Questions: 10 Pages: 12 ©Copyright for part(s) of this examination may be held by individuals and/or organisations other than the Tasmanian Qualifications Authority.

PLACE LABEL HERE

Tasmanian Certificate of Education

ECONOMICS

Senior Secondary

Subject Code: ECN5C

External Assessment

2010

Section A

Time: approximately 35 minutes

On the basis of your performance in this examination, the examiners will provide results on the following criterion taken from the course statement: Criterion 6 Define and demonstrate knowledge and understanding of

economic terms, ideas and principles.

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CANDIDATE INSTRUCTIONS You MUST ensure that you have addressed the externally assessed criterion on this examination paper. You must answer FIVE questions from this section. You must write brief and clear answers for each of the questions you have chosen. All answers must be written in the spaces provided on the examination paper. Spare answer sheets have been provided on pages 10 and 11, if required. Each question is worth 8 marks. (5 x 8 = 40 marks) This examination is 3 hours in length. It is recommended that you spend approximately 35 minutes in total answering the questions in this booklet. All written responses must be in English.

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Question 1 Explain the concept of opportunity cost. Use a simple decision that you have had to make to illustrate your explanation. Question 2 Explain two factors that will shift the supply curve. For one of these factors provide an example of a market where a change in the factor has caused an increase in supply. Question 3 List three circumstances that could justify government becoming involved in markets to influence the allocation of resources. For one of these circumstances provide a specific example of what form this involvement takes. Question 4 Explain the concept of price elasticity of demand. Explain one factor affecting price elasticity of demand. Question 5 Define the unemployment rate. Give an example of how a person may not be working but not counted as unemployed. Question 6 Define comparative advantage and explain how it applies to Australia’s trade with China. Question 7 Define GDP. Explain the likely effect of an increase in exports on GDP. Question 8 Describe cost push inflation. How might wage increases result in cost push inflation? Question 9 Define globalisation. Describe the impact of globalisation on one aspect of the Australian economy. Question 10 Define the marginal propensity to consume. Explain why the value of the marginal propensity to consume and the marginal propensity to save must add up to 1.

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Question Number: (In the box write the number of the question you have answered.) ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... .......................................................................................................................................................

(8 marks)

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Question Number: (In the box write the number of the question you have answered.) ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... .......................................................................................................................................................

(8 marks)

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Question Number: (In the box write the number of the question you have answered.) ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... .......................................................................................................................................................

(8 marks)

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Question Number: (In the box write the number of the question you have answered.) ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... .......................................................................................................................................................

(8 marks)

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Question Number: (In the box write the number of the question you have answered.) ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... .......................................................................................................................................................

(8 marks)

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Spare Answer sheet if required Question Number: (In the box write the number of the question you have answered.) ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... .......................................................................................................................................................

(8 marks)

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Spare Answer sheet if required Question Number: (In the box write the number of the question you have answered.) ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... .......................................................................................................................................................

(8 marks)

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Questions: 15 Pages: 20 ©Copyright for part(s) of this examination may be held by individuals and/or organisations other than the Tasmanian Qualifications Authority.

PLACE LABEL HERE

Tasmanian Certificate of Education

ECONOMICS

Senior Secondary

Subject Code: ECN5C

External Assessment

2010

Section B

Time: approximately 35 minutes

On the basis of your performance in this examination, the examiners will provide results on the following criterion taken from the course statement: Criterion 5 Comprehend, use and interpret economic data and diagrams.

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CANDIDATE INSTRUCTIONS You MUST ensure that you have addressed the externally assessed criterion on this examination paper. You must answer TEN questions from this section. Answers must be written in the spaces provided on the examination paper. Each question is worth 4 marks. (10 x 4 = 40 marks) Where calculations are required you must show your working out. This examination is 3 hours in length. It is recommended that you spend approximately 35 minutes in total answering the questions in this booklet. All written responses must be in English.

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Question 11 The diagram shows the market for movie tickets. Illustrate on the diagram and describe what will happen to equilibrium price and quantity when the price of DVDs falls. Clearly state two assumptions that you have made in answering this question.

Market for Movie Tickets

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Question 12 Using diagrams show the difference between a change in demand and a change in quantity demanded. Explain your answer.

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Price

Quantity

Price

Quantity

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Question 13 Maggie owns a hairdressing salon in a small town. The relationship between the price she charges for a haircut and the number of haircuts people will want to buy each week is shown in the table below. The price of a haircut at Maggie’s salon is currently $30. Is demand elastic or inelastic at this price? Explain the method you have used to answer this question.

Price ($) per haircut

Haircuts per week

5 35 10 30 15 25 20 20 25 15 30 10 35 5 40 0

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Question 14 The diagram shows the market for plastic kayaks. Illustrate on the diagram and describe what will happen to equilibrium price and quantity when household income increases and the cost of plastic falls simultaneously.

