is the most likely impact on the Federal Government’s income tax revenues and social security payments? Income tax revenues Social security payments (A) Increase Increase (B) Decrease Decrease (C) Increase Decrease (D) Decrease Increase All other things being equal, what impact will a decrease in domestic interest rates have on consumer spending and on the household savings rate? Consumer spending Household savings rate (A) Falls Falls (B) Rises Rises (C) Falls Rises (D) Rises Falls –4– 10 11 The Reserve Bank of Australia sells government securities. What is the most likely effect on the supply of cash in Exchange Settlement accounts and on interest rates? Supply of cash in Exchange Settlement accounts Interest rates (A) Decrease Decrease (B) Increase Decrease (C) Decrease Increase (D) Increase Increase The table shows selected data for an economy with a floating exchange rate. $ billion ($bn) Balance of payments components Exports ? Imports 700 Net Services 100 Net primary income (net income) –150 Net secondary income (net transfers) 50 Balance on the capital and financial account 200 From the data, what is the value of exports? (A) $900bn (B) $700bn (C) $500bn (D) $300bn 12 Which of the following government policy decisions would be most suitable for achieving environmental sustainability? (A) Impose a tax on firms that cause either a positive or negative externality (B) Pay a subsidy to firms that cause either a positive or negative externality (C) Impose a tax on firms that cause a positive externality and pay a subsidy to firms that cause a negative externality (D) Pay a subsidy to firms that cause a positive externality and impose a tax on firms that cause a negative externality –5– 13 Which of the following statements best applies to public goods? (A) These goods are subject to over-pricing. (B) There are fixed supplies of these goods. (C) Consumers must pay to use these goods. (D) Consumers can access these goods without paying directly for them. 14 The following diagram shows aggregate demand (AD) and aggregate supply (AS) curves for the Australian economy. AS1 Price level AS2 AD 0 Quantity All other things being equal, which of the following is most likely to cause the shift in the aggregate supply curve from AS1 to AS2? (A) An increase in the budget surplus (B) An increase in labour productivity (C) An increase in the minimum wage for casual workers (D) An increase in interest rates by the Reserve Bank of Australia –6– 15 The table shows population and employment data for an economy. Year Working age population (million) Employed (million) Unemployed (million) 1 30 21 3 2 40 27 3 Which of the following statements is correct for Year 2 compared to Year 1? (A) Year 2 has a lower participation rate and lower unemployment rate. (B) Year 2 has a lower participation rate and higher unemployment rate. (C) Year 2 has a higher participation rate and lower unemployment rate. (D) Year 2 has a higher participation rate and higher unemployment rate. 16 All other things being equal, which of the following is most likely to cause an increase in Australia’s current account deficit? (A) A decrease in national savings (B) A decrease in Australian overseas aid (C) An increase in the Federal Government’s budget surplus (D) An increase in the number of overseas students studying in Australia 17 The table shows the exchange rate of the Australian dollar ($A) expressed as units of foreign currency per $A. Year Euro per $A1 $US per $A1 Yen per $A1 1 0.7 1.10 80 2 0.8 1.00 90 How has the exchange rate of the Australian dollar changed in Year 2 compared to Year 1? (A) It has appreciated against the Euro and depreciated against the Yen. (B) It has depreciated against the Euro and appreciated against the Yen. (C) It has appreciated against the Euro and depreciated against the $US. (D) It has depreciated against the Euro and appreciated against the $US. –7– 18 The diagram shows the impact of a subsidy paid to domestic producers on the price and quantity of beach towels. Assume that the equilibrium price of beach towels with the subsidy is $10 per towel. Price ($) S1 S2 12 10 8 D 12 20 Quantity From the diagram, what is the subsidy (per towel) paid to domestic producers? (A) $2 (B) $4 (C) $8 (D) $12 19 An increase in investment of $5000 increases the equilibrium level of national income by $20 000. What is the marginal propensity to consume (MPC)? (A) 0.2 (B) 0.25 (C) 0.75 (D) 0.8 20 Which of the following is most likely to reduce Australia’s import volumes? Economic activity in Australia Australian dollar (A) Recession Appreciation (B) Expansion Depreciation (C) Expansion Appreciation (D) Recession Depreciation –8– © Board of Studies NSW 2012 2012 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II ! 40 marks Attempt Questions 21–24 Allow about 1 hour and 15 minutes for this section Student Number Answer the questions in the spaces provided. These spaces provide guidance for the expected length of response. Do NOT write in this area. Extra writing space is provided on pages 18 and 19. If you use this space, clearly indicate what question you are answering. Please turn over ! –9– Office Use Only – Do NOT write anything, or make any marks below this line. 1121 15110 6741310293 Question 21 (10 marks) (a) 2 Distinguish between import tariff and import quota. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ! ............................................................................................................................... ............................................................................................................................... 4 Outline TWO reasons for the protection of domestic industries. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Do NOT write in this area. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 21 continues on page 11 ! (b) – 10 – Office Use Only – Do NOT write anything, or make any marks below this line. 0730310295 Question 21 (continued) (c) Outline an economic benefit and an economic cost of a free trade agreement involving Australia. 4 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ! ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Do NOT write in this area. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 21 ! – 11 – Office Use Only – Do NOT write anything, or make any marks below this line. 8668310293 Question 22 (10 marks) (a) 1 The consumer price index (CPI) is 120 in Year 1 and 126 in Year 2. Calculate the inflation rate between Year 1 and Year 2. ............................................................................................................................... (b) What is the difference between the headline rate and the underlying rate of CPI inflation? 2 ! ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 3 How might inflationary expectations affect inflation? ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ! (c) Do NOT write in this area. ............................................................................................................................... Question 22 continues on page 13 – 12 – Office Use Only – Do NOT write anything, or make any marks below this line. 5654310295 Question 22 (continued) (d) Explain the possible effects on the domestic economy if domestic inflation is high relative to inflation in other countries. 4 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ! ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Do NOT write in this area. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 22 ! – 13 – Office Use Only – Do NOT write anything, or make any marks below this line. 8839310293 Question 23 (10 marks) (a) 1 The diagram shows the Lorenz Curve for an economy. ! Cumulative proportion of national income (%) 100 0 100 Cumulative proportion of households ranked by income (%) On the diagram, draw another Lorenz Curve that represents a MORE equal distribution of income for this economy. 2 Outline an economic benefit of income inequality. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ! (b) Do NOT write in this area. 0 Question 23 continues on page 15 – 14 – Office Use Only – Do NOT write anything, or make any marks below this line. 2984310298 Question 23 (continued) (c) Why are average weekly earnings for males higher than average weekly earnings for females in Australia? 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ! ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Do NOT write in this area. ............................................................................................................................... (d) 4 Explain the ways in which fiscal policy can reduce income inequality. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ! ............................................................................................................................... ............................................................................................................................... End of Question 23 – 15 – Office Use Only – Do NOT write anything, or make any marks below this line. 1918310294 Question 24 (10 marks) (a) What is the difference between underemployment and hidden unemployment? 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ! ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Why might changes in underemployment NOT affect the unemployment rate? 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 24 continues on page 17 Do NOT write in this area. ............................................................................................................................... ! (b) – 16 – Office Use Only – Do NOT write anything, or make any marks below this line. 7407310293 Question 24 (continued) (c) How might an increase in the school leaving age affect labour force participation and unemployment? 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ! ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Do NOT write in this area. ............................................................................................................................... (d) How would an increase in the minimum wage affect the labour market? Assume that the minimum wage is above the equilibrium wage. 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ! ............................................................................................................................... End of Question 24 – 17 – Office Use Only – Do NOT write anything, or make any marks below this line. 4957310290 Section II Extra writing space If you use this space, clearly indicate what question you are answering. ______________________________________________________________________________ ______________________________________________________________________________ ! ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Do NOT write in this area. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ – 18 – Office Use Only – Do NOT write anything, or make any marks below this line. 4792310297 ! ______________________________________________________________________________ Section II Extra writing space If you use this space, clearly indicate what question you are answering. ______________________________________________________________________________ ______________________________________________________________________________ ! ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Do NOT write in this area. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ! ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ – 19 – Office Use Only – Do NOT write anything, or make any marks below this line. 5461310291 ! BLANK PAGE ! Do NOT write in this area. – 20 – © Board of Studies NSW 2012 Office Use Only – Do NOT write anything, or make any marks below this line. 9410310299 2012 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Section III 20 marks Attempt either Question 25 or Question 26 Allow about 35 minutes for this section Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: demonstrate knowledge and understanding relevant to the question use the information provided apply relevant economic terms, concepts, relationships and theory present a sustained, logical and cohesive response Question 25 (20 marks) Analyse the impact of changes in the global economy on Australia’s Balance of Payments. In your response, you should refer to the economic information provided. Traditionally, Australia’s current account deficits have been financed by foreign capital attracted to relatively high domestic interest rates . . . sourced from the excess savings of countries such as Japan and more recently China. % of GDP 5.00 Australia: Current account balances Trade balance (net goods and services) Primary income balance (net income balance) 2.50 Current account balance 0.00 –2.50 –5.00 –7.50 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-01 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Balance of Payments and International Investment Position; Catalogue #5302.0, March 2012, ABS data used with permission from the Australian Bureau of Statistics 1123 OR – 21 – In your answer you will be assessed on how well you: demonstrate knowledge and understanding relevant to the question use the information provided apply relevant economic terms, concepts, relationships and theory present a sustained, logical and cohesive response Question 26 (20 marks) Analyse the impact of changes in the global economy on the structure of industry in the Australian economy. In your response, you should refer to the economic information provided. The long term rise in the services share of GDP in the Australian economy has recently come under pressure as a result of increased competition from foreign providers. Australia: Industry shares of GDP % of GDP 20 Agriculture 18 Mining 16 Manufacturing 14 12 10 Awaiting copyright 8 6 4 2 0 1991 1996 2001 – 22 – 2006 2011 Section IV 20 marks Attempt either Question 27 or Question 28 Allow about 35 minutes for this section Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ demonstrate knowledge and understanding relevant to the question ■ apply relevant economic information, terms, concepts, relationships and theory ■ present a sustained, logical and cohesive response Question 27 (20 marks) For an economy other than Australia, discuss the effects of globalisation on economic growth and the quality of life. OR Question 28 (20 marks) Discuss the effectiveness of economic policies in achieving the Australian government’s economic objectives. End of paper – 23 – BLANK PAGE – 24 – © Board of Studies NSW 2012 2013 H I G H E R S C H O O L C E R T I F I C AT E E X A M I N AT I O N Economics Total marks – 100 Section I Pages 2–8 20 marks • Attempt Questions 1–20 • Allow about 35 minutes for this section General Instructions • Reading time – 5 minutes • Working time – 3 hours • Write using black or blue pen Black pen is preferred • Board-approved calculators may be used Section II Pages 9–19 40 marks • Attempt Questions 21–24 • Allow about 1 hour and 15 minutes for this section Section III Pages 21–22 20 marks • Attempt either Question 25 or Question 26 • Allow about 35 minutes for this section Section IV Page 23 20 marks • Attempt either Question 27 or Question 28 • Allow about 35 minutes for this section 1190 Section I 20 marks Attempt Questions 1–20 Allow about 35 minutes for this section Use the multiple-choice answer sheet for Questions 1–20. 1 Which of the following international organisations is most likely to be involved in financing the construction of a dam in a developing country? (A) The World Bank (B) The World Trade Organisation (C) The International Monetary Fund (D) The Organisation for Economic Cooperation and Development 2 What is the most common reason given for a country to increase tariff protection? (A) To increase trade volumes (B) To maintain domestic employment (C) To reduce the rate of domestic inflation (D) To lower the level of domestic interest rates –2– The diagram shows the Lorenz curves for Country A and Country B. Cumulative proportion of national income (%) 3 100 Country A Country B 0 Cumulative proportion of households ranked by income (%) 100 Which of the following statements is most likely to explain the different income distribution in Country A and Country B? (A) Country A has higher rates of saving than Country B. (B) Country A has higher GDP per capita than Country B. (C) Country A has higher social welfare spending than Country B. (D) Country A has higher incentives for entrepreneurs than Country B. 4 Which of the following statements about free trade agreements is correct? (A) They reduce trade between member countries. (B) They treat member and non-member countries in the same way. (C) They can divert trade from efficient non-member countries to inefficient member countries. (D) They prevent member countries entering into bilateral free trade agreements with non-members. 