TOPIC 3
2014
Question 28 (20 marks) Discuss the role of government in attempting to
achieve environmental sustainability in Australia.
2013
Answers could include:
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Types of unemployment
Economic cycles and cyclical employment
Underemployment and hidden unemployment
Participation rate
Recession, GFC
Confidence, spending effects
Social costs
Fiscal position, automatic stabilisers
Booms, Commodity/resource booms
Structural change –industries, states
Long-term and frictional unemployment
Labour market policies
Education and training
Minimum wages
Centralised vs decentralised labour market
Labour mobility
Section IV
Candidates showed strength in these areas:
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to identify and analyse the causes and effects of unemployment (Q.28)
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using relevant economic diagrams to support arguments
Candidates need to improve in these areas:
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using accurate data and relevant examples to support arguments
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providing a balanced response to both causes and effects of unemployment on the
Australian economy (Q.28)
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supporting responses with more contemporary references to the Australian economy
2010
Question 26
In better responses, candidates provided a balance between the consequences of an unequal
distribution of income and wealth and a range of policies that could be used to reduce
inequality. They highlighted both the positive and negative consequences of inequality and
related this to government initiatives that have been undertaken to reduce the impact of
inequality. Some examples of the government initiatives that were addressed in these
responses included, the compulsory superannuation levy, raising the tax-free threshold, and
specific labour market programs. As well, a number of these candidates made reference to
industrial relations reforms, including recent increases in the minimum wage, and the shift
from Australian Workplace Agreements to Enterprise Agreements. In better responses,
candidates examined the indirect impact of monetary policy on the distribution of income and
wealth, highlighting the benefits of increasing interest rates to higher-income earners and
owners of assets and the resulting increase in income inequality.
In addition, in better responses, candidates distinguished between the concepts of income
and wealth, as well as highlighting the relationship between the two. The use of the stimulus
material, together with additional economic data and examples, was a feature of these
responses. This was coupled with an integration of relevant terminology and an analysis of
appropriate economic theory.
In weaker responses, candidates tended to focus on one part of the question (either
consequences or policies) rather than providing a balanced response. Alternatively, the
discussion of policies tended to be generalised, without offering specific examples of policies
that related directly to inequality. Commonly, candidates who used prepared responses
placed an emphasis on the measurement and causes of inequality rather than consequences
and policies. Typically, there was a limited use of economic terms and concepts in these
responses.
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Question 27
In better responses, candidates analysed and explained the relationship between the cause
and effect of fluctuations in Australia’s external stability. These responses were well
structured, with a clear understanding of external stability and provided a balance between
the causes and effects of these fluctuations.
They typically developed a concise and comprehensive analysis, linking the relationship and
implications of current economic information. For example, they identified and analysed the
issue of a low level of national saving, resulting in a need to borrow from overseas, and the
implications of this on foreign liabilities, debt-servicing costs and the current account deficit.
These responses often linked these effects back to fluctuations in Australia’s external
stability.
A common feature of these responses was the integration of relevant economic theory and
diagrams related to external stability. Typically, they discussed other features of external
stability such exchange rate movements, Australia’s terms of trade, the Pitchford thesis and
international competitiveness. In better responses, candidates commonly referred to both
positive and negative effects of fluctuations in Australia’s external stability and were
supported with current economic examples and data.
Weaker responses were typically general, with candidates merely stating causes and
sketching in general terms a limited explanation of external stability. For example, candidates
may have stated that a low level of national savings exists, but did not explore the
relationship between the cause and effect of this on Australia’s external stability. Some
candidates relied heavily on prepared responses, for example, on exchange rates, without
directly relating fluctuating exchange rates to external stability or on policy responses without
relating it to the causes or effects. Commonly, in weaker responses, candidates did not
provide a balanced coverage of the causes and effects and simply described some causes
and/or effects of fluctuations in Australia’s external stability.
2009
Question 28
Sample answer/Answers could include:
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Global economic crisis
GWP
Increased trade flows – direction/composition
Globalisation
Increased financial flows
Technology transfer
Internationalisation of the labour force
Expansion of FDI
Increasing dominance of TNCs
Changes in the value of the $A
International business cycle
IMF, WTO, G8
Net foreign debt, net foreign equity, net foreign liabilities
Changes in economic growth
CAD
Debt servicing ratio
International competitiveness
National savings
Cost of servicing foreign liabilities
Investor confidence
Interest rates
Unemployment
Fiscal stimulus
‘Loose’ monetary policy
Business and consumer confidence
Question 28
Better responses analysed the relationship between changes in the global economy and its
impact on Australia’s economic growth and external stability. The impact of the global
financial crisis (GFC) on Australia’s economic growth was well supported by reference to
economic data. These responses then developed the flow-on impacts on Australia’s policy
responses. They analysed the impacts of the global financial crisis on external stability and
how changes in trade volumes, terms of trade, investment flows and exchange rates affected
Australia’s current account deficit (CAD).
Better responses also analysed changes other than the GFC, such as the trade liberalisation
of the past two decades and the emergence of China. Impacts of these changes on Australia’s
economic growth and external stability were well analysed and supported by economic data.
Weaker responses gave lengthy descriptions of the causes of changes in the global economy,
in particular the GFC. Detailed accounts of the mechanisms of exchange rate changes and
interest rate changes were also prevalent in weaker responses.
The effects of changes were poorly dealt with in weaker responses. Very detailed accounts of
the Australian government’s recent fiscal policy and monetary policy initiatives were itemised
without reference to the question asked. Clear understanding of some key terms like
‘external stability’ and ‘terms of trade’ was not evident in weaker responses.