Market for plastic kayaks

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Question 15 The following diagram shows the production possibilities curve for agricultural and manufactured goods for a country. Use the diagram to help you explain what would happen to the production possibilities curve if scientists discovered a new fertilizer that increases agricultural productivity.

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Agricultural Goods (units)

Manufactured Goods (units)

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Question 16 The table shows annual GDP growth for the United States (US) and Australia for the last seven years. Calculate the average growth rate for each country. Comment on the pattern of growth in each country over the period.

Year US GDP growth

Australian GDP growth

2003 3.76 3.67 2004 3.01 2.05 2005 2.69 3.07 2006 2.42 2.54 2007 2.50 3.59 2008 -1.88 -0.10 2009 0.06 1.98

(Source: Fred 2 San Fransisco Federal Reserve Bank, Australian Bureau of Statistics, Cat. 5206.0) ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... (4 marks)

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Question 17 The graph shows the annual inflation rate in Australia over the last 17 years during which Australia has had an inflation-targeting monetary policy. What is the target for monetary policy in Australia? Using the data in the graph, describe how successful the central bank has been in meeting its target.

(Source: Reserve Bank of Australia) ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... (4 marks)

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Question 18 The table contains the Human Development Index and GDP per capita in US dollars for a number of countries. Explain why these two measures provide different rankings of standards of living in the countries.

Country HDI GDP/capita US$ Australia 0.970 39 066 Ireland 0.965 59 324 Japan 0.960 34 313 US 0.956 45 592 UK 0.947 45 442

Israel 0.935 22 835 Hong Kong 0.944 29 912

Greece 0.942 27 995 Peru 0.806 3 846

China 0.772 2 432

(Source: UNDP Human Development report, 2009.) ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... (4 marks)

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Question 19 The following table shows the components of Aggregate Demand. Calculate total Aggregate Demand. Calculate the multiplier for a fiscal policy which by increasing government expenditure by $40 billion, results in an increase in Aggregate Demand by $160 billion.

Consumption $200 billion Government expenditure $90 billion Investment $50 billion Exports $5 billion Imports $6 billion Total Aggregate Demand

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Question 20 Complete the five-sector circular flow diagram, clearly labelling leakages and injections. Explain how a rise in government expenditure affects the circular flow in the economy. ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... (4 marks)

Individuals Businesses

International Flows

Government

Financial Institutions

Income (Y)

Resources

Output (O)

Consumption Expenditure (C)

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Question 21 The following table shows labour market data for males and females in Australia in April 2010. Calculate the unemployment and participation rates for both genders and comment on the differences (calculate your answers to one decimal place).

Males Females Employed persons (‘000s) 6026.9 4998.6 Unemployed persons (‘000s) 337.9 290.1 Working age population (‘000s) 8343.6 8557.3 Unemployment rate (%) Participation rate (%)

(Source: Australian Bureau of Statistics, Cat. 6202.0) ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... (4 marks)

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Question 22 The following data are for Government tax receipts and expenditure. Fill in the budget balance for 2008-09 and 2009-10. Explain how the Government has gone into deficit in the last two years. What has been the percentage growth in taxation revenue and government expenditure from the first to final year shown in the Table?

Year Tax Receipts ($m)

Expenditure ($m)

Surplus/Deficit ($m)

2004-05 235984 222407 13577 2005-06 255943 240136 15807 2006-07 272637 253321 19316 2007-08 294917 271843 23074 2008-09 292600 316046 2009-10 285201 339478

(Source: Commonwealth Budget Papers, 2010-11.) ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... (4 marks)

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Question 23 The following graph shows the change in the Australian dollar against the US dollar in 2009. Explain whether this is an appreciation or depreciation of the Australian dollar. Explain the effect this change in the value of the exchange rate will have on the export industry.

(Source: Reserve Bank of Australia) .................................................................................................................................................... .................................................................................................................................................... .................................................................................................................................................... .................................................................................................................................................... .................................................................................................................................................... .................................................................................................................................................... .................................................................................................................................................... .................................................................................................................................................... (4 marks)

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Question 24 The chart shows the cash rate in Australia from March 2008 to March 2010. Identify one quarter where the Reserve Bank loosened monetary policy and one quarter where they tightened monetary policy over this period.

(Source: Reserve Bank of Australia) ................................................................................................................................................ ................................................................................................................................................ ................................................................................................................................................ ................................................................................................................................................ ................................................................................................................................................ ................................................................................................................................................ ................................................................................................................................................ ................................................................................................................................................ (4 marks)

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Question 25 The table shows the external accounts for Australia. Fill in the missing numbers. Comment on how each of the components has changed over the time period given.