5 Which of the following is likely to encourage the hidden unemployed to enter the labour force? (A) A reduction in child-care costs (B) An increase in the unemployment rate (C) An increase in marginal income tax rates (D) A reduction in funding of traineeship programs –3– 6 7 Which of the following discretionary changes to taxation and transfer payments is most likely to have the greatest expansionary effect on the economy? Taxation Transfer payments (A) Increases Increase (B) Decreases Decrease (C) Decreases Increase (D) Increases Decrease There is an increase in the minimum rate of employer superannuation contributions from 9% to 12% of wages. Which of the following is the most likely effect of this increase? (A) Increased cost inflation (B) Decreased cost inflation (C) Increased demand inflation (D) Decreased demand inflation 8 The non-accelerating inflation rate of unemployment (NAIRU) is most likely to be reduced by increasing (A) spending on retraining job seekers. (B) the level of unemployment benefits. (C) protection levels for domestic industries. (D) spending on public infrastructure projects. 9 Which of the following describes the market equilibrium price and output in the presence of a negative externality? Price Output (A) Too high Too high (B) Too low Too low (C) Too low Too high (D) Too high Too low –4– 10 The table shows current account data for a hypothetical economy with a floating exchange rate. Components of the current account $ billion ($bn) Exports of goods and services 100 Imports of goods and services 120 Net primary income –140 Net secondary income –40 What is the balance on the capital account? (A) A deficit of $160 billion (B) A surplus of $160 billion (C) A deficit of $200 billion (D) A surplus of $200 billion 11 Which of the following types of unemployment is NOT affected by the rise in mining sector activity or the decline in manufacturing sector activity? (A) Seasonal (B) Frictional (C) Structural (D) Long-term 12 Which of the following is most likely to increase a manufacturing firm’s productivity? (A) An increase in personal income tax rates (B) An increase in investment in capital goods (C) A decrease in demand by consumers for the firm’s product (D) A decrease in the size of the import quota for similar products –5– 13 14 15 Which combination of actions by the Reserve Bank of Australia is most likely to cause a rise in the value of the Australian dollar? Foreign currency Cash rate (A) Buy Increase (B) Sell Decrease (C) Sell Increase (D) Buy Decrease Which combination of changes in interest rates and the value of the Australian dollar is most likely to increase aggregate demand in the Australian economy? Interest rates Value of the Australian dollar (A) Increase Appreciates (B) Decrease Depreciates (C) Decrease Appreciates (D) Increase Depreciates There is a decline in the marginal propensity to consume (MPC). Which combination of changes in the simple multiplier and equilibrium income is most likely to result? Simple multiplier Equilibrium income (A) Increases Increases (B) Decreases Decreases (C) Decreases Increases (D) Increases Decreases –6– 16 Australia’s interest rates are reduced while those of its major trading partners remain unchanged. Which combination of changes in the supply of $A and the trade weighted index is most likely to result? 17 18 Supply of $A Trade weighted index (A) Increases Increases (B) Decreases Decreases (C) Decreases Increases (D) Increases Decreases Which combination of actions does the Reserve Bank of Australia need to take in order to implement a contractionary monetary policy? Commonwealth Government Securities Domestic money supply (A) Buy Increase (B) Sell Decrease (C) Sell Increase (D) Buy Decrease Australia’s headline annual (CPI) inflation rate has fallen from 3% to 2%, while the underlying annual inflation rate remains unchanged at 3%. The divergence between these two measures of inflation is most likely due to (A) a decrease in house prices. (B) an increase in house prices. (C) a decrease in world oil supply. (D) an increase in world oil supply. –7– 19 The following table shows the volume and price of exports and imports for two years. Exports Imports Year Volume Price Volume Price Year 1 100 100 100 100 Year 2 105 110 110 105 How have the terms of trade and the volume of net exports changed between Year 1 and Year 2? 20 Terms of trade Net exports (A) Risen Increased (B) Fallen Decreased (C) Fallen Increased (D) Risen Decreased The diagram shows the effect of a tariff on domestic supply (SS) and demand (DD). The free trade price is $20. The current tariff is $10. Price (per unit) D S 30 25 20 S D 80 90 100 110 120 Quantity If the government reduces the tariff to $5, which combination of outcomes is correct? Tariff revenue Domestic output (A) Rises Rises (B) Falls Falls (C) Falls Rises (D) Rises Falls –8– © Board of Studies NSW 2013 2013 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II  40 marks Attempt Questions 21–24 Allow about 1 hour and 15 minutes for this section Student Number Answer the questions in the spaces provided. These spaces provide guidance for the expected length of response. Do NOT write in this area. Extra writing space is provided on pages 18 and 19. If you use this space, clearly indicate which question you are answering. Write your Centre Number and Student Number at the top of this page. Please turn over  –9– Office Use Only – Do NOT write anything, or make any marks below this line. 1191 15110 6741310293 Question 21 (10 marks) A highway currently passes through a country town. The government is proposing to build a bypass that diverts highway traffic away from the town. 4 Discuss the costs and benefits of this proposal. ............................................................................................................................... ...............................................................................................................................  ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 21 continues on page 11 Do NOT write in this area. ...............................................................................................................................  (a) – 10 – Office Use Only – Do NOT write anything, or make any marks below this line. 0730310295 Question 21 (continued) (b) Explain the effect that globalisation has had on environmental sustainability. 6 ............................................................................................................................... ............................................................................................................................... ...............................................................................................................................  ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 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End of Question 21  – 11 – Office Use Only – Do NOT write anything, or make any marks below this line. 8668310293 Question 22 (10 marks) (a) A hypothetical economy has a simple multiplier of 2.5. Calculate the change in national income that would result from an increase in investment of $100 million. 1 ............................................................................................................................... (b) Outline how economic growth in a major trading partner might influence economic growth in Australia.  ............................................................................................................................... 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... How will an increase in Australia’s marginal propensity to save (MPS) affect Australia’s economic growth? 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 22 continues on page 13 – 12 – Office Use Only – Do NOT write anything, or make any marks below this line. 5654310295  (c) Do NOT write in this area. ............................................................................................................................... Question 22 (continued) (d) Explain the effects of a reduced rate of economic growth on the Australian Government budget. 4 ............................................................................................................................... ............................................................................................................................... ...............................................................................................................................  ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 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End of Question 22  – 13 – Office Use Only – Do NOT write anything, or make any marks below this line. 8839310293 Question 23 (10 marks) (a) 2 Distinguish between the current account deficit and foreign debt. ............................................................................................................................... ............................................................................................................................... ...............................................................................................................................  ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Explain how the level of national savings can influence the size of the current account. 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Do NOT write in this area. ............................................................................................................................... ............................................................................................................................... Question 23 continues on page 15  (b) – 14 – Office Use Only – Do NOT write anything, or make any marks below this line. 2984310298 Question 23 (continued) (c) What are the positive and negative implications of a current account deficit for the Australian economy? 5 ............................................................................................................................... ............................................................................................................................... ...............................................................................................................................  ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 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End of Question 23  – 15 – Office Use Only – Do NOT write anything, or make any marks below this line. 1918310294 Question 24 (10 marks) (a) The following diagram shows aggregate demand and aggregate supply curves for a hypothetical economy. P 2  AS P0 AD 0 Q0 Q (b) 2 Outline an effect of product market deregulation on inflation. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Do NOT write in this area. On the diagram, draw the new curve that results if there is a fall in labour productivity. Label the new equilibrium price P1 and the new equilibrium quantity Q1. ............................................................................................................................... 2 Outline a feature of a centralised labour market policy. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 24 continues on page 17 – 16 – Office Use Only – Do NOT write anything, or make any marks below this line. 7407310293  (c) Question 24 (continued) (d) Outline an advantage and a disadvantage of moving from a fixed exchange rate to a floating exchange rate system. 4 ............................................................................................................................... ............................................................................................................................... ...............................................................................................................................  ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Do NOT write in this area. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 24  – 17 – Office Use Only – Do NOT write anything, or make any marks below this line. 4957310290 Section II Extra writing space If you use this space, clearly indicate which question you are answering. ______________________________________________________________________________ ______________________________________________________________________________  ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Do NOT write in this area. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ – 18 – Office Use Only – Do NOT write anything, or make any marks below this line. 4792310297  ______________________________________________________________________________ Section II Extra writing space If you use this space, clearly indicate which question you are answering. ______________________________________________________________________________ ______________________________________________________________________________  ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Do NOT write in this area. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________  ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ – 19 – Office Use Only – Do NOT write anything, or make any marks below this line. 5461310291  BLANK PAGE  Do NOT write in this area. – 20 – © Board of Studies NSW 2013 Office Use Only – Do NOT write anything, or make any marks below this line. 9410310299 2013 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Section III 20 marks Attempt either Question 25 or Question 26 Allow about 35 minutes for this section Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ demonstrate knowledge and understanding relevant to the question ■ use the information provided ■ apply relevant economic terms, concepts, relationships and theory ■ present a sustained, logical and cohesive response Question 25 (20 marks) Explain how movements in the Australian dollar can affect the performance of the Australian economy. In your response, you should refer to the economic information provided. The high Australian dollar has had a major moderating effect on the resources boom. In doing so, it has created some winners and some losers. Australian dollar 1987–2012 vs. $US 1.20 1.10 vs. $US 1.10 1.00 1.00 0.90 0.90 0.80 0.80 0.70 0.70 0.60 0.60 0.50 0.50 0.40 Dec 1987 Dec 1992 Dec 1997 Dec 2002 OR 1192 1.20 vs. US dollar Long-term average 1987–2012 – 21 – Dec 2007 0.40 Dec 2012 In your answer you will be assessed on how well you: ■ demonstrate knowledge and understanding relevant to the question ■ use the information provided ■ apply relevant economic terms, concepts, relationships and theory ■ present a sustained, logical and cohesive response Question 26 (20 marks) Explain the effects of Australia’s macroeconomic policy mix on economic growth and inflation in the domestic economy. In your response, you should refer to the economic information provided. In early 2008, before the global financial crisis (GFC), inflation was the major concern of policy makers. Post-GFC, their focus has shifted to economic growth. Australian unemployment and underlying inflation 2002–2012 Annual inflation rate (%) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Dec 2002 Underlying CPI annual inflation rate Unemployment rate Dec 2004 Dec 2006 Dec 2008 – 22 – Dec 2010 Unemployment rate (%) 8.0 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 Dec 2012 Section IV 20 marks Attempt either Question 27 or Question 28 Allow about 35 minutes for this section Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ demonstrate knowledge and understanding relevant to the question ■ apply relevant economic information, terms, concepts, relationships and theory ■ present a sustained, logical and cohesive response Question 27 (20 marks) Analyse the effects of domestic AND global free trade and protection policies on the Australian economy. OR Question 28 (20 marks) Analyse the causes of unemployment and its effects on the Australian economy. End of paper – 23 – BLANK PAGE – 24 – © Board of Studies NSW 2013 2014 HIGHER SCHOOL CERTIFICATE EXAMINATION Economics Total marks – 100 Section I Pages 2–9 20 marks • Attempt Questions 1–20 • Allow about 35 minutes for this section General Instructions • Reading time – 5 minutes • Working time – 3 hours • Write using black or blue pen Black pen is preferred • Board-approved calculators may be used Section II Pages 13–23 40 marks • Attempt Questions 21–24 • Allow about 1 hour and 15 minutes for this section Section III Pages 25–26 20 marks • Attempt either Question 25 or Question 26 • Allow about 35 minutes for this section Section IV Page 27 20 marks • Attempt either Question 27 or Question 28 • Allow about 35 minutes for this section 1190 Section I 20 marks Attempt Questions 1–20 Allow about 35 minutes for this section Use the multiple-choice answer sheet for Questions 1–20. 