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ECONOMICSWritten examination
Tuesday 24 November 2020 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 4 4 65
Total 80
• Studentsarepermittedtobringintotheexaminationroom:pens,pencils,highlighters,erasers,sharpenersandrulers.
• StudentsareNOTpermittedtobringintotheexaminationroom:blanksheetsofpaperand/orcorrectionfluid/tape.
• Nocalculatorisallowedinthisexamination.
Materials supplied• Questionandanswerbookof24pages• Answersheetformultiple-choicequestions• Additionalspaceisavailableattheendofthebookifyouneedextraspacetocompleteananswer.
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.
©VICTORIANCURRICULUMANDASSESSMENTAUTHORITY2020
SUPERVISOR TO ATTACH PROCESSING LABEL HEREVictorian Certificate of Education 2020
STUDENT NUMBER
Letter
2020ECONOMICSEXAM 2
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SECTION A–continued
SECTION A – Multiple-choice questions
Instructions for Section AAnswerallquestionsinpencilontheanswersheetprovidedformultiple-choicequestions.Choosetheresponsethatiscorrectorthatbest answersthequestion.Acorrectanswerscores1;anincorrectanswerscores0.Markswillnotbedeductedforincorrectanswers.Nomarkswillbegivenifmorethanoneansweriscompletedforanyquestion.
Question 1Whichoneofthefollowingactionsareeconomistsmostlikelytoconsiderasinvestmentexpenditure?A. anindividualbuyingsharesB. asupermarketinstallingself-servecheckoutsC. acompanypayingitsworkershigherwagesD. ahouseholdpurchasingahomeentertainmentunit
Question 2Whichoneofthefollowingisaleakagefromthecircularflowmodelofincome?A. anincreaseinconsumptionspendingB. transferpaymentsmadebythegovernmentC. anincreaseinimportsD. anincreaseininvestmentspending
Question 3Whichoneofthefollowingbestdescribesthecharacteristicsofapublicgood?A. excludableandrivalrousB. excludableandnon-rivalrousC. non-excludableandrivalrousD. non-excludableandnon-rivalrous
Question 4IfAustralia’sforeignequityassetsexceeditsforeignequityliabilities,thismeansthatA. AustraliahasinvestedlessoverseasthanforeignershaveinvestedinAustralia.B. AustraliahasinvestedmoreoverseasthanforeignershaveinvestedinAustralia.C. theAustralianGovernmenthasincreaseditsborrowingsfromoverseastofundbudgetdeficits.D. theAustralianGovernmenthasdecreaseditsborrowingsfromoverseastofundbudgetdeficits.
Question 5Theimpositionofatariffwouldcausewhichoneofthefollowing?A. adecreaseinthepriceofimportsandariseinthedemandforimportsB. anincreaseinthepriceofimportsandariseinthedemandforimportsC. adecreaseinthepriceofimportsandariseinthedemandforimport-competingdomesticgoodsD. anincreaseinthepriceofimportsandariseinthedemandforimport-competingdomesticgoods
3 2020ECONOMICSEXAM
SECTION A – continuedTURN OVER
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Question 6AnimprovementinAustralia’scurrentaccountbalanceismostlikelytooccurwhenA. thetradebalancesurplusincreases.B. thetermsoftradedeteriorate.C. theAustraliandollarappreciates.D. China’seconomicgrowthslows.
Question 7SupposetheAustralianGovernmentwaspayingsubsidiestobeekeepers.Ifthegovernmentreducedorremovedthesesubsidies,the mostlikelyeffectonthepriceofhoneywouldbeA. anincreaseinprice,astherewouldbeanincreaseinthedemandforhoney.B. adecreaseinprice,astherewouldbeadecreaseinthedemandforhoney.C. adecreaseinprice,astherewouldbeanincreaseinthesupplyofhoney.D. anincreaseinprice,astherewouldbeadecreaseinthesupplyofhoney.