December 2009

December 2008

December 2007

Balance on goods and services ($m) -7467 1620 Net incomes and transfers ($m) -10294 -12060 Current account ($m) -18483 -20208

(Source: Australian Bureau of Statistics, Cat. 5302.0)

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Questions: 5 Pages: 24 ©Copyright for part(s) of this examination may be held by individuals and/or organisations other than the Tasmanian Qualifications Authority.

PLACE LABEL HERE

Tasmanian Certificate of Education

ECONOMICS

Senior Secondary

Subject Code: ECN5C

External Assessment

2010

Section C

Time: approximately 1 hour and 10 minutes

On the basis of your performance in this examination, the examiners will provide results on the following criteria taken from the course statement: Criterion 9 Identify economic problems and their impact on individuals and

sectors of society. Criterion 10 Identify solutions to economic problems and their impact on

individuals and sectors of society.

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CANDIDATE INSTRUCTIONS You MUST ensure that you have addressed ALL of the externally assessed criteria on this examination paper. You must answer TWO questions from this section. All answers must be written in the spaces provided on the examination paper. Each question is worth 40 marks. (2 x 40 = 80 marks) • Criterion 9 is worth 40 marks • Criterion 10 is worth 40 marks This examination is 3 hours in length. It is recommended that you spend approximately 1 hour and 10 minutes in total answering the questions in this booklet. All written responses must be in English.

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Question 26 Market economies can use monetary policy to stabilise aggregate demand. This part assesses Criterion 9. (a) Describe how consumption and investment are affected by an economic boom with reference

to the multiplier. Describe economic problems arising from an economic boom. (20 marks) This part assesses Criterion 10. (b) The Reserve Bank of Australia may increase the cash rate to reduce Aggregate Demand

during an economic boom. Explain how this will affect consumption. (10 marks) (c) Explain the process by which the Reserve Bank of Australia increases the cash rate. (10 marks)

Total (40 marks) Question 27 The effects of an appreciation or depreciation in the Australian dollar can be both good and bad. This part assesses Criterion 9. (a) Why might economists be concerned about an appreciation in the Australian dollar? (20 marks) This part assesses Criterion 10. (b) Explain how rising demand for Australian iron ore should affect the Australian dollar and

Australian iron ore exports. (10 marks) (c) If the Reserve Bank of Australia raises interest rates to reduce inflation, explain what will

happen to the value of the Australia dollar against the US dollar and how this will affect exports. (10 marks)

Total (40 marks)

Section C continues over the page.

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Section C (continued) Question 28 Unemployment rises during periods of recession. This part assesses Criterion 9. (a) Explain the economic costs of unemployment. (12 marks) (b) Identify and explain the type of unemployment which rises during an economic slowdown. (8 marks) This part assesses Criterion 10. (c) Explain how fiscal policy can be used to stimulate Aggregate Demand and the possible

impact on unemployment. Provide a recent Australian example of fiscal policy. (20 marks)

Total (40 marks) Question 29 Government interventions in markets can sometimes have unintended and undesirable consequences. This part assesses Criterion 9. (a) Explain why competitive market equilibrium might not always be a desirable outcome for

society as a whole. (20 marks) This part assesses Criterion 10. (b) Explain how a price ceiling, set below equilibrium, in an otherwise competitive market, can

result in outcomes that policy makers might not have expected or wanted. (20 marks)

Total (40 marks)

Section C continues opposite.

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Section C (continued) Question 30 International trade can result in increased jobs, incomes and choice. This part assesses Criterion 9. (a) The Australian Government has been a party to a number of Free Trade Agreements in recent

years. Explain why such agreements can create intense debate and tensions among different groups in society. (20 marks)

This part assesses Criterion 10. (b) Use the concept of comparative advantage to explain how international trade leads to gains. (12 marks) (c) Explain how a tariff works to reduce the gains to international trade. (8 marks)

Total (40 marks)

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Question Number: (In the box write the number of the question you have answered.) ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... .......................................................................................................................................................

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Question Number: (In the box write the number of the question you have answered.) ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... .......................................................................................................................................................

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Questions: 3 Pages: 16 ©Copyright for part(s) of this examination may be held by individuals and/or organisations other than the Tasmanian Qualifications Authority.

PLACE LABEL HERE

Tasmanian Certificate of Education

ECONOMICS

Senior Secondary

Subject Code: ECN5C

External Assessment

2010

Section D

Time: approximately 35 minutes

On the basis of your performance in this examination, the examiners will provide results on the following criteria taken from the course statement: Criterion 8 Analyse and evaluate issues and information.