1 Which of the following is a trading bloc? (A) The European Union (EU) (B) The World Trade Organisation (WTO) (C) The General Agreement on Tariffs and Trade (GATT) (D) The Organisation for Economic Cooperation and Development (OECD) 2 Of which of the following groups is Australia a member? (A) The Group of 8 (G8) (B) The Group of 20 (G20) (C) The North America Free Trade Agreement (NAFTA) (D) The Association of South-East Asian Nations (ASEAN) 3 Which of the following would be most likely to occur if there was a recession in the domestic economy? (A) Defence spending would increase. (B) Transfer payments would decrease. (C) GST taxation receipts would increase. (D) Income taxation receipts would decrease. 4 In which of the following circumstances could the International Monetary Fund (IMF) be called in to assist a country? (A) A trade dispute (B) A financial crisis (C) A foreign investment dispute (D) An infrastructure funding shortage –2– 5 In 1983 Australia moved from a fixed to a floating exchange rate. Which of the following has been a disadvantage of the floating exchange rate? (A) Lower foreign currency reserves (B) Higher foreign currency reserves (C) Increased exchange rate volatility (D) Decreased exchange rate volatility 6 A second airport is to be built in Sydney. Which of the following best describes a positive externality likely to arise from this project? (A) Reduced job opportunities around the second airport (B) Increased traffic congestion around the second airport (C) Reduced traffic congestion around the existing airport (D) Increased job opportunities around the existing airport 7 An economy is operating at its natural rate of unemployment. What would be the long term effect on the unemployment rate and the participation rate of an increase in labour market flexibility? Unemployment rate Participation rate (A) Increases Increases (B) Decreases Increases (C) Increases Decreases (D) Decreases Decreases –3– 8 The table shows selected data for an economy. Year Nominal GDP Real GDP 2013 100 100 2014 105 103 According to the data, what has happened to the consumer price index (CPI) between 2013 and 2014? (A) The CPI has fallen by less than the change in nominal GDP. (B) The CPI has fallen by more than the change in nominal GDP. (C) The CPI has risen by less than the change in nominal GDP. (D) The CPI has risen by more than the change in nominal GDP. 9 If a government stopped funding education, what would happen to the market equilibrium price and quantity of education? Equilibrium price Equilibrium quantity (A) Falls Rises (B) Falls Falls (C) Rises Rises (D) Rises Falls –4– 10 The graph shows the demand for, and supply of, Australian dollars. $A in terms of $US S 0.90 D 0 Q Quantity of $A Which combination of shifts in the demand and supply curves must result in a depreciation of the Australian dollar? 11 Demand curve shift Supply curve shift (A) Left Right (B) Left Left (C) Right Left (D) Right Right Which of the following best illustrates the effect of reduced competition on product markets? Equilibrium price Equilibrium quantity (A) Decreases Increases (B) Decreases Decreases (C) Increases Increases (D) Increases Decreases –5– 12 The table shows consumer price index (CPI) data for a hypothetical economy. Year CPI 2011 145 2012 150 2013 156 What is the inflation rate for this economy for 2013? (A) 3% (B) 4% (C) 5% (D) 6% 13 Australia’s mining boom has resulted in a significant increase in foreign investment. Which of the following shows the effects of this increase on Australia’s Balance of Payments? 14 Primary income account Capital and financial account (A) Credit increase Debit increase (B) Credit increase Credit increase (C) Debit increase Debit increase (D) Debit increase Credit increase The Reserve Bank of Australia decides to implement an expansionary monetary policy. Which of the following changes to commercial banks’ holdings of assets is most likely to occur? Commercial banks’ holdings of Commercial banks’ holdings of cash in Commonwealth Government securities exchange settlement accounts (A) Decrease Increase (B) Increase Increase (C) Decrease Decrease (D) Increase Decrease –6– The diagram shows the Lorenz curves for a hypothetical economy. Cumulative proportion of total income (%) 15 100 A B 0 Cumulative proportion of persons ranked by income (%) 100 The Lorenz curve has shifted from A to B. All other things being equal, which of the following changes might explain this shift? 16 Change in the top marginal tax rate Change in business profits (A) Decrease Increase (B) Decrease Decrease (C) Increase Increase (D) Increase Decrease The table shows components of the Balance of Payments for a hypothetical economy. Components of the Balance of Payments Balance of Goods and Services Net Primary Income $ billion (bn) 10 –20 Net Secondary Income –5 Balance on Capital Account 1 Balance on Financial Account ? What is the balance on the Financial Account? (A) A deficit of $14 billion (B) A deficit of $16 billion (C) A surplus of $14 billion (D) A surplus of $16 billion –7– 17 Australia has a lower minimum wage for youth than for adults. Which of the following is most likely to cause an increase in youth unemployment? Minimum wage for youth 18 Minimum wage for adults (A) Unchanged Increase (B) Unchanged Unchanged (C) Increase Increase (D) Increase Unchanged The table shows National Accounts data for consumption (C ) and national income (Y) for a hypothetical economy. Year C ($ million) Y ($ million) 1 240 320 2 280 370 An increase in exports lifted national income by $100 million in Year 3. All other things being equal, what was the increase in exports? (A) $20 million (B) $25 million (C) $75 million (D) $80 million –8– Use the following demand and supply diagram to answer Questions 19 and 20. Price ($) D S 25 20 15 10 S 20 19 D 30 40 50 60 70 80 Quantity (millions) Consider an economy in which there is a tariff of $15 in addition to the world price of $10. If the government reduces the tariff from $15 to $10, what will be the change in tariff revenue? (A) $100 million (B) $200 million (C) $400 million (D) $600 million 20 Consider an economy that operates a free trade policy. The government is proposing to introduce a $5 tariff in addition to the world price of $10. What import quota could the government introduce to have the same effect on domestic output as a $5 tariff? (A) 20 million units (B) 30 million units (C) 40 million units (D) 60 million units –9– BLANK PAGE – 10 – BLANK PAGE – 11 – BLANK PAGE – 12 – © 2014 Board of Studies, Teaching and Educational Standards NSW 2014 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Centre Number Section II ! 40 marks Attempt Questions 21–24 Allow about 1 hour and 15 minutes for this section Student Number Answer the questions in the spaces provided. These spaces provide guidance for the expected length of response. Do NOT write in this area. Extra writing space is provided on pages 22 and 23. If you use this space, clearly indicate which question you are answering. Write your Centre Number and Student Number at the top of this page. Please turn over ! – 13 – Office Use Only – Do NOT write anything, or make any marks below this line. 1191 15110 6741310293 Question 21 (10 marks) (a) Distinguish between local content rules and export incentives. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ! ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... The United States Government gives a subsidy to its farmers. 4 Explain the likely effects of this policy on farmers and consumers in Australia. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 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BLANK PAGE ! Do NOT write in this area. – 24 – © 2014 Board of Studies, Teaching and Educational Standards NSW Office Use Only – Do NOT write anything, or make any marks below this line. 9410310299 2014 HIGHER SCHOOL CERTIFIC ATE EXAMINATION Economics Section III 20 marks Attempt either Question 25 or Question 26 Allow about 35 minutes for this section Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ demonstrate knowledge and understanding relevant to the question ■ use the information provided ■ apply relevant economic terms, concepts, relationships and theory ■ present a sustained, logical and cohesive response Question 25 (20 marks) Explain how both labour market policies and fiscal policies can be used to reduce income inequality and wealth inequality. In your response, you should refer to the economic information provided. An income safety net for all has been a long-term policy goal. The debate has been about whether minimum wages and welfare payments achieve this objective or whether disincentive effects mean that it has been counterproductive for some groups. Distribution of Income, Taxes and Government Benefits in Australia, 2009–2010 (% shares of total income, taxes and benefits paid to/received by different income groups) Share of the poorest 20% of income earners Share of the richest 20% of income earners 3.3% 45.0% Less taxes paid: Income tax paid Indirect taxes paid (eg GST, petrol taxes) 1.2% 12.5% 56.2% 30.1% Plus government benefits received: Transfer payments (eg pension, unemployment) In-kind payments (eg free health, education) 36.5% 22.0% 2.5% 15.3% Final Income 11.3% 34.7% Income earned before tax (eg wages and salaries, interest income) OR 1192 – 25 – In your answer you will be assessed on how well you: ■ demonstrate knowledge and understanding relevant to the question ■ use the information provided ■ apply relevant economic terms, concepts, relationships and theory ■ present a sustained, logical and cohesive response Question 26 (20 marks) Explain the causes of inflation and its effects on the Australian economy. In your response, you should refer to the economic information provided. Australia has benefited from its return to low inflation in the 1990s but . . . inflation remains an influence on the economy, markets and policy. Inflation, wages growth and interest rates in A ustralia 1980–2013 20 % % CPI inflation (Annual) 18 20 18 16 Average Weekly Earnings (wages, annual growth) 16 14 RBA Cash interest rate 14 4 4 2 2 0 0 –2 –2 – 26 – 2013 6 2010 6 2005 8 2000 8 1995 10 1990 10 1985 12 1980 12 Section IV 20 marks Attempt either Question 27 or Question 28 Allow about 35 minutes for this section Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are available. In your answer you will be assessed on how well you: ■ demonstrate knowledge and understanding relevant to the question ■ apply relevant economic information, terms, concepts, relationships and theory ■ present a sustained, logical and cohesive response Question 27 (20 marks) For an economy other than Australia, discuss the strategies used to promote both economic growth and development. OR Question 28 (20 marks) Discuss the role of government in attempting to achieve environmental sustainability in Australia. End of paper – 27 – BLANK PAGE – 28 – © 2014 Board of Studies, Teaching and Educational Standards NSW 2015 HIGHER SCHOOL CERTIFICATE EXAMINATION Economics Total marks – 100 Section I 20 marks General Instructions Section II 40 marks Section III 20 marks Section IV 20 marks 1030 Section I 20 marks Attempt Questions 1–20 Allow about 35 minutes for this section 1 2 3 4 5 6 Import quota Subsidy to domestic producers 7 Year 1 GDP growth Inflation Unemployment rate 8 9 $A in terms of $US S D1 0 D Quantity of $A 10 Year Import price index Export price index 1 100 100 110 100 Terms of trade 11 International competitiveness Trade weighted index 12 13 AD AS P AS AD 0 AS AD AS AD Q 14 Year Unemployment rate Participation rate 1 Reason for change in the unemployment rate 15 Reason for change in the participation rate 16 Year National income 1 1000 3 17 Australian dollar Australian GDP Savings 18 Year C I 1 G X M 300 100 100 300 19 Year Headline inflation Underlying inflation 1 3 Reason for change in headline inflation Reason for change in underlying inflation 20 $ Billion 10 BLANK PAGE BLANK PAGE © 2015 Board of Studies, Teaching and Educational Standards NSW 2015 HIGHER SCHOOL CERTIFICATE EXAMINATION Economics Centre Number Section II Do NOT write in this area. 40 marks Attempt Questions 21–24 Allow about 1 hour and 15 minutes for this section Student Number Please turn over Office Use Only – Do NOT write anything, or make any marks below this line. 1031 15110 6741310293 Question 21 2 3 Question 21 continues on page 15 0730310295 Do NOT write in this area. 5 End of Question 21 Office Use Only – Do NOT write anything, or make any marks below this line. 8668310293 Question 22 2 4 Question 22 continues on page 17 5654310295 Do NOT write in this area. 4 End of Question 22 Office Use Only – Do NOT write anything, or make any marks below this line. 8668310293 8839310293 Question 23 2 3 Question 23 continues on page 19 2984310298 Question 23 (continued) (c) A country’s economy is operating at the non-accelerating inflation rate of unemployment (NAIRU). 5 What are the policy implications of this for the country’s government if its aim is to reduce unemployment? ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 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End of Question 24 – 21 – Office Use Only – Do NOT write anything, or make any marks below this line. 4957310290 Section II extra writing space If you use this space, clearly indicate which question you are answering. 4792310297 Section II extra writing space Do NOT write in this area. If you use this space, clearly indicate which question you are answering. Office Use Only – Do NOT write anything, or make any marks below this line. 5461310291 BLANK PAGE © 2015 Board of Studies, Teaching and Educational Standards NSW 9410310299 2015 HIGHER SCHOOL CERTIFICATE EXAMINATION Economics Section III 20 marks Attempt either Question 25 or Question 26 Allow about 35 minutes for this section ■ ■ ■ ■ Question 25 Source: Australian Government, The Treasury Productivity growth in Australia (% per annum), 1996–2013 % change per year 4.9 2 0 –2 –4.6 1995–96 1999–2000 2003–04 Labour productivity ase on Australian ureau o Statistics ata OR 2007–08 2011–12 Capital productivity Question 26 Source: Australian Government, The Treasury Changes in business investment in Australian industry sectors, 2011–2015 % change per year 60 Mining Services Manufacturing Total % change per year 60 30 30 0 0 –30 2011–12 2013–14 2012–13 ata revie s: Aus a e ermission y est ac nstitutional an ectations A 2014–15 A S y n ustry e ro uce –30 ith Section IV 20 marks Attempt either Question 27 or Question 28 Allow about 35 minutes for this section ■ ■ ■ Question 27 OR Question 28 End of paper BLANK PAGE © 2015 Board of Studies, Teaching and Educational Standards NSW 2016 HIGHER SCHOOL CERTIFICATE EXAMINATION Economics Total marks – 100 Section I Pages 2–8 20 marks • Attempt Questions 1–20 • Allow about 35 minutes for this section General Instructions • Reading time – 5 minutes • Working time – 3 hours • Write using black pen • Board-approved calculators may be used Section II Pages 9–19 40 marks • Attempt Questions 21–24 • Allow about 1 hour and 15 minutes for this section Section III Pages 21–23 20 marks • Attempt either Question 25 or Question 26 • Allow about 35 minutes for this section Section IV Page 24 20 marks • Attempt either Question 27 or Question 28 • Allow about 35 minutes for this section 2030 Section I 20 marks Attempt Questions 1–20 Allow about 35 minutes for this section Use the multiple-choice answer sheet for Questions 1–20. 