2017 Economics Written examination · ECONOMICS Written examination ... • Place the answer sheet...

ECONOMICSWritten examination

Thursday 2 November 2017 Reading time: 2.00 pm to 2.15 pm (15 minutes) Writing time: 2.15 pm to 4.15 pm (2 hours)

QUESTION AND ANSWER BOOK

Structure of bookSection Number of

questionsNumber of questions

to be answeredNumber of

marks

A 15 15 15B 5 5 65

Total 80

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

• StudentsareNOTpermittedtobringintotheexaminationroom:blanksheetsofpaperand/orcorrectionfluid/tape.

• Nocalculatorisallowedinthisexamination.

Materials supplied• Questionandanswerbookof24pages• Answersheetformultiple-choicequestions• Additionalspaceisavailableattheendofthebookifyouneedextrapapertocompleteananswer.

Instructions• Writeyourstudent numberinthespaceprovidedaboveonthispage.• Checkthatyournameandstudent numberasprintedonyouranswersheetformultiple-choice

questionsarecorrect,andsignyournameinthespaceprovidedtoverifythis.• AllwrittenresponsesmustbeinEnglish.

At the end of the examination• Placetheanswersheetformultiple-choicequestionsinsidethefrontcoverofthisbook.

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

©VICTORIANCURRICULUMANDASSESSMENTAUTHORITY2017

SUPERVISOR TO ATTACH PROCESSING LABEL HEREVictorian Certificate of Education 2017

STUDENT NUMBER

Letter

2017ECONOMICSEXAM 2

SECTION A – continued

SECTION A – Multiple-choice questions

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

Question 1RelativescarcitycanbestbedefinedasA. wantsinrelationtoneeds.B. wantsinrelationtoresources.C. unlimitedwantsinrelationtolimitedresources.D. limitedwantsinrelationtounlimitedresources.

Question 2Whichoneofthefollowingmighthelptoreduceagovernment’sbudgetdeficit?A. aslowingofgrowthintheworldeconomyB. reducingthemarginalrateofpersonalincometaxC. removingthemeanstestonsomeitemsofgovernmentwelfareD. removingtheexemptionsofeducationandfoodfromthegoodsandservicestax(GST)

Question 3Whichoneofthefollowingisunlikelytoincreaseproductivity?A. increasingtariffsB. labourskillstrainingC. innovationinworkpracticesD. investmentinphysicalcapital

Question 4WhatwouldbetheeffectonthemarketforGoodXiftherewereariseinthepriceofasubstitutegood?A. ThedemandcurvewouldshiftleftandtheequilibriumpriceofGoodXwoulddecrease.B. ThesupplycurvewouldshiftleftandtheequilibriumpriceofGoodXwouldincrease.C. ThedemandcurvewouldshiftrightandtheequilibriumpriceofGoodXwouldincrease.D. ThesupplycurvewouldshiftrightandtheequilibriumpriceofGoodXwoulddecrease.

Question 5Whatisthemostlikelyeffectofadecreaseinthetariffonanimportedgood?A. alossofjobsforoverseassuppliersB. afallinthepriceofacompetingdomesticgoodC. ariseinthepriceofacompetingdomesticgoodD. anincreaseinemploymentinthedomesticsector

3 2017ECONOMICSEXAM

SECTION A – continuedTURN OVER

Question 6Overtime,whichoneofthefollowingwouldmostlikelyincreaseaggregatesupplyintheeconomy?A. reducingtheagepensionB. reducingskilledmigrationC. reducingtheretirementageD. reducingfundingforapprenticeships

Question 7ConsiderthefollowinghypotheticalConsumerPriceIndex(CPI)data.

Year CPI

1 100

2 110

3 121

TheincreaseintheannualrateofinflationfromYear2toYear3isA. 10%B. 11%C. 20%D. 21%

Question 8Accordingtothefive-sectorcircularflowmodeloftheeconomy,ariseinthetotalvalueofinjectionsrelativetothetotalvalueofleakagesismostlikelytoresultinA. adecreaseinconsumptionandadecreaseinlevelsofaggregatedemand.B. adecreaseintotalincomesandariseintheunemploymentrate.C. neitheradecreaseinconsumption,levelsofaggregatedemandandtotalincomes,norariseinthe

unemploymentrate.D. adecreaseinconsumption,levelsofaggregatedemandandtotalincomes,andariseinthe

unemploymentrate.

