ATAR Notes: Forum
VCE Stuff => VCE Business Studies => VCE Subjects + Help => VCE Economics => Topic started by: abcdqdxD on October 13, 2016, 09:10:18 am
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Hi everyone,
With the Economics exam just around the corner, let's gather all our last minute exam questions in this thread.
I'll try to get back to your questions within 1-2 days.
Fire away!
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Hi there!
I have a request if you will, to read and critique my 8 mark policy mix question from the 2010 VCAA exam.
This is a question you can somewhat forge for the eco exam other than the mix of goals goals they give you, So I want to know if I had left anything out for this answer.
Question: Examine the relationship that has existed between Budgetary policy and Monetary policy in Australia over the past two years, and its effect on the achievement of the economic goals of low inflation and strong and sustainable growth. (8 marks)
Answer: The goal of strong and sustainable growth is the highest level of real GDP elevation (3.5-4%) with minimal unfavourable costs on the environment, inflation or external sector. Low inflation refers to inflation growth being on average within the RBA's goal of 2-3% over the course of the economic cycle.
Budgetary policy is the fed governments manipulation of receipts and outlays to achieve its economic/social goals for Australia. The projected budget deficit in 2016-17 is overall, mildly contractionary, with a projected decrease in deficit from $39.9 billion to $37.1 billion at the end of the financial year. This should decrease injections relative to leakages in the economy and undermine the achievement of strong economic growth. However, it may be more sustainable in the sense that the environment will not be as heavily impacted. (Although also unsustainable as our inflation rate will trail even lower than it is (1%), perhaps to deflation). {This has actively seen the government attempting to implement fiscal consolidation and return the budget to surplus in the medium term}.
however, through various discretionary measures, budgetary policy has still being injecting stimulus and promoting the achievements of these goals. For example, the reduction in corporate tax rate to 27.5% for company's with less than $10million turnover has effectively increased aggregate supply and encouraged firms to increase their productive capacity. This has increased Aggregate demand directly through private investment, increased our resource utilisation capabilities, shifted the ppf curve to the right and promoted non-inflationary growth.
Monetary policy involves the RBA's cash rate manipulation by intervening in the short term money market to increase/decrease liquidity. Monetary policy has been at record breaking stimulative stances, facilitating a record low cash rate of 1.75% in may 2016, before being lowered to 1.5% at the start of August. As inflation is under control, The RBA have actively been using monetary policy to pursue other goals well within its charter (Jobs and growth)Through various transmission mechanisms (lower cost of credit and increased cash flows), firms and households have actively been taking these lower rates and investing in themselves and their businesses. This has actively increased AD through consumption (C) and investment (I), which has helped once again increase employment, productive capacity and the ability to have non inflationary growth.
Thereby, although at face value budgetary policy and monetary policy seem to be contractionary, the specific discretionary budgetary policy's signify their complementary expansionary stance, helping to both achieve, through their individual methods, the goals of strong and sustainable growth and low inflation.
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Correction for the conclusion:
*monetary policy and budgetary policy seem to be conflicting*
lol
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100.00:
Your response was really detailed and quite well structured. I would probably give it a 6/8 which is well above average.
Some things you could do to make your answer even stronger:
- discuss inflation in more depth as a standalone topic from economic growth
- discuss 2 budgetary policies in depth
- discuss 2 transmission mechanisms in depth
In other words, for an 8 mark question, structure is everything. If you nail the structure, the marks will follow.
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Hi,
I was wondering how would you link slower wage growth to the goal of low inflation/SSEG?
-would you say that slower wage growth means that firms cost of production is not rising as fast and hence may lead to lower cost push inflation
-pr could you say that slower wage growth means that wages in Aus are growing at a slower rate compared to other countries thus improving international price competitiveness and boosting exports
Thanks in advance :)
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Hi,
I was wondering how would you link slower wage growth to the goal of low inflation/SSEG?
-would you say that slower wage growth means that firms cost of production is not rising as fast and hence may lead to lower cost push inflation
-pr could you say that slower wage growth means that wages in Aus are growing at a slower rate compared to other countries thus improving international price competitiveness and boosting exports
Thanks in advance :)
Yep both of them work fine on the supply side.
On the demand side, you could argue: demand factor -> slower growth in AD (hence slower GDP growth) -> slow growth in labour demand -> slow wage growth (slower increase in inflation)
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Hi,
I have been averaging around Cs throughout the whole year, what do I need to get for the final exam to get a study score out of 30?
Thanks!