1 Which of the following is an example of a monetary union? (A) EU (B) APEC (C) ASEAN (D) NAFTA 2 Which of the following policies is mainly used to manage inflation? (A) Fiscal policy (B) Monetary policy (C) Competition policy (D) Labour market policy 3 Which of the following is most likely to result in an increased budget surplus? (A) Reduced government spending and reduced taxation (B) Increased government spending and reduced taxation (C) Reduced government spending and increased taxation (D) Increased government spending and increased taxation 4 Other things being equal, which of the following is most likely to increase if Australia’s major trading partners experience an economic slowdown? (A) Australia’s GDP growth (B) Australia’s unemployment rate (C) Demand for Australia’s exports (D) Australia’s consumer price index –2– 5 A government decides to reduce tariffs on imported goods. Other things being equal, what will be the most likely impact on the domestic economy? (A) Tariff revenue will increase. (B) Tariff revenue will remain unchanged. (C) There will be a redistribution of income from importers to local producers. (D) There will be a redistribution of income from local producers to importers. 6 An increase in which of the following will most likely change a Gini coefficient from 0.3 to 0.4? (A) Company tax rates (B) The goods and services tax rate (C) Marginal income tax rates for high income earners (D) Tax rates levied on the profits from the sale of property 7 Which of the following best describes a person experiencing frictional unemployment? (A) A university student struggling to find work during a recession (B) A summer fruit-picker undertaking full-time training to acquire new skills (C) A self-employed worker whose business has shut down and who plans to start a new business (D) A factory worker who is employed part-time and who is actively seeking to increase their hours of work –3– The diagram refers to the change in the distribution of income in a hypothetical economy. Cumulative proportion of total income (%) 8 Year 1 Year 2 Cumulative proportion of persons ranked by income (%) Which of the following is most likely to increase as a result of the change in income inequality from Year 1 to Year 2? (A) Consumption (B) Labour force mobility (C) Risk-taking by entrepreneurs (D) Saving and capital investment 9 A government has recently decided to increase the age of retirement. Which of the following are the most likely impacts of this decision on the labour force participation rate and taxation revenue? Impact on the labour force participation rate Impact on taxation revenue (A) Increase Decrease (B) Increase Increase (C) Decrease Increase (D) Decrease Decrease –4– 10 All other things being equal, which of the following is most likely to shift the demand curve for labour from DD to D1D1? D1 Wages S D D1 D 0 Quantity of labour (A) An economic downturn in the global economy (B) An increase in the labour force participation rate (C) The establishment of minimum employment standards across all industries (D) The implementation of a decentralised method of determining employment contracts 11 A government has changed the method of financing its budget deficit. Instead of borrowing from the domestic private sector, it will now borrow from overseas. All other things being equal, what is the most likely impact of this change on the domestic economy? (A) The foreign debt will decrease. (B) The budget deficit will decrease. (C) Current account deficit will increase. (D) Domestic borrowing costs will increase. –5– 12 What is the most likely impact of an increase in the official cash rate on the domestic economy? (A) Lower inflationary expectations resulting from a depreciation of the domestic currency (B) Higher inflationary expectations resulting from an appreciation of the domestic currency (C) A redistribution of income and wealth towards those with a relatively high marginal propensity to save (D) A redistribution of income and wealth towards those with a relatively high marginal propensity to consume 13 The Australian Government has received a repayment of an interest-free loan made to a developing economy. How will this be recorded in Australia’s balance of payments? (A) A debit in the secondary income account (B) A credit in the secondary income account (C) A debit in the capital and financial account (D) A credit in the capital and financial account 14 15 Which of the following is most likely to result in a decline in Australia’s terms of trade? Demand for Australia’s exports Supply of Australia’s exports (A) Decreased Increased (B) Increased Decreased (C) Increased Increased (D) Decreased Decreased Which of the following is most likely to allow an infant industry in Australia to benefit from globalisation? (A) An increase in Australia’s import quotas (B) A decrease in Australia’s levels of protection (C) A decrease in Australia’s regulation of transnational corporations (D) An increase in Australia’s recognition of international educational qualifications –6– 16 The table shows selected data for a hypothetical economy. Year Money GDP ($ millions) Population (millions) CPI 1 1000 100 100 2 1500 150 110 All other things being equal, how are real Gross Domestic Product (GDP) and the Human Development Index (HDI) most likely to change from Year 1 to Year 2? (A) Real GDP and the HDI both increase. (B) Real GDP and the HDI both decrease. (C) Real GDP decreases and the HDI increases. (D) Real GDP increases and the HDI decreases. 17 An increase in which of the following is most likely to lower the non-accelerating inflation rate of unemployment (NAIRU)? (A) Official cash rate (B) Government spending (C) Infrastructure investment (D) Use of centralised wage bargaining 18 The table shows hypothetical data for the Australian economy. Year $A in terms of $US Headline inflation (%) 1 0.70 2 2 0.75 1 All other things being equal, how did the purchasing power of Australian consumers change overseas and domestically from Year 1 to Year 2? Purchasing power of Australians travelling overseas Purchasing power of Australian consumers domestically (A) Increased Increased (B) Decreased Increased (C) Increased Decreased (D) Decreased Decreased –7– 19 The table shows hypothetical data for the Australian economy. Loans owed by foreigners to Australians ($ billions) 150 Loans owed by Australians to foreigners ($ billions) 600 Australian assets owned by foreigners ($ billions) 100 Foreign assets owned by Australians ($ billions) 250 What is the value of Australia’s Net Foreign Liabilities? (A) $300 billion (B) $400 billion (C) $600 billion (D) $1100 billion 20 It can be argued that a public road is NOT a public good because (A) travel times vary with usage. (B) the private sector can build and maintain roads. (C) when one car uses the road another car can still use the road. (D) the road is used by both public and private forms of transport. –8– © 2016 Board of Studies, Teaching and Educational Standards NSW 2016 HIGHER SCHOOL CERTIFICATE EXAMINATION Economics Centre Number Section II 40 marks Attempt Questions 21–24 Allow about 1 hour and 15 minutes for this section Student Number Answer the questions in the spaces provided. These spaces provide guidance for the expected length of response. Do NOT write in this area. Extra writing space is provided on pages 18 and 19. If you use this space, clearly indicate which question you are answering. Write your Centre Number and Student Number at the top of this page. Please turn over –9– Office Use Only – Do NOT write anything, or make any marks below this line. 2031 15110 6741310293 Question 21 (10 marks) (a) Why might a government prefer to protect an industry with a subsidy rather than a tariff? 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Explain how removal of a subsidy might promote greater efficiency in an economy. 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 21 continues on page 11 – 10 – Office Use Only – Do NOT write anything, or make any marks below this line. 0730310295 Do NOT write in this area. ............................................................................................................................... Question 21 (continued) (c) Discuss the likely impacts on government revenue and expenditure of removing a subsidy. 5 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 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End of Question 21 – 11 – Office Use Only – Do NOT write anything, or make any marks below this line. 8668310293 Question 22 (10 marks) (a) 2 Outline the difference between a private benefit and a social benefit. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Explain why developed and developing nations may take different approaches to environmental sustainability. 4 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 22 continues on page 13 – 12 – Office Use Only – Do NOT write anything, or make any marks below this line. 5654310295 Do NOT write in this area. ............................................................................................................................... Question 22 (continued) (c) Explain an advantage and a disadvantage of international environmental agreements in addressing environmental sustainability in the global economy. 4 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 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End of Question 22 – 13 – Office Use Only – Do NOT write anything, or make any marks below this line. 8839310293 Question 23 (10 marks) (a) On the diagram draw a new supply curve that shows a depreciation of the Australian dollar. $A in terms of $US 1 S D 0 Briefly explain why there might be an increase in the supply of Australian dollars. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (c) Explain how a decrease in an economy’s Trade Weighted Index may affect the level of inflation in that economy. 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 23 continues on page 15 – 14 – Office Use Only – Do NOT write anything, or make any marks below this line. 2984310298 Do NOT write in this area. (b) Quantity of $A Question 23 (continued) (d) Assess the impacts of a depreciation in the Australian dollar on the level of employment in Australia. 4 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 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End of Question 23 – 15 – Office Use Only – Do NOT write anything, or make any marks below this line. 1918310294 Question 24 (10 marks) (a) In a hypothetical economy, MPC = 0.9. 1 What is the change in national income if investment declines by $100 million? ............................................................................................................................... ............................................................................................................................... (b) 4 Explain how changes in the MPC can affect an economy’s growth. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 24 continues on page 17 – 16 – Office Use Only – Do NOT write anything, or make any marks below this line. 7407310293 Do NOT write in this area. ............................................................................................................................... Question 24 (continued) (c) Explain how changes in both aggregate demand and aggregate supply influence economic activity. 5 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Do NOT write in this area. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 24 – 17 – Office Use Only – Do NOT write anything, or make any marks below this line. 4957310290 Section II extra writing space If you use this space, clearly indicate which question you are answering. Do NOT write in this area. – 18 – Office Use Only – Do NOT write anything, or make any marks below this line. 4792310297 Section II extra writing space Do NOT write in this area. If you use this space, clearly indicate which question you are answering. – 19 – Office Use Only – Do NOT write anything, or make any marks below this line. 5461310291 BLANK PAGE Do NOT write in this area. – 20 – © 2016 Board of Studies, Teaching and Educational Standards NSW Office Use Only – Do NOT write anything, or make any marks below this line. 9410310299 2016 HIGHER SCHOOL CERTIFICATE EXAMINATION Economics Section III 20 marks Attempt either Question 25 or Question 26 Allow about 35 minutes for this section Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are available. Your answer will be assessed on how well you: ■ demonstrate knowledge and understanding relevant to the question ■ use the information provided ■ apply relevant economic terms, concepts, relationships and theory ■ present a sustained, logical and cohesive response Question 25 (20 marks) Please turn over 2032 – 21 – Question 25 (20 marks) Explain how the Australian Government’s labour market policies affect both the employed and the unemployed. In your response, refer to the economic information provided. Without regulation and an ability to act collectively, many employees are likely to have much less bargaining power than employers, with adverse outcomes for their wages and conditions . . . [Awards in the Australian labour market have] some undesirable inconsistencies and rigidities . . . ... Wages paid are typically the key cost of employing labour… Businesses incur other employment costs, such as workers compensation premiums, provision for leave, superannuation and payroll taxes . . . For employees, wages are often the main ‘return’ from working, such that an increase in wages induces more people to enter the labour force to seek work . . . Productivity Commission Inquiry Report, November 2015 Labour force participation rates in Australia February 1978 to February 2014 75 Participation rate (%) 70 Males 65 All persons 60 55 Females 50 45 40 February 1978 February 1984 February 1990 February 1996 February 2002 February 2008 February 2014 Adapted from Productivity Commission Inquiry Report, November 2015 OR – 22 – Question 26 (20 marks) Explain why an Australian Government may not be able to achieve all of its economic objectives. In your response, refer to the economic information provided. We are currently seeking permission to publish this material, but due to copyright implications, it cannot be displayed until permission has been obtained. Where possible, a link to the original source has been provided below. Real GDP and CPI Inflation: Australia 2011–2015 Year end Real GDP growth Please turn over – 23 – Year end CPI Inflation Sep 2015 Jun 2015 Mar 2015 Dec 2014 Sep 2014 Jun 2014 Mar 2014 Dec 2013 Sep 2013 Jun 2013 Mar 2013 Dec 2012 Sep 2012 Jun 2012 Mar 2012 Dec 2011 Sep 2011 Jun 2011 Mar 2011 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Section IV 20 marks Attempt either Question 27 or Question 28 Allow about 35 minutes for this section Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are available. Your answer will be assessed on how well you: ■ demonstrate knowledge and understanding relevant to the question ■ apply relevant economic information, terms, concepts, relationships and theory ■ present a sustained, logical and cohesive response Question 27 (20 marks) Assess the impact of the Reserve Bank of Australia’s expansionary monetary policy on the Australian economy. OR Question 28 (20 marks) Analyse the influence of different factors on Australia’s trade and financial flows. End of paper – 24 – © 2016 Board of Studies, Teaching and Educational Standards NSW HIGHER SCHOOL CERTIFICATE EXAMINATION 2017 Economics General Instructions • • • • Total marks: 100 Section I – 20 marks (pages 2–8) Reading time – 5 minutes Working time – 3 hours Write using black pen NESA approved calculators may be used • Attempt Questions 1–20 • Allow about 35 minutes for this section Section II – 40 marks (pages 9–20) • Attempt Questions 21–24 • Allow about 1 hour and 15 minutes for this section Section III – 20 marks (pages 21–22) • Attempt either Question 25 or Question 26 • Allow about 35 minutes for this section Section IV – 20 marks (page 23) • Attempt either Question 27 or Question 28 • Allow about 35 minutes for this section 2030 Section I 20 marks Attempt Questions 1–20 Allow about 35 minutes for this section Use the multiple-choice answer sheet for Questions 1–20. 