2016 Economics Exam Questions Thread

[100.00]

how economic growth may conflict with full employment???

Bit of an odd question... the only thing I can think of is that as economic growth increases firms generate greater incomes which allows them to spend on initiatives to increase productivity (e.g. technology), which may make certain workers redundant as firms move to become price competitive.

However if you are talking about strong and SUSTAINABLE growth, you could say if the government increases spending (e.g. G2 investment spending) to increase infrastructure development and generate employment e.t.c, it may come at the expense of being closer to our productive capacity and although growth may increase, it won't be sustainable in the longer term. - although this isn't currently the case with Australia as we have an abundance of spare resources.

hope i helped. 

[hermansia12]

how economic growth may conflict with full employment???

In full employment, inflation goes up (consumers have more propensity to spend so businesses raise the price to maintain and gain more profit). Sustainable economic growth only occurs if the inflation rate is in the target band of 2-3%. Therefore in full employment, the higher inflation rates would lead to volatile economic growth, as prices will be above equilibrium, leading to oversupply which can then increase unemployment as there is too much supply -> Slowing economic growth.

[100.00]

In full employment, inflation goes up (consumers have more propensity to spend so businesses raise the price to maintain and gain more profit). Sustainable economic growth only occurs if the inflation rate is in the target band of 2-3%. Therefore in full employment, the higher inflation rates would lead to volatile economic growth, as prices will be above equilibrium, leading to oversupply which can then increase unemployment as there is too much supply -> Slowing economic growth.

What? if you have achieved full employment the inflation rates will be between 2-3% and therefore correspond the achievement of strong and sustainable growth. Also wont prices be above equilibrium because of strong demand side conditions in periods of full employment that require prices to go up to get consumers to ration their demand? there shouldn't be an oversupply of labour, if anything there should be an undersupply of labour as more will need to be hired to fuel the periods of greater demand in periods of full employment and stronger growth.

Did I miss something??

[100.00]

Hi!
If we get asked a question on bi-lateral/multilateral FTA's (ive never seen one), but how do we approach it? Just state an agreement (e.g. UN), and explain how removal of impediments promotes free trade?
Thanks!

[hermansia12]

What? if you have achieved full employment the inflation rates will be between 2-3% and therefore correspond the achievement of strong and sustainable growth. Also wont prices be above equilibrium because of strong demand side conditions in periods of full employment that require prices to go up to get consumers to ration their demand? there shouldn't be an oversupply of labour, if anything there should be an undersupply of labour as more will need to be hired to fuel the periods of greater demand in periods of full employment and stronger growth.

Did I miss something??

I don't think that inflation rate is guaranteed to be 2-3% in full employment; 2-3% inflation is usually achieved in 5% unemployment rate due to the non-accelerating inflation rate of unemployment. Although you absolutely right about the undersupply of labour; I made a mistake there. The undersupply does conflict with sustainable long term economic growth

[100.00]

I don't think that inflation rate is guaranteed to be 2-3% in full employment; 2-3% inflation is usually achieved in 5% unemployment rate due to the non-accelerating inflation rate of unemployment. Although you absolutely right about the undersupply of labour; I made a mistake there. The undersupply does conflict with sustainable long term economic growth
[/quote

Lol you scared me for a second there

[abcdqdxD]

Best to write within the lines, but going a little over is generally OK. Just use common sense, if you write to the edge of the paper, chances are it wont scan. Easy fix is probably writing smaller and having less spaces between words.

RE full employment:

Full employment: healthy level of eco growth and inflation
Overemployment: high level of eco growth, but high inflation (not ideal)

[jessamyh16]

if we get a question that asks us to state a budgetry policy that is aimed at keeping the goal of low inflation(2-3%), do we give a policy that will cause inflation to rise since to current inflation is only 1%??

[abcdqdxD]

if we get a question that asks us to state a budgetry policy that is aimed at keeping the goal of low inflation(2-3%), do we give a policy that will cause inflation to rise since to current inflation is only 1%??

Hmm, I would probably just mention a policy that increases AS, then argue it will continue to help keep inflation low.

Generally budgetary policy isn't used to target higher inflation (we use monetary policy for that). I can see where you're coming from though.

[jessamyh16]

thanks very much very helpful

[100.00]

Hey guys,
Sorry to be a pain but me and a friend wrote a page and a half extra on the eco exam yesterday in the room for extra responses part and for the 2nd one, we didn't write PTO because it was a continuation of the last question on the previous page. - As in we didn't think it was necessary because it was obvious the question wasn't finished and the examiner would keep reading, but now I remember they only get the scanned copy. Will they remember to scan this part? surely they know under exam pressure people can forget to write PTO.

Also, (ABC you answered this but I'm still unsure), is it impossible to at get at least 1 mark out of 3 for that 6 marker If you talk about how PIT affected the demand-side which then affected supply. - I justified it beautifully with a current PIT example. It's stressing me out a little.

Thanks a bunch.