TA

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CANDIDATE INSTRUCTIONS You MUST ensure that you have addressed ALL of the externally assessed criteria on this examination paper. You must answer ONE question from this section. Your answer must be written in the space provided on the examination paper. You must write clear and detailed answers for the question you have chosen. This section is worth 40 marks. (1 x 40 = 40 marks) This examination is 3 hours in length. It is recommended that you spend approximately 35 minutes in total answering the questions in this booklet. All written responses must be in English.

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Question 31 Carefully examine the following extract:

Export Surge Lifts Growth Outlook

Australian Financial Review, 1 September 2010

The mining boom has shrunk the current account deficit to its narrowest level in nearly a decade, boosting growth in the local economy. Gross domestic product figures due for release today are expected to show the growth accelerated to around 0.9 per cent in the June quarter, up from 0.5 per cent in the first three months of the year. The current account deficit narrowed to a $5.6 billion deficit in the June quarter, from $16.5 billion in the previous three months [the March quarter]. Uncertainties about the global outlook are expected to result in the RBA keeping interest rates on hold until 2011, according to analysts, as policymakers wait and see whether the worldwide economy’s rebound from the worst downturn since the Great Depression is in jeopardy.

(a) Explain which part of the current account the mining boom is likely to affect, and how that

translates into growth in the local economy. (8 marks) (b) If net income plus net current transfers were -$12 billion and -$13 billion in the June and

March quarters of 2010 respectively, deduce the size of the balance of trade on goods and services in each quarter. (8 marks)

(c) Explain what you think would happen to the financial/capital account during the second

quarter of 2010. (8 marks) (d) Why do you think the Reserve Bank of Australia might not want to increase interest rates in

this environment? (8 marks) (e) What advice would you give to the government about maintaining its fiscal stimulus? (8 marks)

Total (40 marks)

Section D continues opposite.

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Section D (continued) Question 32 Carefully examine the following extract:

Schools targeted in productivity drive

Australian Financial Review, 27 January 2010 Businesses are making unprecedented levels of investment in the national schools system in areas such as maths, science and information technology to try to lift workforce participation and productivity. In a trend that has taken hold worldwide and is now actively encouraged by the federal government, big name companies from sectors including banking, information technology, energy and defence are injecting cash into schools. Former Victorian premier Steve Bracks says National Australia Bank’s $15 million Schools First program to reward school-community partnerships is the single largest private-sector investment in schools education in Australia’s history. ‘There is a genuine view that this is a contribution that NAB can make to Australia’s overall competitiveness and skill base,’ says Bracks. The bank’s deputy CEO, Michael Ullmer, describes Schools First as a ‘very important part of our reputation agenda’ and ‘a strong driver of shareholder value over the longer term’. There are also immediate productivity gains associated with happier and more engaged staff, he says. There is a demonstratable link between community outreach programs and improved staff engagement.

(a) Based on the article above, what are the benefits to a company of investing in the nation’s

school system? (6 marks) (b) How do we measure workforce participation and what are the benefits of improving the level

of workforce participation? (8 marks) (c) The article above suggests that improved education outcomes will lead to an increase in

Australia’s overall competitiveness. Explain how this will occur. (10 marks) (d) Explain why there is a role for government in providing education in the Australian economy. (10 marks) (e) Some people argue that education should be ‘free’. Why, from an economic perspective, is

this not possible? (6 marks)

Total (40 marks)

Section D continues over the page.

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Section D (continued) Question 33 Carefully examine the following extract:

Warning of higher food prices

Australian Financial Review, 11 August 2010 Food producers have warned that higher wheat, barley and corn prices will be felt at the check-out in the next few months as they pass on rising costs. A severe drought in Russia, one of the world’s biggest wheat exporters, has heightened fears for global production shortages, pushing the price up 60 per cent since July to a two-year high. ‘We are seeing inflation in the price of carbohydrates,’ David Farley, managing director of Australia’s biggest cattle producer, Australian Agricultural Company, said. ‘Our business converts carbohydrates to protein. The carbohydrate we use is corn, wheat and oats. [Higher prices] are going to flow through to loaves of bread and bottles of beer.’ Rising food prices and the increased pressure they would place on interest rates could become a problem for the new federal government.

(a) Explain how the drought in Russia has contributed to a 60 per cent increase in the world price

of wheat. Use a demand and supply diagram in your answer. (8 marks) (b) Explain how an increase in the price of carbohydrates (wheat, corn, oats, etc.) will affect the

price of a bottle of beer. Use a supply and demand diagram in your answer. (8 marks) (c) Using your understanding of the Consumer Price Index explain how it will be affected by the

drought in Russia. (8 marks) (d) Explain how rising food prices put upward pressure on interest rates. (8 marks) (e) What would be the response of the Reserve Bank of Australia in addressing inflationary

pressure in the economy? (8 marks)

Total (40 marks)

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Question Number: (In the box write the number of the question you have answered.) ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... ....................................................................................................................................................... .......................................................................................................................................................

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