2016 HSC Economics Exam Discussion

[hermansia12]

Hi Everyone!

The economics exam is over!! How did everyone find the exam? Share your thoughts and economic ideas in this thread

Suggested answers will be up soon

A copy of the exam is here if you need it!
____________________________

Multiple choice

Solutions

1. A -> EU shares the same currency
2. B -> Monetary policy targets keeping inflation in target band of 2-3%
3. C -> In budget surplus Revenue > Total Expenditure i.e Taxation increased and Reduced Spending
4. B -> If Aus. Trading partners experience slowdown then Aus. will have slowdown too so higher cyclical unemployment
5. D -> Protection level decreased so local producers less competitive so more people will buy from importers
6. B -> Gini Coefficient increasing = more inequality so greater gap in income
7. C -> Frictional unemployment = those between jobs
8. A -> Inequality in income has increased;
9. B -> Age of retirement increased means more people staying in work force longer therefore higher participation rate and higher taxation (Income tax and less pension payouts)
10. D -> Demand for labor higher therefore more decentralised (more incentive to hire employees)
11. C -> CAD increases as foreign debt increases
12. C -> Those who can save more will benefit from interest rates rising
13. D-> Repayment is a credit (More money to spend in economy) and in the KAFA as secondary income generally involves gifts and one way transfers
14. A-> Terms of trade is decreasing means our export price is more competitive therefore demand has fallen and supply increases (Export Price/Import Price -> Imports more expensive than exports so demand increases (Law of supply and demand);
15. D-> Infant industries can be outcompeted quickly by cheaper world price. So increase in protection will increase their competitiveness; More overseas qualifications will improve structural issues and develop more efficient methods 
16. D-> Real GDP has increased (Money GDP/CPI) and since CPI increased but avg income has not then those with lower income will have less propensity to spend so inequality increases (i.e HDI decreases)
17. C-> Nairu includes frictional, seasonal and structural unemployment; Increased infrastructure will reduce structural unemployment
18. A-> Dollar has appreciated, able to buy more foreign currency i.e higher purchasing power overseas; Lower inflation domestically means that purchasing power has increased (can buy more for less)
19. A -> 150 - 600 -100 +250 = 300
20. A -> Shows that it is a rival good because it can be congested in peak hour

Short Answer

Solutions

21. (a)
-Subsidy is less likely to cause retaliation effect
-Does not distort domestic consumption by raising prices

(b)
-More competition in the economy therefore puts more pressure on local producers to become more efficient; Lower prices in the long term 
-Over long term can increase demand of labour as demand for good goes up when price goes down(i.e labor productivity as more efficient use of labour)   
-Removal means no longer fiscal burden Gov. can spend more on other areas in economy to generate greater dynamic efficiency

(c)
-Gov. revenue increases (Less fiscal burden) and can spend on other areas of the economy (such as infrastructure)
-Revenue also increases as more people are employed in the industry as it becomes more efficient; More income tax
-Higher level of employment reduces level of welfare payment
-Able to put more to repay foreign debt (Move into contractionary stance)

22.
(a)
-Private Benefit - Benefitting only individual or individual firm
-Social Benefit - Benefits whole of society

(b)
Developing nations: Favours economic growth more than environmental sustainability
-May overuse and exploit resources in order to maximise output and lower prices (Law of supply)
-To become more competitive in global economy
-Lack of regulation due to corrupt governments
Developed Nations:
-Favoured in international agreements (e.g Kyoto Protocol) may be more inclined to be more environmentally sustainable
-Tourism is prominent in most developed nations - Favour Environmental sustainability to promote this industry

(c)
-Increase awareness of environmental concerns e.g Carbon emissions -> Can lead to increased action on issue
-Agreements puts pressure on economies to address Envir. Sust. But economies may not adhere to conditions
-Excludes many developing nations; limited in its effectiveness

23.
(b)
Supply may increase if Aus. increases foreign investment -> More $AU in global market as more $AU is converted into foreign currency 

(c) 
Trade Weighted Index = Avg of exchange rates against economy's currency
Decrease -> Depreciation in currency; Price of imports are more expensive inflation rises
Price of exports decreases -> Higher global demand increasing aggregate demand -> Economic growth
May cause inflation to rise in the long term as suppliers capitalise on higher demand

(d)
-Causes exports to be more competitive -> Higher demand -> Long term increase in econ. growth; reduce level of cyclical unemployment
-Reduce level of structural unemployment (esp. in manufacturing) as there is higher demand
-Increased income from higher demand of goods means that suppliers can afford to increase wages -> Encourage more people to enter into the workforce and decrease hidden unemployment 