1 2 3 4 Which of the following is most likely to be of benefit to transnational corporations? A. Increased trade barriers B. Variations in regional business cycles C. Restrictions on international financial flows D. Migration laws that encourage international labour mobility In theory, which of the following best describes the characteristics of a public good? A. Excludable and rival B. Excludable and non-rival C. Non-excludable and rival D. Non-excludable and non-rival Which statement about the time lags associated with government policies is most correct? A. Fiscal policy has a longer implementation lag than monetary policy. B. Microeconomic policies have a shorter impact lag than fiscal policy. C. Monetary policy has a longer impact lag than microeconomic policies. D. Microeconomic policies have a shorter implementation lag than monetary policy. An economy is experiencing high unemployment and an inflation rate below the central bank’s target rate. Which macroeconomic policy mix is best for this economy? A. Expansionary fiscal and monetary policy B. Contractionary fiscal and monetary policy C. Expansionary fiscal and contractionary monetary policy D. Contractionary fiscal and expansionary monetary policy –2– 5 6 7 8 Other things being equal, Australia’s international competitiveness would be improved by an increase in which of the following? A. Australian inflation B. Aggregate supply in Australia C. Australian government spending D. The value of the Australian dollar Which of the following is most likely to be included in a market-based policy for the management of air pollution? A. Fines for firms that pollute B. Firms buying and selling pollution permits C. Domestic regulation that forces firms to meet certain emission targets D. An international treaty that specifies emission targets and is legally enforceable Which of the following would most likely be driven by fluctuations in the business cycle? A. An increase in the GST rate B. An increase in the tax free threshold C. A decrease in company taxation receipts D. A decrease in the top marginal income tax rate Which of the following is most likely to occur if the Australian government finances a budget deficit by borrowing funds in the domestic money market? A. Upward pressure on interest rates B. Increased domestic money supply C. Depreciation of the Australian dollar D. A rise in the Australian government’s share of foreign debt –3– 9 A government decides to reduce the import quota for a product. Other things being equal, which of the following is most likely to occur in the domestic market? 10 11 A. The revenue of foreign producers will increase. B. The domestic price of the product will increase. C. Domestic firms will produce less of the product. D. The market share of foreign producers will increase. Which of the following is the minimum requirement in order for an adult worker in Australia to receive the National Minimum Wage? A. They are legally employed. B. They are a member of a trade union. C. They are covered by an industrial award. D. They are covered by an enterprise agreement. Which of the following must have happened if there has been a movement in Australia’s Terms of Trade from 115 to 105? A. The value of Australia’s imports increased relative to the value of Australia’s exports. B. The value of Australia’s imports decreased relative to the value of Australia’s exports. C. The price of Australia’s imports increased relative to the price of Australia’s exports. D. The price of Australia’s exports increased due to an appreciation in the Australian dollar. –4– 12 13 Which of the following correctly ranks, from largest to smallest, the sources of income as a percentage of Australian household income? A. Returns to labour, returns to enterprise, returns to land and capital, transfer payments B. Returns to labour, transfer payments, returns to land and capital, returns to enterprise C. Returns to labour, transfer payments, returns to enterprise, returns to land and capital D. Returns to labour, returns to enterprise, transfer payments, returns to land and capital There is a downturn in the economy of a major importer of Australian goods and services. Which of the following is most likely to occur? 14 A. A depreciation of the Australian dollar B. An appreciation of the Australian dollar C. A revaluation of the importer’s currency D. A devaluation of the importer’s currency The table shows hypothetical data for an economy. G M T I X S 25 60 30 20 70 35 Which statement about this economy is correct? A. It is expanding because exports are greater than imports. B. It is contracting because savings are greater than taxation. C. It is expanding because injections are greater than leakages. D. It is contracting because leakages are greater than injections. –5– 15 The table shows employment data for a hypothetical economy. Year Population (millions) Working age population (millions) Number employed (millions) Number unemployed (millions) 1 10 5 2 1 2 20 8 3 2 3 30 16 7 3 4 40 20 9 6 In which year is the unemployment rate 40% and the participation rate 62.5%? 16 A. 1 B. 2 C. 3 D. 4 The table shows consumer price index (CPI) data for a hypothetical economy. Year CPI 1 100 2 105 3 110 What happens to the prices of goods and services from Year 1 to Year 3? A. They remain unchanged. B. They increase at a constant rate. C. They increase at a decreasing rate. D. They increase at an increasing rate. –6– 17 The table shows hypothetical balance of payments data for a country. Year 1 (billions) Year 2 (billions) Exports of goods $100 $60 Imports of goods $110 $70 Net services –$20 –$30 Net primary income –$80 –$85 Net secondary income $10 –$5 Capital account $20 $30 Financial account $75 $90 Assuming a floating exchange rate, which of the following statements is true? 18 A. The balance of goods and services remains constant. B. The current account deficit decreases from Year 1 to Year 2. C. The net errors and omissions are larger in Year 2 than in Year 1. D. The capital and financial account surplus decreases from Year 1 to Year 2. It can be argued that a book in a public library is NOT a public good. Which of the following explanations best supports this argument? A. People can borrow a different book. B. Only one person can read the book at a time. C. Anyone can become a member of the library and borrow the book. D. The contents of the book do not change regardless of the number of times it has been read. –7– 19 The table shows data for National Income (Y) and Consumption (C ) for a hypothetical economy. Year Y C 1 0 100 2 1000 Z 3 X 1300 If the value of the multiplier is 2.5, which row in the following table shows the missing values for X and Z? 20 X Z A. 1200 250 B. 1200 1100 C. 2000 600 D. 2000 700 In 2019, one US dollar buys 1.25 Australian dollars. In 2020, one Australian dollar buys 0.75 US dollars. Which statement is most correct? A. There is no change in the exchange rate between 2019 and 2020. B. Australian exports to the US are less expensive in 2020 compared to 2019. C. Goods imported from the US are more expensive in 2019 compared to 2020. D. For US investors, Australian assets are more expensive to buy in 2020 compared to 2019. –8– © 2017 NSW Education Standards Authority 2017 HIGHER SCHOOL CERTIFICATE EXAMINATION Centre Number Economics Do NOT write in this area. Section II Answer Booklet Student Number 40 marks Attempt Questions 21–24 Allow about 1 hour and 15 minutes for this section Instructions • Write your Centre Number and Student Number at the top of this page. • Answer the questions in the spaces provided. These spaces provide guidance for the expected length of response. • Extra writing space is provided at the back of this booklet. If you use this space, clearly indicate which question you are answering. Please turn over –9– Office Use Only – Do NOT write anything, or make any marks below this line. 2031 15110 6741310293 Question 21 (10 marks) (a) 2 Why can dumping be used as a justification for trade protection? ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Explain the difference between subsidies and local content rules in discouraging dumping. 4 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 21 continues on page 11 – 10 – Office Use Only – Do NOT write anything, or make any marks below this line. 0730310295 Do NOT write in this area. ............................................................................................................................... Question 21 (continued) (c) Compare and contrast the roles of the International Monetary Fund (IMF) and the World Bank in international economic integration. 4 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Do NOT write in this area. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 21 – 11 – Office Use Only – Do NOT write anything, or make any marks below this line. 8668310293 Question 22 (10 marks) (a) 2 A large agricultural property in Australia is sold to a foreign investor. Outline how this transaction can affect TWO components of Australia’s balance of payments. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 2 Distinguish between direct investment and portfolio investment. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 22 continues on page 13 – 12 – Office Use Only – Do NOT write anything, or make any marks below this line. 5654310295 Do NOT write in this area. (b) Question 22 (continued) (c) 6 Discuss the costs and benefits for Australia of foreign direct investment. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 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End of Question 22 – 13 – Office Use Only – Do NOT write anything, or make any marks below this line. 8839310293 Question 23 (10 marks) (a) 2 Distinguish between income and wealth. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Explain TWO ways in which taxation can be used to change the Gini coefficient from 0.5 to 0.2. 4 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 23 continues on page 15 – 14 – Office Use Only – Do NOT write anything, or make any marks below this line. 2984310298 Do NOT write in this area. ............................................................................................................................... Question 23 (continued) (c) 4 Explain how age and gender affect wealth inequality in Australia. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Do NOT write in this area. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 23 – 15 – Office Use Only – Do NOT write anything, or make any marks below this line. 1918310294 Question 24 (10 marks) (a) Identify ONE type of unemployment that is present at full employment and ONE type of unemployment that is not. 2 Present at full employment: ................................................................................. Not present at full employment: .......................................................................... (b) 4 Explain how unemployment affects economic growth in an economy. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 24 continues on page 17 – 16 – Office Use Only – Do NOT write anything, or make any marks below this line. 7407310293 Do NOT write in this area. ............................................................................................................................... Question 24 (continued) (c) Contrast the use of fiscal policy for an economy at the non-accelerating inflation rate of unemployment (NAIRU) with its use when the economy is above the NAIRU. 4 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Do NOT write in this area. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 24 – 17 – Office Use Only – Do NOT write anything, or make any marks below this line. 4957310290 Section II extra writing space If you use this space, clearly indicate which question you are answering. Do NOT write in this area. – 18 – Office Use Only – Do NOT write anything, or make any marks below this line. 4792310297 Section II extra writing space Do NOT write in this area. If you use this space, clearly indicate which question you are answering. – 19 – Office Use Only – Do NOT write anything, or make any marks below this line. 5461310291 Section II extra writing space If you use this space, clearly indicate which question you are answering. Do NOT write in this area. – 20 – © 2017 NSW Education Standards Authority Office Use Only – Do NOT write anything, or make any marks below this line. 9410310299 HIGHER SCHOOL CERTIFICATE 2017 EXAMINATION Economics Section III 20 marks Attempt either Question 25 or Question 26 Allow about 35 minutes for this section Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are available. Your answer will be assessed on how well you: demonstrate knowledge and understanding relevant to the question use the information provided apply relevant economic terms, concepts, relationships and theory present a sustained, logical and cohesive response Question 25 (20 marks) Analyse the implications of a decline in global economic activity for Australia’s economic policies. In your response, refer to the economic information provided. A flexible exchange rate helps soften the impact of external shocks on an economy, such that monetary and fiscal policy can be directed towards achieving domestic economic policy objectives. Adapted from The Exchange Rate and the Reserve Bank’s Role in the Foreign Exchange Market, February 2017 © Reserve Bank of Australia terms of trade OR 2032 – 21 – cash rate 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Mar-16 Mar-15 Mar-14 Mar-13 Mar-11 Mar-10 Mar-12 Australia’s terms of trade and cash rate, 2010–2016 160.0 140.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0 Question 26 (20 marks) Analyse the role that the Australian government’s economic policies play in achieving price stability in Australia. In your response, refer to the economic information provided. Despite depreciation of the Australian dollar, inflation has declined due to a range of factors including heightened retail competition, moderation in conditions in housing markets and declines in the costs of business inputs such as fuel and utilities. Adapted from the Minutes of the Monetary Policy Meeting of the Reserve Bank Board, 3 May 2016 © Reserve Bank of Australia cash rate trade weighted index (TWI) consumer price index (CPI) wage growth – 22 – 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Mar-16 Mar-15 Mar-14 Mar-13 Mar-12 Australian TWI, wage growth, cash rate and CPI: 2010–2016 Mar-11 Mar-10 90 80 70 60 50 40 30 20 10 0 Section IV 20 marks Attempt either Question 27 or Question 28 Allow about 35 minutes for this section Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are available. Your answer will be assessed on how well you: ● demonstrate knowledge and understanding relevant to the question ● apply relevant economic information, terms, concepts, relationships and theory ● present a sustained, logical and cohesive response Question 27 (20 marks) With reference to BOTH Australia AND one other economy, compare and contrast the effects of globalisation on economic growth and environmental sustainability. OR Question 28 (20 marks) Explain how labour market policies can be used to achieve Australia’s economic objectives. End of paper – 23 – BLANK PAGE – 24 – © 2017 NSW Education Standards Authority NSW Education Standards Authority 2018 HIGHER SCHOOL CERTIFICATE EXAMINATION Economics General Instructions • • • • Reading time – 5 minutes Working time – 3 hours Write using black pen Calculators approved by NESA may be used Total marks: 100 Section I – 20 marks (pages 2–8) • Attempt Questions 1–20 • Allow about 35 minutes for this section Section II – 40 marks (pages 9–20) • Attempt Questions 21–24 • Allow about 1 hour and 15 minutes for this section Section III – 20 marks (pages 21–23) • Attempt either Question 25 or Question 26 • Allow about 35 minutes for this section Section IV – 20 marks (page 24) • Attempt either Question 27 or Question 28 • Allow about 35 minutes for this section 2040 Section I 20 marks Attempt Questions 1–20 Allow about 35 minutes for this section Use the multiple-choice answer sheet for Questions 1–20. 