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Hey guys,
How are you all feeling for the eco exam on Thursday? I'm feeling fucked right now despite having done all the vcaa eco exams since 2007 till 2015 and stuck on 74%-78% range. I'm really struggling to improve at the moment. I'm always consistently getting 2-3 multi choice answers wrong and I've done over 600 of them haha fml. For section B, my answers are always different to the examiner's solutions, like there's always certain key phrases that I never seem to use no matter how hard I think about the question, or ideas which I use are different according to the examiner's report. My sac marks have been poor and my rank is pretty bad. I'd die for a 35 raw hahah. I hope i'm not alone ::)
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Hey guys,
How are you all feeling for the eco exam on Thursday? I'm feeling fucked right now despite having done all the vcaa eco exams since 2007 till 2015 and stuck on 74%-78% range. I'm really struggling to improve at the moment. I'm always consistently getting 2-3 multi choice answers wrong and I've done over 600 of them haha fml. For section B, my answers are always different to the examiner's solutions, like there's always certain key phrases that I never seem to use no matter how hard I think about the question, or ideas which I use are different according to the examiner's report. My sac marks have been poor and my rank is pretty bad. I'd die for a 35 raw hahah. I hope i'm not alone ::)
Hi, I was in the same boat as you. No matter how many multiple choice questions and short answer questions I did, I always managed to get at least 2 wrong on the multiple choice and lose 1 here and there on short answer. That is, until I stopped cramming in exams and thoroughly revised the content. I have gotten 14/15+ every exam Ive done since then. Remember, economics is very volatile in terms of questions. The 2015 VCAA economics exam may be completely different than this years - especially in the short answer where they tend to be very creative. My point is the amount of exams you do doesn't define your economic knowledge. If you do an exam that has 30 short answer marks allocated to domestic stablity and one 4 marker on microeconomics, what good will that do you if the next exam has 20 marks worth of microeconomics. My advice and take it as you will, is to lay off the exams between now and Thursday if you are still doing some and focus on reading over everything - particularly those key terms you keep on forgetting to include in your answers. - I have found this to be most effective. Good luck friend!
Remember a 78% will land you something like a 33, so keep in mind you are extremely close, so dont stress and you will get that 35 no problem!
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Hi,
I have been averaging around Cs throughout the whole year, what do I need to get for the final exam to get a study score out of 30?
Thanks!
The C+ on the exam in the past few years has been around a 63-72%, meaning if you get between this range and of course taking in SACS and the level of your C+, you will get somewhere between 28-32.
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Using an example, explain why the existence of asymmetric information can lead to an inefficient allocation of resources. (4 mk)
This was in one of the CPAP exams and the written response part with the example was that businesses possess more info than consumer, able to make false claims, and consumers buy it which leads to an over-allocation of resources. And if consumers are more cautious about this, it leads to an under allocation of resources because of less investment in the product. Does this refer to allocative inefficiency? Since I had always just linked over/under allocation of resources to negative/positive externalities, not asymmetric information.
My response was:
Asymmetric information is a type of market failure (where an unregulated freely operation market fails to allocate resources efficiently to satisfy society), that occurs when party holds more information than the other relevant to the transaction or exchange. For example, in an employment contract, asymmetric information can occur in the event that the employee knows more information about their work effort and productiveness than their employer. This represents a situation of moral hazard where the employee may work far less productively as they may not be directly observed, which is viewed as a less efficient or favourable action from society's point of view. Technical inefficiency would then occur where the maximum volume of goods and services is not produced as employees may be working with less effort and at a lower productivity, which means society's satisfaction and wellbeing is not met and market failure occurs.
Would this be enough for a 4 mark question?
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Also, I have another question. ;D How is the current account balance as a percentage of GDP calculated? I know it's in the negatives because of the current account deficit but I'm just confused, I can't picture it in my head haha.
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Using an example, explain why the existence of asymmetric information can lead to an inefficient allocation of resources. (4 mk)
This was in one of the CPAP exams and the written response part with the example was that businesses possess more info than consumer, able to make false claims, and consumers buy it which leads to an over-allocation of resources. And if consumers are more cautious about this, it leads to an under allocation of resources because of less investment in the product. Does this refer to allocative inefficiency? Since I had always just linked over/under allocation of resources to negative/positive externalities, not asymmetric information.
My response was:
Asymmetric information is a type of market failure (where an unregulated freely operation market fails to allocate resources efficiently to satisfy society), that occurs when party holds more information than the other relevant to the transaction or exchange. For example, in an employment contract, asymmetric information can occur in the event that the employee knows more information about their work effort and productiveness than their employer. This represents a situation of moral hazard where the employee may work far less productively as they may not be directly observed, which is viewed as a less efficient or favourable action from society's point of view. Technical inefficiency would then occur where the maximum volume of goods and services is not produced as employees may be working with less effort and at a lower productivity, which means society's satisfaction and wellbeing is not met and market failure occurs.