Question 8Whichoneofthefollowingisleastlikelytobeanexampleofamonetarypolicytransmissionmechanismresultingfromlowerinterestrates?A. anincreaseinnetcapitalinflowB. anincreaseinborrowingsforhousinginvestmentC. adecreaseinimportsresultingfromafallinthevalueoftheAustraliandollarD. anincreaseinexportsresultingfromafallinthevalueoftheAustraliandollar
Question 9ThepriceelasticityofdemandforaproductwillbegreaterA. themoreresponsivetheindustrysupplycurveisfortheproduct.B. thelargerthenumberofsubstitutesfortheproduct.C. thelowertheproportionoftheirincomeconsumersspendontheproduct.D. themorenecessaryconsumersregardtheproducttobefortheirconsumption.
Question 10Afallintheequilibriumpricebutnochangeinequilibriumquantitycouldonlyoccurfromwhichoneofthefollowingcombinations?A. adecreaseindemandandanincreaseinsupplyB. anincreaseindemandandadecreaseinsupplyC. adecreaseinbothdemandandsupplyD. anincreaseinbothdemandandsupply
2020ECONOMICSEXAM 4
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SECTION A–continued
Question 11Whichoneofthefollowingwouldmostlikelyhappenifallcountriesagreedtosignificantlyreducecarbonemissionsbymovingtowardsagreaterrelianceonrenewableenergysources?A. ThedemandforAustraliancoalwouldincreaseandthepricereceivedforcoalexportswouldrise.B. ThedemandforAustraliancoalwoulddecreaseandthepricereceivedforcoalexportswouldfall.C. ThedemandforAustraliannaturalgaswoulddecreaseandthepricereceivedfornaturalgasexports
wouldrise.D. ThedemandforAustraliannaturalgaswouldincreaseandthepricereceivedfornaturalgasexports
wouldfall.
Question 12Thelabourforceunder-utilisationratemeasurestheA. unemployedasapercentageofthelabourforce.B. unemployedandunderemployedasapercentageofthelabourforce.C. underemployedasapercentageofthepopulationaged15yearsandover.D. unemployedandunderemployedasapercentageofthepopulationaged15yearsandover.
Question 13ConsiderthefollowinghypotheticalAustralianGovernmentBudgetfigures.
Item Amount (billions)
totalreceipts $200
totaloutlays $175
netcashflowsfrominvestmentsinfinancialassets(IFAPP) $10
FutureFundearnings $5
Whatisthesizeoftheunderlyingcashsurplus?A. $10billionB. $25billionC. $30billionD. $40billion
Question 14Whichcombinationofaggregatesupplypolicieswillhaveadifferentoveralleffectonthegoaloffullemploymentthantheothercombinationsgiven?A. anincreaseinresearchanddevelopmentgrants,increasedspendingontrainingandeducation,aboost
ininvestmentininfrastructureB. areductioninsubsidiesforinfantindustriescompetingwithimports,adecreaseinspendingontraining
andeducation,areductionininvestmentininfrastructureC. areductionintariffprotectionintheeconomy,areductioninthepersonalincometaxrates,areduction
inspendingontrainingandeducationD. amovetowardsfreetrade,areductioninthecompanytaxrate,areductioninresearchanddevelopment
grants
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END OF SECTION A TURN OVER
Question 15Whichoneofthefollowingisthemostlikelytocausecostinflation?A. excessdemandforgoodsandservicesB. thegovernmentreducingcompanytaxratesC. expectationsbyemployersthatinterestrateswillfallD. anincreaseinsuperannuationcontributionspaidbyemployers
2020ECONOMICSEXAM 6
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SECTION B – Question 1–continued
Question 1 (16marks)
Thelowercashratehasputdownwardpressureontheexchangerate,whichissupportingactivityacrossarangeofindustries.