1 2 3 A key objective of decentralised wage determination is to increase A. work–life balance. B. equality of income. C. labour productivity. D. full-time employment. From which of the following would a developing economy be most likely to receive funds to build a bridge? A. World Bank B. World Trade Organisation C. International Monetary Fund D. Organisation for Economic Cooperation and Development The value of trade between countries A and B increases while the value of trade between countries A and C decreases. All other things being equal, this most likely occurred because country A 4 A. implemented a free trade agreement with country B. B. implemented a free trade agreement with country C. C. raised import tariffs on both country B and country C. D. reduced import tariffs on both country B and country C. A reduction in a country’s company tax rate is most likely to A. depreciate the country’s currency. B. reduce the profitability of the country’s firms. C. increase frictional unemployment in the country. D. increase foreign direct investment in the country. –2– 5 A country’s central bank wishes to improve the international competitiveness of the country’s exports. Which combination of actions by the central bank is most likely to achieve this objective? Foreign exchange transaction 6 Official interest rate movement A. Sell domestic currency Increase B. Buy domestic currency Increase C. Sell foreign currency Decrease D. Buy foreign currency Decrease Residents in a country town experience a significant slow-down in the speed of their internet service as a result of a large increase in usage from newly-connected households. The slower internet speed is most likely a result of 7 A. free riding. B. rivalry in consumption. C. non-excludability in usage. D. the internet being a public good. There is a significant increase in official interest rates in the United States of America (US). All other things being equal, which of the following would be true? Impact on foreign exchange markets Value of Australian dollar in terms of $US A. Increased demand for $US Depreciates B. Decreased demand for $US Depreciates C. Increased supply of $US Appreciates D. Decreased supply of $US Appreciates –3– 8 Country A’s Lorenz curve is closer to the line of perfect equality than Country B’s Lorenz curve. All other things being equal, which of the following is true? 9 A. Country A has a larger Gini coefficient than country B. B. Country B has a more equitable distribution of income than country A. C. Country A’s Lorenz curve will move closer to country B’s Lorenz curve if country A’s top marginal income tax rate is decreased. D. Country B’s Lorenz curve will move closer to country A’s Lorenz curve if country B’s top marginal income tax rate is decreased. An Australian company purchases a foreign company that pays a dividend to Australian shareholders. How would these transactions be recorded on Australia’s balance of payments? 10 Purchase of the company Payment of the dividend A. Debit on the financial account Credit on the current account B. Credit on the financial account Debit on the current account C. Credit on the capital account Debit on the financial account D. Debit on the capital account Credit on the current account Alex has worked full time for the last two years at her current place of work. Under Australia’s national system for determining minimum employment standards, and assuming all other things being equal, Alex is NOT guaranteed A. redundancy pay. B. four weeks annual leave per year. C. notice of termination of her employment. D. protection against unfair dismissal by her employer. –4– 11 Which change in budget outcomes from Year 1 to Year 2 represents an expansionary fiscal stance? Budget outcome in Year 1 12 Budget outcome in Year 2 A. $5 billion surplus $10 billion surplus B. $10 billion deficit $5 billion deficit C. $10 billion deficit $15 billion surplus D. $10 billion surplus $5 billion deficit The Fair Work Act 2009 (Cth) facilitated the move from a state-based to a national system of industrial relations. Which of the following provides the best justification for this move? 13 14 A. To reduce the power of national employee unions B. To reduce compliance costs for state governments C. Because private sector companies employ workers in many states D. Because state governments typically employ workers only in their own state Which of the following statements about government regulation is most correct? A. All government regulations reduce efficiency. B. Regulations restricting the behaviour of firms can increase efficiency. C. Microeconomic reform requires the removal of government regulation. D. Government regulations restrict the entry of transnational corporations. In Australia, returns to enterprise typically represent a lower proportion of household income than returns to labour because A. the company tax rate is higher than some marginal personal income tax rates. B. lower interest rates have significantly reduced household income from interest. C. most workers are employed by firms and many family businesses make a loss or small profit. D. households usually comprise at least one worker and most workers are employed by large firms. –5– 15 The diagram shows the relationship between a country’s consumption and income in Year 1 and Year 2. Consumption Year 1 Year 2 0 Income Which of the following could explain the change from Year 1 to Year 2? 16 A. A rise in asset prices B. A rise in interest rates C. A fall in the unemployment rate D. A fall in the goods and services tax rate The table shows economic information for a hypothetical economy. Year Terms of trade (TOT) Trade weighted index (TWI) 1 100 50 2 110 60 Which of the following best explains the changes in the TOT and the TWI from Year 1 to Year 2? A. There is an increase in global demand for the goods this economy exports and imports. B. The economy’s central bank increases the official cash rate relative to global interest rates. C. Global demand for the goods this economy imports has increased relative to global demand for the goods this economy exports. D. Global demand for the goods this economy exports has increased relative to global demand for the goods this economy imports. –6– 17 For a particular country, the underlying inflation rate is greater than the headline inflation rate. This is most likely to have been caused by a significant 18 A. reduction in electricity production. B. expansion in global oil production. C. depreciation of the domestic currency. D. increase in the country’s minimum wage. The table shows economic information for a hypothetical economy experiencing cyclical unemployment. Non-accelerating inflation rate of unemployment (NAIRU) 5% Marginal propensity to consume (MPC) 0.8 Change in national income (Y) required to reach full employment $5 billion The government of this hypothetical economy increases its expenditure by $1 billion. All other things being equal, what will be the consequence of this action? A. National income will rise by $1 billion. B. The rate of unemployment will equal the NAIRU. C. The NAIRU will exceed the rate of unemployment. D. The economy will experience a rapid increase in inflation. –7– 19 Country A and country B have flexible exchange rates and are considering forming a monetary union. Country A is currently experiencing a recession while country B is currently experiencing a boom. Which of the following is most likely to be true immediately after country A and country B form the monetary union? 20 A. Imported inflation will be lower in country B. B. It will be cheaper for foreign tourists to visit country A. C. It will be cheaper for foreign firms to acquire assets in country B. D. The international competitiveness of country A’s exporters will increase. The diagram shows domestic demand and supply curves for a hypothetical economy. Price ($) S 10 8 World price = 6 D 0 100 200 300 400 500 Quantity As a result of a change in trade policy in this economy, government revenue increases by $400, the revenue of local producers declines by $1400 and the revenue of foreign producers increases by $1600. Which of the following is most likely to describe the change in trade policy that occurred? A. A tariff of $0 has been replaced with a tariff of $2. B. A tariff of $4 has been replaced with a quota of 200. C. A quota of zero has been replaced with a tariff of $2. D. A quota of zero has been replaced with a quota of 200. –8– © 2018 NSW Education Standards Authority 2018 HIGHER SCHOOL CERTIFICATE EXAMINATION Centre Number Economics Do NOT write in this area. Section II Answer Booklet Student Number 40 marks Attempt Questions 21–24 Allow about 1 hour and 15 minutes for this section Instructions • Write your Centre Number and Student Number at the top of this page. • Answer the questions in the spaces provided. These spaces provide guidance for the expected length of response. • Extra writing space is provided at the back of this booklet. If you use this space, clearly indicate which question you are answering. Please turn over –9– Office Use Only – Do NOT write anything, or make any marks below this line. 2041 15110 6741310293 Question 21 (10 marks) (a) 2 Outline ONE cause of recent low wage growth in Australia. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Explain how a low unemployment rate can co-exist with a high level of underemployment. 4 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 21 continues on page 11 – 10 – Office Use Only – Do NOT write anything, or make any marks below this line. 0730310295 Do NOT write in this area. ............................................................................................................................... Question 21 (continued) (c) 4 Explain the effects of low wage growth on the Australian economy. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 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Define efficiency in this context. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Outline why reform of a single factor market is likely to have a greater impact on the economy than reform of a single product market. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (c) Why might it be difficult to implement microeconomic reform during a period of low economic growth? 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 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Question 22 (continued) (d) Explain how labour market reforms can help government achieve the objectives of full employment and price stability in the long term. 4 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 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End of Question 22 – 13 – Office Use Only – Do NOT write anything, or make any marks below this line. 8839310293 Question 23 (10 marks) (a) 4 Explain ONE cost and ONE benefit of globalisation. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 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Question 23 (continued) (b) 6 Explain how Australia has contributed to the process of globalisation. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 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End of Question 23 – 15 – Office Use Only – Do NOT write anything, or make any marks below this line. 1918310294 Question 24 (10 marks) The table shows economic information for a hypothetical economy with a flexible exchange rate. 2016 CPI 100 105 1 000 1 050 12 000 12 120 Full-time employed (’000) 8 000 7 920 Part-time employed (’000) 3 400 3 500 Net foreign debt ($ billion) 900 1 000 1 050 1 050 Nominal GDP ($ billion) Labour force (’000) Net foreign liabilities ($ billion) With reference to the table, calculate the unemployment rate in 2016. Show all working. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) With reference to the table, calculate the rate of growth in real GDP from 2016 to 2017. Show all working. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 24 continues on page 17 – 16 – Office Use Only – Do NOT write anything, or make any marks below this line. 7407310293 Do NOT write in this area. (a) 2017 Question 24 (continued) (c) Explain the relationship between net foreign debt and net foreign liabilities. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (d) Justify why the economy in the table is likely to have experienced a depreciation of its exchange rate between 2016 and 2017. 4 Do NOT write in this area. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 24 – 17 – Office Use Only – Do NOT write anything, or make any marks below this line. 4957310290 Section II extra writing space If you use this space, clearly indicate which question you are answering. Do NOT write in this area. – 18 – Office Use Only – Do NOT write anything, or make any marks below this line. 4792310297 Section II extra writing space Do NOT write in this area. If you use this space, clearly indicate which question you are answering. – 19 – Office Use Only – Do NOT write anything, or make any marks below this line. 5461310291 Section II extra writing space If you use this space, clearly indicate which question you are answering. Do NOT write in this area. – 20 – © 2018 NSW Education Standards Authority Office Use Only – Do NOT write anything, or make any marks below this line. 9410310299 2018 HIGHER SCHOOL CERTIFICATE EXAMINATION Economics Section III 20 marks Attempt either Question 25 or Question 26 Allow about 35 minutes for this section Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are available. Your answer will be assessed on how well you: ● demonstrate knowledge and understanding relevant to the question ● use the information provided ● apply relevant economic terms, concepts, relationships and theory ● present a sustained, logical and cohesive response Question 25 (20 marks) Please turn over 2042 – 21 – Question 25 (20 marks) Assess the extent to which the move towards free trade restricts the Australian Government’s ability to achieve its economic objectives of full employment, distribution of income and external stability. In your response, refer to the economic information provided. The gains from free trade tend to be dispersed while the losses tend to be concentrated. In response, governments can attempt to compensate the losers. GEOFFREY GARRETT, 1 February 2017 © Geoffrey Garrett Nov 2016 Jul 2015 Mar 2014 Nov 2012 Jul 2011 Mar 2010 Nov 2008 Jul 2007 Mar 2006 Nov 2004 Jul 2003 Mar 2002 Nov 2000 Jul 1999 Mar 1998 Nov 1996 Jul 1995 Mar 1994 Nov 1992 Jul 1991 Mar 1990 Nov 1988 Jul 1987 Nov 1984 250 225 200 175 150 125 100 75 Mar 1986 Construction, manufacturing and total employment in Australia (Index value = 100 in November 1984) Manufacturing employment Construction employment Total employment Based on data supplied by: Australian Bureau of Statistics; ABS data series-A84090240X, A84090246L and A84932381A, Catalogue #6291.055.003 Labour Force Table 04 OR – 22 – Question 26 (20 marks) Assess the extent to which Australia’s economic growth since the last recession in 1991 can be attributed to macroeconomic policy decisions made by the Australian Government. In your response, refer to the economic information provided. This material cannot be displayed, due to copyright issues. Australian official cash rate and federal government budget outcomes 4 –2 01 20 15 2 –2 01 20 13 0 –2 01 11 20 –2 8 20 09 00 6 –2 00 20 07 4 –2 00 20 05 2 –2 00 20 03 0 –2 00 01 20 –2 8 19 99 99 6 –1 99 19 97 4 –1 99 19 95 2 –1 99 93 19 –1 91 19 19 89 –1 99 0 18 16 14 12 10 8 6 4 2 0 6 Federal government budget outcome ($ billion) 30 20 10 0 –10 –20 –30 –40 –50 –60 01 Official cash rate (%) Federal government budget outcome ($ billion) Official cash rate (%) Adapted from the ‘Monetary Policy Changes – A2’. Used by permission from the Reserve Bank of Australia Please turn over – 23 – Section IV 20 marks Attempt either Question 27 or Question 28 Allow about 35 minutes for this section Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are available. Your answer will be assessed on how well you: ● demonstrate knowledge and understanding relevant to the question ● apply relevant economic information, terms, concepts, relationships and theory ● present a sustained, logical and cohesive response Question 27 (20 marks) Evaluate the success of government policies designed to achieve environmental sustainability in Australia. OR Question 28 (20 marks) Assess the importance of factors that determine the size and composition of Australia’s current account. End of paper – 24 – © 2018 NSW Education Standards Authority NSW Education Standards Authority 2019 HIGHER SCHOOL CERTIFICATE EXAMINATION Economics General Instructions • • • • Reading time – 5 minutes Working time – 3 hours Write using black pen Calculators approved by NESA may be used Total marks: 100 Section I – 20 marks (pages 2–8) • Attempt Questions 1–20 • Allow about 35 minutes for this section Section II – 40 marks (pages 9–20) • Attempt Questions 21–24 • Allow about 1 hour and 15 minutes for this section Section III – 20 marks (pages 21–23) • Attempt either Question 25 or Question 26 • Allow about 35 minutes for this section Section IV – 20 marks (page 24) • Attempt either Question 27 or Question 28 • Allow about 35 minutes for this section 2060 Section I 20 marks Attempt Questions 1–20 Allow about 35 minutes for this section Use the multiple-choice answer sheet for Questions 1–20. 