Would this be enough for a 4 mark question?
Hello, I would give it around a 2-3/4
the response was overall good. Your example was slightly vague, say why they cannot be assessed (e.g. difficult to monitor individual efforts in for example, construction sites where there are many workers) I would still stay clear of this example.
Also state what moral hazard is (employer will incur the cost of less productive employees)
Although, you could state that not divulging all aspects of the workers characteristics in the contract, for example, perhaps they have a permanent broken finger that limits their ability to carry things in the quickest possible time. This would represent adverse selection as the employer would be at a disadvantage by allocating his available wages to an unproductive worker, thereby not maximising the businesses needs and wants (allocative efficiency), whilst also hindering technical efficiency due to less output produced per input of labour working hours for that particular employee.
Also ensure you say why it leads to a less favourable action from societies point of view (perhaps due to less efficient construction workers extending the time it takes to build a house and minimising the achievement of the landlords want of having it completed on time)
Hope i helped :D
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Also, I have another question. ;D How is the current account balance as a percentage of GDP calculated? I know it's in the negatives because of the current account deficit but I'm just confused, I can't picture it in my head haha.
Hey There :)
So current account (CA) is given by the following equation:
CA = Balance of Good and Services + Net Primary Income + Net Secondary Income
A credit is positive -> Money flowing into economy for it to use (Injection)
A debit is negative -> Money has to leave the economy (Leakage)
When this is added up, if Debit > Credit then it will be a negative value therefore a deficit.
Then put the CA total over the GDP multiply it by 100. This will give the percentage of CAD against GDP.
Hope this helps :)
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What is the relationship between budgetary and monetary policies?
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What is the relationship between budgetary and monetary policies?
Unlikely you will get a standalone question on that, usually it will be examined in a 6 or 8 mark question linking BP/MP to 2 eco goals.
- comment on whether budgetary/monetary policy is complimentary (are they both expansionary and contractionary)?
- budgetary and monetary policy are the two levers by which government/RBA can impact the achievement of the economic goals. Budgetary influences 'G' under CIGXM, and monetary policy influences primary C and I. This has flow on effects on eco growth and the other goals.
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Does excise tax shift demand or supply curve to the left?
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Does excise tax shift demand or supply curve to the left?
Excise tax (e.g. on tobacco) -> increase cost of production for tobacco producers -> AS curve shift left -> reduce quantity supplied
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A lot better, much improved on the last one. Don't stress too much over it, you sound like you know what you're doing
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Hey guys, can someone explain the link between participation rate and unemployment, and vice versa, i can't get my head around it :P thanks so much!
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Hey guys, can someone explain the link between participation rate and unemployment, and vice versa, i can't get my head around it :P thanks so much!
Generally the two have an inverse relationship. When unemployment goes up, people get discouraged looking for work and the participation rate goes down as a result (less people seeking work or are working). When unemployment goes down, unemployed people get encouraged to look for work and the participation rate goes up.
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Thanks ABC!
(sorry I kind of stole your "thunder" with regards to the previous answers) - I couldnt help it hahaha ;)
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What is the best way to go about finishing the exam tomorrow???
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Generally the two have an inverse relationship. When unemployment goes up, people get discouraged looking for work and the participation rate goes down as a result (less people seeking work or are working). When unemployment goes down, unemployed people get encouraged to look for work and the participation rate goes up.
Oh wow, I've never thought of it that way. Thanks so much for the help :D
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What is the best way to go about finishing the exam tomorrow???
Do most of the MC in reading time and use writing time to tackle the written response questions. Redo the MC quickly in writing time to double check your answers.
I always aimed to spend 10-15 minutes writing time on MC and the rest of the writing time was dedicated to written responses.
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Is there any techniques to remember the difference between disinflation and deflation?
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Is there any techniques to remember the difference between disinflation and deflation?
deflation: stuff getting cheaper
disinflation: stuff getting expensive at a slower rate
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This may sound stupid, but am I allowed to highlight the questions and response in the exam? or will it not scan properly?
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If only one question fits onto about 2/3 of the page, would you be able to write a couple of lines underneath that? :P How much generally would you be able to write underneath the lines if it's scanned?
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how economic growth may conflict with full employment???
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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. :)
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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.
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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??
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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!
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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 :)
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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 :)
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Lol you scared me for a second there ;)
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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)
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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%??
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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.
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thanks very much very helpful
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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.