Source:statementbyPhilipLowe,GovernoroftheReserveBankofAustralia, ‘MonetaryPolicyDecision’,mediarelease,3December2019,
<www.rba.gov.au>
a. DescribehowalowercashrateinAustraliaputsdownwardpressureonthevalueoftheexchangerateandhowthismightsupportactivityacrossarangeofindustries. 4marks
SECTION B – Written responses
Instructions for Section BAnswer allquestionsinthespacesprovided.
7 2020ECONOMICSEXAM
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SECTION B – Question 1–continuedTURN OVER
b. ExplainthelikelyimpactofeachofthefollowingscenariosonAustralia’sexchangerate. 6marks
• Thereisafavourablemovementinthetermsoftrade.
• Thereisaslowdowninglobaleconomicgrowth.
2020ECONOMICSEXAM 8
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SECTION B – Question 1–continued
c. ExplainhowdownwardpressureonAustralia’sexchangeratemightinfluenceeachofthe following. 6marks
• Australia’sbalanceofpaymentsoncurrentaccount
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SECTION B – continuedTURN OVER
• Australia’smaterialandnon-materiallivingstandards
2020ECONOMICSEXAM 10
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SECTION B – Question 2–continued
Question 2 (21marks)a. DescribetwoeconomicreasonswhytheAustralianGovernmentmightfinditdifficultto
achieveabudgetsurplusintheshorttomediumterm. 4marks
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SECTION B – Question 2–continuedTURN OVER
b. Explaintheroleofautomaticstabilisersininfluencingaggregatedemandandstabilisingthebusinesscyclein2020. 5marks
2020ECONOMICSEXAM 12
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SECTION B – Question 2–continued
c. Describehowtwodiscretionarybudgetarypolicyinitiativesannouncedineither2019or2020mightinfluenceaggregatedemandandtheachievementofthedomesticmacroeconomicgoalofstrongandsustainableeconomicgrowth. 6marks
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SECTION B – continuedTURN OVER
d. Evaluatetheeffectivenessofmonetarypolicyin2020inachievingtheAustralianGovernment’sdomesticmacroeconomicgoaloffullemployment. 6marks
2020ECONOMICSEXAM 14
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SECTION B – Question 3–continued
Question 3 (10marks)a. Explaintherelationshipbetweenanefficientallocationofresourcesandaggregatesupply. 4marks
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SECTION B – continuedTURN OVER
b. Explainhowthefollowingaspectsofbudgetarypolicymightinfluenceaggregatesupplyandtheachievementofstrongandsustainableeconomicgrowth. 6marks
• Spendingontrainingandeducation
• Investmentininfrastructure
2020ECONOMICSEXAM 16
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SECTION B – Question 4–continued
Question 4 (18marks)a. Explainthenatureof,andconditionsfor,aperfectlycompetitivemarket. 3marks
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SECTION B – Question 4–continuedTURN OVER
b. Inacompetitivemarket,explainhowanincreaseindemandforaproductmightresultinachangeinrelativeprices,andexplainhowthiswouldinfluenceresourceallocationandlivingstandards. 5marks
2020ECONOMICSEXAM 18
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SECTION B – Question 4–continued
c. Describeonestrengthandoneweaknessassociatedwiththeuseofthemarkettoallocateresources. 4marks
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TURN OVER
d. Usingafullylabelleddemandandsupplydiagram,explainhowtheAustralianGovernmentcouldcorrectamarketfailure. 6marks
END OF QUESTION AND ANSWER BOOK
2020ECONOMICSEXAM 20
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Extra space for responses
Clearly number all responses in this space.
21 2020ECONOMICSEXAM
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TURN OVER
2020ECONOMICSEXAM 22
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23 2020ECONOMICSEXAM
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TURN OVER
2020ECONOMICSEXAM 24
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Ananswerbookisavailablefromthesupervisorifyouneedextraspacetocompleteananswer.Pleaseensureyouwriteyourstudent numberinthespaceprovidedonthefrontcoveroftheanswerbook.At the end of the examination, place the answer book inside the front cover of this question and answer book.
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