Question 9Thefollowinginformationreferstoahypotheticalcountry’stermsoftrade.

Year Import price index Export price index

1 100 100

2 104 117

ThechangeinthetermsoftradefromYear1toYear2mostlikelymeansthat,forthiscountryA. theexchangeratewillfall.B. thecurrentaccountdeficitwillrise.C. thevalueofimportsisgreaterthanthevalueofexports.D. moreimportscanbeboughtwithagivenvolumeofexports.

2017ECONOMICSEXAM 4

SECTION A – continued

Question 10Thequantitydemandedforaproductincreasesbyahigherpercentagethanthedecreaseinthepriceofthatproduct.Whatisthisknownas?A. demandelasticityB. demandinelasticityC. supplyelasticityD. supplyinelasticity

Question 11Whatnameisgiventothetypeofefficiencywhereresourcesarereallocatedtoincreasechoiceandmeetthechangingtastesandneedsofconsumers?A. dynamicefficiencyB. allocativeefficiencyC. productiveefficiencyD. intertemporalefficiency

Question 12Considerthefollowingdatarelatingtoahypotheticalcountry’sbalanceofpaymentsfor2016–2017.

Item $ billion (b)

netgoods +110

netservices –50

netprimaryincomes –90

netsecondaryincomes +25

Fromthisdata,thebalanceofpaymentsoncurrentaccountwouldbeaA. $15bsurplus.B. $15bdeficit.C. $5bsurplus.D. $5bdeficit.

Question 13Asthelevelofaggregatedemandslows,thebudgetoutcomewillA. improveasunemploymentincreases.B. deteriorateasunemploymentincreases.C. improveassocialsecuritypaymentsdecrease.D. deteriorateassocialsecuritypaymentsdecrease.

5 2017ECONOMICSEXAM

END OF SECTION ATURN OVER

Question 14WhentheReserveBankofAustraliabuysgovernmentsecuritiesontheovernightmarket,theeffect willbetoA. increasethesupplyofcashinthemoneymarketandincreasethecashrate.B. decreasethesupplyofcashinthemoneymarketandincreasethecashrate.C. increasethesupplyofcashinthemoneymarketanddecreasethecashrate.D. decreasethesupplyofcashinthemoneymarketanddecreasethecashrate.

Question 15Whichoneofthefollowingisanexampleofgovernmentcapitalexpenditure?A. personalincometaxrefundsB. paymentofunemploymentbenefitsC. provisionoftransportinfrastructureD. governmentloanstotertiarystudentsforuniversityfees

2017ECONOMICSEXAM 6

SECTION B – Question 1–continued

Question 1 (11marks)a. Explainoneeffectofcompetitivemarketsontheefficiencyofresourceallocation. 2marks

b. Distinguishbetweenpublicgoodsandcommonaccessresources. 3marks

SECTION B – Written responses

Instructions for Section BAnswer allquestionsinthespacesprovided.

7 2017ECONOMICSEXAM

SECTION B – Question 1–continuedTURN OVER

c. Identifyarecentexampleofgovernmentinterventioninmarketsandexplainhowitunintentionallyledtoadecreaseintheefficiencyofresourceallocation. 3marks

2017ECONOMICSEXAM 8

SECTION B – continued

d. Selectoneofthefollowingaspectsofbudgetarypolicy:• spendingontrainingandeducation• researchanddevelopmentgrants• subsidies

Explainhowincreasedfundingonthisaspectofbudgetarypolicymightinfluenceaggregatesupplyandthegoalofstrongandsustainableeconomicgrowth. 3marks

9 2017ECONOMICSEXAM

SECTION B – continuedTURN OVER

CONTINUES OVER PAGE

2017ECONOMICSEXAM 10

SECTION B – Question 2–continued

Question 2 (9marks)Belowisascheduleofdemandandsupplyforstrawberriesduringoneweekinthesummerof2016.