1 2 3 4 Which of the following is a feature of globalisation? A. International division of labour B. Higher levels of trade protection C. Greater inefficiencies in global markets D. Decreased levels of economic integration The G20 is best described as A. a trading bloc. B. a regional free-trade agreement involving Australia. C. a monetary union that has adopted a common currency. D. a government forum for coordination of economic policies. Which of the following describes a benefit of an appreciation of the Australian dollar to the Australian economy? A. Increased trade deficit B. Decreased import volume C. Decreased foreign debt repayments D. Increased international competitiveness Which policy in Australia is least likely to be influenced by political constraints? A. Fiscal B. Monetary C. Labour market D. Microeconomic –2– 5 6 7 8 Which of the following is most likely to be the cause of a rise in the participation rate? A. More people are retiring earlier B. More parents are returning to the workforce C. More unemployed people are joining the defence force D. More students are choosing to continue with further education If there is an increase in interest rates, which of the following is most likely to happen? A. Economic growth will decrease and consumer spending will decrease. B. The money supply will increase and the rate of inflation will decrease. C. Business investment will increase and consumer spending will decrease. D. Unemployment will decrease and the rate of economic growth will decrease. Which of the following is NOT a reason for low wage growth in an economy? A. Low inflation B. Low unemployment C. Low economic growth D. Low productivity growth Which pair of sectors contribute most to Australia’s export income? A. Mining and Services B. Mining and Agriculture C. Services and Agriculture D. Services and Manufacturing –3– 9 The table shows hypothetical data for an economy. S G M T I X 200 400 350 300 350 250 Which row of the table is correct for this economy? 10 Trade balance Economic growth A. Surplus Positive B. Surplus Negative C. Deficit Positive D. Deficit Negative The central bank of a hypothetical economy reduces the cash rate. All other things being equal, what is the likely effect of this action? A. A decrease in consumer expenditure B. An increase in the rate of unemployment C. An appreciation of the economy’s exchange rate D. An increase in the price of assets in the economy –4– The following diagram shows the level of income in an economy over two years. Cumulative proportion of total income (%) 11 Year 1 Year 2 Cumulative proportion of persons ranked by income (%) What changes in the top marginal rate of tax and the goods and services tax (GST) would have caused this shift in the Lorenz curve from Year 1 to Year 2? 12 Top marginal rate of tax Goods and services tax (GST) A. Increase Increase B. Increase Decrease C. Decrease Increase D. Decrease Decrease The table shows information for a hypothetical economy. CAD $50 billion Net foreign debt $900 billion Net foreign equity $100 billion GDP $1800 billion What is the Net Foreign Liabilities for this economy as a percentage of GDP? A. 2.8% B. 44.4% C. 50.0% D. 55.6% –5– 13 Inflation in a hypothetical economy has decreased from 3% in Year 1 to 2% in Year 2. Based on this information, which statement is true? 14 A. Prices are increasing on average. B. Prices are decreasing on average. C. Unemployment is at the non-accelerating inflation rate of unemployment (NAIRU). D. Unemployment is below the non-accelerating inflation rate of unemployment (NAIRU). The following information is for a hypothetical economy. Working age population Full-time employed 10 000 000 4 000 000 Participation rate 50% Unemployment rate 10% How many people are employed part time in this economy? 15 A. 500 000 B. 1 000 000 C. 4 000 000 D. 4 500 000 The table shows data for national income (Y ) and savings (S) in $ billion for a hypothetical economy. Year Y S 1 250 50 2 450 100 All other things being equal, what is the new equilibrium level of income (Y ) in Year 3 if investment increases by $35 billion? A. $497 billion B. $590 billion C. $600 billion D. $650 billion –6– 16 17 Which of the following is an example of a fiscal policy that is both contractionary and discretionary? A. Decreased tax-free threshold B. Increased infrastructure spending in rural regions C. Increased spending due to unexpectedly higher unemployment D. Decreased unemployment expenditure due to higher than forecasted economic growth The Australian government provides financial aid to build a road in a neighbouring country. Residents in Australia receive pension payments from overseas. How will these debit and credit transactions be recorded in Australia’s balance of payments? Debit 18 Credit A. Secondary income Primary income B. Capital account Primary income C. Capital account Secondary income D. Secondary income Secondary income Which combination of factors is most likely to result in an increase in Australia’s Trade Weighted Index? Terms of trade Global interest rates relative to Australian interest rates A. Increase Increase B. Increase Decrease C. Decrease Increase D. Decrease Decrease –7– Use the diagram to answer Questions 19 and 20. The diagram shows the domestic demand and supply for a particular good within an economy. The world price is $3. 8 S 7 6 5 Price ($) 4 3 D 2 1 0 10 20 30 40 50 60 70 Quantity (thousands) 19 The government is considering imposing a tariff that would have the same impact on domestic production as an import quota of 20 000 items. What is the total tariff revenue that will be generated? 20 A. $0 B. $10 000 C. $20 000 D. $40 000 Assume the government decides to only use subsidies as a form of protection. What is the subsidy per unit that would result in no imports? A. $0 B. $2 C. $3 D. $4 –8– © 2019 NSW Education Standards Authority 2019 HIGHER SCHOOL CERTIFICATE EXAMINATION Centre Number Economics Do NOT write in this area. Section II Answer Booklet Student Number 40 marks Attempt Questions 21–24 Allow about 1 hour and 15 minutes for this section Instructions • Write your Centre Number and Student Number at the top of this page. • Answer the questions in the spaces provided. These spaces provide guidance for the expected length of response. • Extra writing space is provided at the back of this booklet. If you use this space, clearly indicate which question you are answering. Please turn over –9– Office Use Only – Do NOT write anything, or make any marks below this line. 2061 15110 6741310293 Question 21 (10 marks) The diagram shows movements in the Australian dollar against the US dollar. $A in terms of $US S0 S1 0.70 0.60 D 0 Q1 Quantity of $A Outline a reason for the change in supply of the Australian dollar as shown in the diagram. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Explain why Australia’s exchange rate against the US dollar might NOT move in the same direction as Australia’s Trade Weighted Index. 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 21 continues on page 11 – 10 – Office Use Only – Do NOT write anything, or make any marks below this line. 0730310295 Do NOT write in this area. (a) Q0 Question 21 (continued) (c) Explain the effects of a depreciating Australian dollar on accounts within the Balance of Payments. 5 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 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End of Question 21 – 11 – Office Use Only – Do NOT write anything, or make any marks below this line. 8668310293 Question 22 (10 marks) (a) Outline the relationship between economic growth and economic development. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Examine TWO reasons for the difference in living standards between nations. 4 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 22 continues on page 13 – 12 – Office Use Only – Do NOT write anything, or make any marks below this line. 5654310295 Do NOT write in this area. ............................................................................................................................... Question 22 (continued) (c) Assess the effectiveness of ONE strategy used to promote economic development in a country other than Australia. 4 Selected country .............................................................................................. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 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End of Question 22 – 13 – Office Use Only – Do NOT write anything, or make any marks below this line. 8839310293 Question 23 (10 marks) (a) Outline a cost that may be associated with achieving ecologically sustainable development. 2 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) 2 Why may a public beach NOT be considered a public good? ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (c) 2 How does market failure create negative externalities? ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 23 continues on page 15 – 14 – Office Use Only – Do NOT write anything, or make any marks below this line. 2984310298 Do NOT write in this area. ............................................................................................................................... Question 23 (continued) (d) Explain how market-based policies can be used to preserve the natural environment. 4 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Do NOT write in this area. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 23 – 15 – Office Use Only – Do NOT write anything, or make any marks below this line. 1918310294 Question 24 (10 marks) Use the table to answer parts (a) and (b). The following information refers to a hypothetical economy. Year Real GDP ($ billion) Consumer price index (CPI) Unemployment rate (% workforce) Current account balance (as a % of real GDP) 1 1000 100 8.9 –4 2 1100 110 6.2 –4.5 3 1220 132 3.5 –5.5 (a) 1 Calculate the inflation rate in Year 3. ............................................................................................................................... (b) Justify an appropriate monetary policy stance for this economy. Support your answer with reference to the economic indicators provided. 4 Monetary policy stance ................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 24 continues on page 17 – 16 – Office Use Only – Do NOT write anything, or make any marks below this line. 7407310293 Do NOT write in this area. ............................................................................................................................... Question 24 (continued) (c) Explain the limitations of using monetary policy for economic management of the Australian economy. 5 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 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End of Question 24 – 17 – Office Use Only – Do NOT write anything, or make any marks below this line. 4957310290 Section II extra writing space If you use this space, clearly indicate which question you are answering. Do NOT write in this area. – 18 – Office Use Only – Do NOT write anything, or make any marks below this line. 4792310297 Section II extra writing space Do NOT write in this area. If you use this space, clearly indicate which question you are answering. – 19 – Office Use Only – Do NOT write anything, or make any marks below this line. 5461310291 Section II extra writing space If you use this space, clearly indicate which question you are answering. Do NOT write in this area. – 20 – © 2019 NSW Education Standards Authority Office Use Only – Do NOT write anything, or make any marks below this line. 9410310299 2019 HIGHER SCHOOL CERTIFICATE EXAMINATION Economics Section III 20 marks Attempt either Question 25 or Question 26 Allow about 35 minutes for this section Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are available. Your answer will be assessed on how well you: ● demonstrate knowledge and understanding relevant to the question ● use the information provided ● apply relevant economic terms, concepts, relationships and theory ● present a sustained, logical and cohesive response Question 25 (20 marks) Please turn over 2062 – 21 – Question 25 (20 marks) Discuss the effects of sustained budget deficits on economic growth and external stability in the Australian economy. In your response, refer to the economic information provided. Since 2008, the policies implemented in response to the GFC have encouraged greater economic activity. This has resulted in public and private sector borrowing to fund investment, consumption and imports which have contributed to Australia’s uninterrupted economic growth. Over the same period, Australia has experienced record high asset prices and household debt, net foreign debt in excess of $1 trillion and the lowest rates of household savings since December 2007. This material cannot be displayed, due to copyright issues. OR – 22 – Question 26 (20 marks) Discuss the effects of microeconomic policies on employment and inflation in the Australian economy. In your response, refer to the economic information provided. The economic reforms undertaken in Australia have opened markets to increased competition and have transformed a relatively closed and regulated economy into one that is more efficient, flexible and open. This has reduced the size and number of industries supported by large ongoing subsidies and high tariffs, notably in manufacturing. Labour productivity (%) 5 Decade average Labour productivity 4 3 2 1 0 –1 –2 1980 1990 2000 2010 2017 Year CPI inflation (%) 12 RBA’s target range CPI inflation 10 8 6 4 2 0 –2 1980 1990 2000 2010 2017 Year The Treasury Please turn over – 23 – Section IV 20 marks Attempt either Question 27 or Question 28 Allow about 35 minutes for this section Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are available. Your answer will be assessed on how well you: ● demonstrate knowledge and understanding relevant to the question ● apply relevant economic information, terms, concepts, relationships and theory ● present a sustained, logical and cohesive response Question 27 (20 marks) Explain the causes and effects of unequal distribution of income and wealth in Australia. OR Question 28 (20 marks) Explain the effects of protectionist policies on both the Australian and the global economy. End of paper – 24 – © 2019 NSW Education Standards Authority NSW Education Standards Authority 2020 HIGHER SCHOOL CERTIFICATE EXAMINATION Economics General Instructions • • • • Reading time – 5 minutes Working time – 3 hours Write using black pen Calculators approved by NESA may be used Total marks: 100 Section I – 20 marks (pages 2–9) • Attempt Questions 1–20 • Allow about 35 minutes for this section Section II – 40 marks (pages 13–24) • Attempt Questions 21–24 • Allow about 1 hour and 15 minutes for this section Section III – 20 marks (pages 25–27) • Attempt either Question 25 or Question 26 • Allow about 35 minutes for this section Section IV – 20 marks (page 28) • Attempt either Question 27 or Question 28 • Allow about 35 minutes for this section 1060 Section I 20 marks Attempt Questions 1–20 Allow about 35 minutes for this section Use the multiple-choice answer sheet for Questions 1–20. 1 2 3 4 Which of the following identifies two economic objectives of monetary policy? A. Price stability and full employment B. Economic growth and external stability C. Price stability and distribution of income D. Economic growth and environmental sustainability Which international organisation is responsible for maintaining financial stability in global financial markets? A. World Bank B. World Trade Organisation C. International Monetary Fund D. Asia–Pacific Economic Cooperation Which of the following is most likely to be a feature of a decentralised wage determination system? A. Increased income equality B. Wage increases are linked to inflation C. Government policy determines wage outcomes D. Employment contracts can vary from one workplace to another A developing economy is most likely to be characterised by A. low productivity and low population growth. B. low employment and low infant mortality rate. C. inadequate access to education and underprovision of public goods. D. inadequate access to health care and GDP dominated by the provision of services. –2– 5 A country imposes a quota on wheat imports. Assume that it does not allow any imports of wheat beyond the quota. Which of the following is most likely to occur if this country decides to reduce this quota on wheat imports? 