24.
(a)
[1/(1-0.9)]*100 = 1000
i.e $1000 million decrease in national income

(b)
MPC = marginal propensity to consume
If MPC decreases -> Consumers are less likely to spend -> Decrease economic growth -> Increased unemployment
Increased unemployment can further this spiral of unwillingness to spend -> Long term Low growth
If MPC increases -> More likely to spend -> Increase economic growth as aggregate demand increases

(c)
Economic growth directly related to level of aggregate demand and supply
Higher Aggregate Demand -> Higher level of economic activity  as consumers have a higher propensity to consume
Higher supply -> Lowers prices (Law of supply) Increases demand for goods -> Higher economic growth 
Higher supply due to microeconomic policies -> Long term economic growth as industries are more competitive and is able to lower unemployment (increased demand means suppliers will want to supply more to meet demand therefore needs more labour)

Essays

Solutions

25.
-Labour Market Includes all types of unemployment, underemployment and those employed
-Increasing participation rates ; Increased infrastructure more efficient -> Lower prices -> Higher demand -> More income
-Offer higher wages -> Entice those in hidden unemployment to look for job
-Minimum wage -> Protects employees
-Childcare subsidies -> Entice more females to participate in workforce ( relieve domestic duties ) -> Increase participation rate but increase unemployment temporarily

26.
-Many gov. objectives conflict with each other
-e.g economic growth and external stability in CAD; Necessary for growth 2011-2012 (Mining boom)
-Sustainable Economic growth if inflation is in target band;
-Current low inflation (Out of target band) may be beneficial for economic growth -> increase spending as increase propensity to consume -> Less likely to save

27.
Expansionary monetary policy -> Lower Interest rates (Current Policy all time low Cash rate of 1.5%)
Aims to keep inflation within target band
Domestic market operations - Can impact exchange rates -> Balance of goods and services and aggregate demand (Economic growth)
Not as effective as in the past - May need to turn to fiscal policy

28.
Globalisation -> Increasing integration of global economies
Free trade agreements and trading blocks influencing and changing trade flows -> e.g EU changing Aus. trade flows to Asia-Pacific nations
Increase in volume of trade due to heightened demand for exports in global market
Flow of money is more fluid -> Foreign lending and borrowing; Increases CAD but necessary to fund expensive capital with our low savings history
More volatile -> "Infectious" nature of global economy -> Slow down in one economy will impact many other economies

[itsAnuu]

mc was fked. rest was a gods gift

[onepunchboy]

Yea i felt like mc was harder than previous papers

[juanmata]

Essays were generous, i thought question 26 and 27 were practically the same essay. Short answers were not bad

[sudodds]

I actually liked the multiple choice (but that probably means i didn't understand it haha) and the short answers!
I liked question 26 but I thought the stimulus' were a bit odd, HATED question 27 and 28 :/ I did 28 but I think I royally screwed it up hahaha, spent ages talking about composition of trade until I realised that actually doesn't really relate to what they were asking :/

[itsAnuu]

Cad for 11) is C not D

[itsAnuu]

And for 6) an increase in gini coefficient means income inequality is worsening, answer should be B

[itsAnuu]

And 8 is A) its asking what is the RESULT OF THE INCREASE in equality of income

[Canny98]

Hi Everyone!

The economics exam is over!! How did everyone find the exam? Share your thoughts and economic ideas in this thread

Suggested answers will be up soon

A copy of the exam is here if you need it!
____________________________

Multiple choice

Solutions

1. A -> EU shares the same currency
2. B -> Monetary policy targets keeping inflation in target band of 2-3%
3. C -> In budget surplus Revenue > Total Expenditure i.e Taxation increased and Reduced Spending
4. B -> If Aus. Trading partners experience slowdown then Aus. will have slowdown too so higher cyclical unemployment
5. D -> Protection level decreased so local producers less competitive so more people will buy from importers
6. C -> Gini Coefficient increasing = more equality therefore reducing higher income earners income through tax will increase that equality
7. C -> Frictional unemployment = those between jobs
8. D -> Inequality in income has decreased; Interest and dividends from investments will contribute to individual income
9. B -> Age of retirement increased means more people staying in work force longer therefore higher participation rate and higher taxation (Income tax and less pension payouts)
10. D -> Demand for labor higher therefore more decentralised (more incentive to hire employees)
11. D -> CAD increases as foreign debt increases

 

Should 11 not be C then?

[hermansia12]

Thank you The errors have been noted.

[itsAnuu]

8 wasnt changed

[itsAnuu]

12) says the likely impact, not the cause of

[itsAnuu]

14) is a decline in terms of trade, not an increase

[Canny98]

I believe 13 is B and 14 is A, any one else?

[sudodds]

I believe 13 is B and 14 is A, any one else?

I got those two answers as well, but I'm not 100% confident I got them right (especially 13 because I always mix up BOP haha)