Price (per punnet)

Quantity demanded (no. of punnets)

Quantity supplied (no. of punnets)

$5 140000 30 000

$8 120000 50 000

$10 80 000 80 000

$12 60 000 90000

$14 30 000 110 000

a. Constructademandandsupplycurvediagramusingthedatainthetable.Ensureallaspectsofthegrapharelabelledappropriately. 3marks

11 2017ECONOMICSEXAM

SECTION B – continuedTURN OVER

b. Assumingthemarketforstrawberriesisaperfectlycompetitivemarket,identifytheequilibriumpriceandquantitytraded,andexplainwhatismeantby‘equilibrium’. 2marks

c. Assumethatduringthesummertherewasaperiodofunseasonablycoldweatherandtheoutputofstrawberrieswasnegativelyaffected.

Drawthisscenarioonthegraphinpart a.,clearlyshowingtheadjustmenttothemarketconditions. 2marks

d. Explaintheadjustmenttotheequilibriumpriceandquantity. 2marks

2017ECONOMICSEXAM 12

SECTION B – Question 3–continued

Question 3 (28marks)TreasurerScottMorrisonstatedinhis2016–2017BudgetspeechthattheAustralianGovernmenthasa‘planforjobsandgrowth’.

a. Describethe2016–2017performanceoftheAustralianeconomyintermsof‘jobsandgrowth’. 4marks

13 2017ECONOMICSEXAM

SECTION B – Question 3–continuedTURN OVER

b. Selectoneofthefollowingaggregatesupplypolicies:• welfarereformpolicy• taxreformpolicy• immigrationpolicy

Explainhowthispolicymightbeimplementedtoincrease‘jobsandgrowth’. 4marks

2017ECONOMICSEXAM 14

SECTION B – Question 3–continued

c. Selectanaggregatesupplypolicyfromthelistinpart b. Youmayusethesamepolicythatyouselectedinpart b. oradifferentpolicyfromthelist.

Outlineonestrengthandoneweaknessofusingthispolicytoincreaseemploymentandratesofeconomicgrowth. 4marks

d. Explainhowaggregatedemandpolicieshaveinfluenced‘jobsandgrowth’in2016–2017. 8marks

15 2017ECONOMICSEXAM

SECTION B – Question 3–continuedTURN OVER

2017ECONOMICSEXAM 16

SECTION B – Question 3–continued

e. Evaluateonestrengthandoneweaknessofusingeachofbudgetarypolicyandmonetarypolicyinachievingincreased‘jobsandgrowth’. 8marks

17 2017ECONOMICSEXAM

SECTION B – continuedTURN OVER

2017ECONOMICSEXAM 18

SECTION B – Question 4–continued

Question 4 (9marks)

2010 2011 2012 2013 2014 2015 2016–1

0

1

2

3

4

5

%

–1

0

1

2

3

4

5

%

year ended

Consumer Price Inflation

quarterly(seasonally adjusted)

2017

Source:adaptedfromABS;RBAChartPack, ‘TheAustralianEconomyandFinancialMarkets’,September2017,p.4

a. Referringtothegraphabove,assesstheextenttowhichAustraliahasbeenabletoachieveitsgoaloflowinflation(pricestability)in2016–2017. 3marks

19 2017ECONOMICSEXAM

SECTION B – continuedTURN OVER

b. Explainoneeconomicfactorthatmighthaveinfluencedthegoaloflowinflation(pricestability)in2016–2017. 2marks

c. DiscussthelikelyeffectofthebehaviourofConsumerPriceInflationonthestanceandfocusofmonetarypolicyduringthepasttwoyears. 4marks

2017ECONOMICSEXAM 20

SECTION B – Question 5–continued

Question 5 (8marks)

2010 2011 2012 2013 2014 2015 2016 2017–9

–6

–3

0

%

–9

–6

–3

0

%

Current account balanceper cent of nominal GDP

Source:adaptedfromABS;RBAChartPack, ‘TheAustralianEconomyandFinancialMarkets’,September2017,p.17

a. Referringtothegraphabove,outlineonefactorthatmightexplainthetrendinAustralia’scurrentaccountbalancein2015–2016and2016–2017. 2marks

21 2017ECONOMICSEXAM

TURN OVER

b. ExplainthelikelyeffectoftradeliberalisationonanytwoofAustralia’sdomesticmacroeconomicgoals. 6marks

END OF QUESTION AND ANSWER BOOK

2017ECONOMICSEXAM 22

Extra space for responses

Clearly number all responses in this space.

23 2017ECONOMICSEXAM

TURN OVER

2017ECONOMICSEXAM 24

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