6 A. Increased wheat prices within the country B. Increased export revenue for foreign wheat exporters C. Decreased income for wheat producers within the country D. Decreased government revenue from the change in the volume of imports The table represents data for a hypothetical economy. Year Import price index Export price index 1 125 100 2 160 80 Which of the following shows the value of the terms of trade index in Year 2 and the terms of trade trend from Year 1 to Year 2? 7 Terms of trade index Terms of trade trend A. 50 Increased B. 50 Decreased C. 200 Increased D. 200 Decreased A foreign business purchases the rights to sell an Australian-designed product overseas. How will this transaction be recorded in Australia’s Balance of Payments? A. Debit in the capital account B. Credit in the capital account C. Debit in the financial account D. Credit in the financial account –3– 8 9 Which of the following is likely to cause a decrease in the labour force participation rate? A. A decrease in the rate of unemployment B. A decrease in the number of discouraged workers C. An increase in the level of hidden unemployment D. An increase in the value of transfer payments made to the unemployed The following diagram shows two aggregate demand curves for a hypothetical economy. Price level AD2 AD1 Total output All other things being equal, the shift from AD1 to AD2 is most likely to have been caused by an increase in A. the income tax-free threshold. B. business investment in training programs. C. the cash rate of the hypothetical economy. D. employment in the economy of a major trading partner. –4– 10 The table shows hypothetical data for the Australian economy over a two-year period. Consumer price index (CPI) Employed persons (’000) Unemployed persons (’000) Population (’000) Year 1 Year 2 100 103 1800 2000 200 125 2008 2095 Which row of the table below best accounts for the changes in CPI and unemployment rate from Year 1 to Year 2? Reason for change in CPI 11 Reason for change in unemployment rate A. Reduction in the cash rate Removal of government initiatives for education and training B. Appreciation of the Australian dollar Increase in domestic investment C. Increase in import tariffs Global economic downturn D. Increase in consumer confidence An appreciation in the currency of a major trading partner A central bank’s monetary policy stance results in a depreciation of the economy’s exchange rate. All other things being equal, which of the following best identifies the stance and a possible effect on the economy of the depreciation in the exchange rate? Monetary policy stance Effect on economy A. Expansionary Increase in the level of foreign direct investment by domestic businesses B. Expansionary Increase in the cost of international borrowing C. Contractionary Increase in the number of service-based exports D. Contractionary Increase in the balance on the net primary income account –5– 12 The table shows data for a hypothetical economy. Year Real GDP growth rate Unemployment rate 1 2.10% 5.20% 2 2.90% 5.20% Assume the economy is operating at the non-accelerating inflation rate of unemployment (NAIRU). Which of the following describes the most likely relationship between the changes in the economy’s real GDP growth rate and level of unemployment? 13 A. Lower aggregate supply leading to a reduction in dynamic efficiencies B. Lower aggregate supply accompanied by a decrease in technical efficiencies C. Higher aggregate demand accompanied by a decrease in underemployment D. Higher aggregate demand leading to a reduction in structural unemployment A domestic economy has experienced a decline in its net foreign liabilities as a percentage of Gross Domestic Product (GDP). Which of the following is most likely to have increased, contributing to this decline? 14 A. Debt servicing costs B. Exchange rate volatility C. Foreign investment into the domestic economy D. Returns on international investments by domestic businesses Under a floating exchange rate, the capital and financial account for an economy in Year 1 is $10.6 bn surplus. In Year 2 the current account balance is in a $3.5 bn surplus. Which of the following represents the outcome of the capital and financial account in Year 2 and the change in size of this account from Year 1 to Year 2? Outcome of capital and financial account in Year 2 Change in size ($bn) A. Deficit 7.1 B. Deficit 14.1 C. Surplus 7.1 D. Surplus 14.1 –6– 15 An economy has a headline inflation rate of 2.3% while its underlying inflation rate is 2.6%. Which factor could best account for this? 16 A. Increased minimum wage B. Short-term oversupply of petrol C. Reduced supply of fruit due to drought D. Increased demand for the domestic currency The table shows data for a hypothetical economy. Year Nominal GDP ($bn) Consumer price index (CPI) 1 400 100 2 420 105 All other things being equal, which statement is most likely to be true for this economy? 17 A. Real GDP remains unchanged due to a decrease in global economic activity. B. Nominal GDP has increased due to an appreciation of the economy’s exchange rate. C. Nominal GDP has increased due to a decrease in the tariff applied to imported products. D. Real GDP remains unchanged due to increases in the cost of production for businesses. An initial increase in government spending of $10 million leads to a final increase in national income of $25 million. What is the value of marginal propensity to consume (MPC)? A. 0.25 B. 0.4 C. 0.6 D. 0.75 –7– 18 At equilibrium, when there is no international trade, an economy consumes 30 000 kg of cotton. The government opens the economy to trade and introduces a tariff of $5 per kg on cotton, resulting in imports of 10 000 kg and a total consumption of 35 000 kg of cotton. The world price for cotton is $20 per kg. What is the change in the domestic production of cotton and in government revenue? Change in domestic production 19 Change in government revenue A. Decreased by 5 000 kg Increased by $50 000 B. Decreased by 5 000 kg Increased by $200 000 C. Decreased by 10 000 kg Increased by $50 000 D. Decreased by 10 000 kg Increased by $200 000 The table shows exchange rate movements for the Australian economy and United States economy. Year Australian dollar (AUD) 1 1 0.9 2 0.9 1 US dollar (USD) All other things being equal, which of the following best accounts for the fluctuation of the exchange rate between Year 1 and Year 2? A. There has been a depreciation of the AUD caused by an upturn in the international business cycle. B. There has been a depreciation of the AUD caused by a downturn in domestic economic activity. C. There has been a depreciation of the USD caused by an increase in Australia’s cash rate relative to the US cash rate. D. There has been a depreciation of the USD caused by a decrease in the deficit of the net income component of the US balance of payments. –8– 20 The diagram shows the demand and supply curves of labour for a hypothetical economy. The government of this economy has introduced a minimum wage (Wl ) set above the equilibrium wage rate (We ). Wage ($) SL Wl We DL Labour The introduction of this minimum wage has an impact on the Lorenz curve of this economy. The most likely impact on the Lorenz curve will be a shift A. inwards as all employees receive a higher wage. B. inwards as there is an increase in the level of employment. C. outwards as all employees receive a higher wage. D. outwards as there is an increase in the level of unemployment. –9– BLANK PAGE – 10 – BLANK PAGE – 11 – BLANK PAGE – 12 – © 2020 NSW Education Standards Authority 2020 HIGHER SCHOOL CERTIFICATE EXAMINATION Centre Number Economics Do NOT write in this area. Section II Answer Booklet Student Number 40 marks Attempt Questions 21–24 Allow about 1 hour and 15 minutes for this section Instructions • Write your Centre Number and Student Number at the top of this page. • Answer the questions in the spaces provided. These spaces provide guidance for the expected length of response. • Extra writing space is provided at the back of this booklet. If you use this space, clearly indicate which question you are answering. Please turn over – 13 – Office Use Only – Do NOT write anything, or make any marks below this line. 1061 15110 6741310293 Question 21 (11 marks) (a) 2 The table shows economic information for a hypothetical economy. Year Gini coefficient Human development index 1 0.87 0.35 2 0.74 0.36 With reference to the given data, outline ONE possible reason for the change in the distribution of income from Year 1 to Year 2 for this economy. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... A developing economy has entered into a multilateral free trade agreement with advanced economies. 2 Outline ONE disadvantage to the developing economy of entering into this trade agreement. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (c) Describe ONE way in which the World Bank helps promote economic development in developing economies. 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 21 continues on page 15 – 14 – Office Use Only – Do NOT write anything, or make any marks below this line. 0730310295 Do NOT write in this area. (b) Question 21 (continued) (d) Economic growth does not always lead to an improvement in economic development. 4 Explain TWO factors that could cause this. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 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End of Question 21 – 15 – Office Use Only – Do NOT write anything, or make any marks below this line. 8668310293 Question 22 (9 marks) (a) 2 Distinguish between structural unemployment and cyclical unemployment. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) Describe how ONE government policy has been used to address a skills shortage in the Australian labour market. 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 22 continues on page 17 – 16 – Office Use Only – Do NOT write anything, or make any marks below this line. 5654310295 Do NOT write in this area. ............................................................................................................................... Question 22 (continued) (c) Explain how a decrease in aggregate demand can lead to underemployment of labour in an economy. 4 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 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End of Question 22 – 17 – Office Use Only – Do NOT write anything, or make any marks below this line. 8839310293 Question 23 (9 marks) (a) 2 Outline ONE reason for the protection of domestic industries. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) A government wants to protect the sugar industry by introducing a subsidy. 1 The diagram below shows the market before the introduction of the subsidy. On the diagram, draw the curve to show the effect of a subsidy with imports equal to zero. Do NOT write in this area. Price per unit ($) S Domestic price World price D Q1 Q2 Q3 Quantity Question 23 continues on page 19 – 18 – Office Use Only – Do NOT write anything, or make any marks below this line. 2984310298 Question 23 (continued) (c) 6 Discuss Australia’s involvement in ONE bilateral trade agreement. Bilateral trade agreement: ............................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... 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End of Question 23 – 19 – Office Use Only – Do NOT write anything, or make any marks below this line. 1918310294 Question 24 (11 marks) (a) Describe the relationship between microeconomic reform and aggregate supply. 3 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... (b) With reference to a specific product market, explain how ONE microeconomic reform has led to increased efficiencies. 4 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Question 24 continues on page 21 – 20 – Office Use Only – Do NOT write anything, or make any marks below this line. 7407310293 Do NOT write in this area. Product market: ............................................................................................... Question 24 (continued) (c) Explain how microeconomic reform in the labour market can lead to a lowering of cost inflation in Australia. 4 ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... Do NOT write in this area. ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... ............................................................................................................................... End of Question 24 – 21 – Office Use Only – Do NOT write anything, or make any marks below this line. 4957310290 Section II extra writing space If you use this space, clearly indicate which question you are answering. Do NOT write in this area. – 22 – Office Use Only – Do NOT write anything, or make any marks below this line. 4792310297 Section II extra writing space Do NOT write in this area. If you use this space, clearly indicate which question you are answering. – 23 – Office Use Only – Do NOT write anything, or make any marks below this line. 5461310291 Section II extra writing space If you use this space, clearly indicate which question you are answering. Do NOT write in this area. – 24 – © 2020 NSW Education Standards Authority Office Use Only – Do NOT write anything, or make any marks below this line. 9410310299 2020 HIGHER SCHOOL CERTIFICATE EXAMINATION Economics Section III 20 marks Attempt either Question 25 or Question 26 Allow about 35 minutes for this section Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are available. Your answer will be assessed on how well you: ● demonstrate knowledge and understanding relevant to the question ● use the information provided ● apply relevant economic terms, concepts, relationships and theory ● present a sustained, logical and cohesive response Please turn over 1062 – 25 – Question 25 (20 marks) Assess the impact of exchange rate fluctuations on the external stability of the Australian economy. In your response, refer to the information provided. The fall in the value of the Australian dollar, taking it down to levels that counteract Australia’s relatively high cost levels, is very positive for sectors that compete internationally, including manufacturing, tourism, higher education, agriculture and mining. UN Climate Change Summit 2019 Source: https://www.un.org/en/climatechange/2019-climate-action-summit With courtesy of Dr. Shane Oliver Balance of payments – current account balance September 2015 – September 2019 $ billion 25 15 5 –5 –15 –25 Sep 2015 Sep 2016 Sep 2017 Sep 2018 Sep 2019 KEY Current account balance Net goods and services Net primary income Australian Bureau of Statistics © Commonwealth of Australia OR – 26 – Question 26 (20 marks) Assess the effectiveness of government economic policies and international agreements in the management of the environment in Australia. In your response, refer to the information provided. With global emissions reaching record levels and showing no sign of peaking, the UN . . . called upon all leaders to come to . . . the Climate Action Summit with concrete, realistic plans to enhance their nationally determined contributions by 2020, in line with reducing greenhouse gas emissions by 45 per cent over the next decade . . . [At the Summit] . . . there was also widespread concern that the world is presently way off course to meet the global target, as emissions continue to increase, and global temperatures rise. UN Climate Action Summit, 2019 https://www.un.org/en/climatechange/2019-climate-action-summit Primary Energy Consumption, 2017 100% 90% KEY 80% Nuclear 70% Hydro 60% Renewables 50% 40% Gas 30% Coal 20% Oil 10% Fossil fuel 0% Australia World USA China European Union Courtesy of AMP Capital Please turn over – 27 – Section IV 20 marks Attempt either Question 27 or Question 28 Allow about 35 minutes for this section Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are available. Your answer will be assessed on how well you: ● demonstrate knowledge and understanding relevant to the question ● apply relevant economic information, terms, concepts, relationships and theory ● present a sustained, logical and cohesive response Question 27 (20 marks) Assess the effectiveness of macroeconomic policies in achieving economic growth and full employment in the Australian economy. OR Question 28 (20 marks) To what extent do limitations of economic policies affect the achievement of economic growth and a more equal distribution of income in the Australian economy? End of paper – 28 – © 2020 NSW Education Standards Authority

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