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HSC Economics Exam Questions With
Answers
Value of subsidy= - Answer =vertical distance between two supply curves Terms of trade= - Answer =Export price index ➗ Import price index X 100Income output/ AD= - Answer =C+I+G+(X-M) MultiplierK= - Answer =
➗ 1-MPCMPC= - Answer =
🔼Consumption ➗ 🔼Income (Y) 🔼GDP/Y= - Answer =k x 🔼AD Globalisation - Answer The integration btwn diff. countries & economies that leads to theincreased impact of int. influences on all aspects of life and ec activity The global economy - Answer Term used to describe the activities of all economies,reflecting that they are now increasingly linked tgthr into 1 ec unit Gross World Product - Answer The sum of total output of g&s produced by all economiesin the world as a whole. Migration - Answer The measurement of people btwn countries on a permanrnt/ longtermbasis, 12 months+
International Division of labour - Answer The means by which tasks in the prodn processare allocated to diff ppl in diff countries around the world Foreign Direct investment (FDI) - Answer The movement of funds btwn economies for thepurpose of est. a new company / buying a substantial proportion of shares in an existing one. (10% +) TNC's - Answer Glbl companies that dominate glbl product and factor markets. They haveprodn facilities in 2+ countries & owned by residents of 2+ countries FOREX - Answer foreign exchange mrkts for the buying & selling of currencies as ameans of facilitating finance flows btwn countries Speculators - Answer Investors who buy/sell financial assets w/ the aim of making profitsfrom ST price movements. They are often criticised for creating volatility. International Monetary Fund (IMF) - Answer International agency that consists of 188members and o/s the stability of the glbl financial system. Major functions: stability of exchange rates& their adjustments & convertibility World trade Organisation (WTO) - Answer An organisation of 155 member countries thatimplements & advances GTA's & resolves trade disputes btwn nations Comparative advantage - Answer Ec principle: nations should specialise in the areas ofprodn theyre most efficient in (lowest op. cost) & trade w/ nations to max both nations SOLInternational Business Cycle - Answer The fluctuations in the lvl of ec activity in the glbl economy over timeRegional Business Cycle - Answer The fluctuations in the lvl of ec activity in a geo region of the glbl ec over time Free trade - Answer Situation where there r no artificial barriers to trade imposed by govthat restrict the free exchange of g&s Opportunity cost/ real cost/ ec cost - Answer A representation of the alt use of resources.Represents the cost of satisfying 1 want over an alt want. Tariffs - Answer Taxes imposed on Imp goods for the purpose of protecting domesticindustries Subsidies - Answer $ payments from gov to bus to encourage prodn of a g/s & influencethe allocn of resources in an ec. Often granted to bus to help them compete w/ o/s prodn of g&s Quotas - Answer Restrictions on the amounts/ values of various kinds of goods that maybe imported World Bank - Answer Financial inst owned by 188 countries that assist poorer nations w/
Savings-investment gap - Answer When an economy has low lvls of savings but requirehigh lvls of investment, which as a result of low savings cannot be funded
Balance of Payments (BOP) - Answer The record of the transactns btwn aus & rest ifworld during a given period, incl. current account & capital & financial account (KAFA)
Current account - Answer Part of the BOP that shows the receipts & payments for g&s,transfer payments and Y flows btwn aus and world in a given time period. These are non-reversible transactions Net goods - Answer Diff btwn what Aus receives for exports (+) & pays for its imports (-) Net primary income (NPY) - Answer Income recieved & paid in relation to investment, incl.loans
Net secondary income (NSY) - Answer Transactions w/o g/s provided in return. Not 'tied'transactions and non-market transfers
Capital & Financial account (KAFA) - Answer Records the borrowing,lending,sales &purchases of assets btwn Aus & the rest of the world. Transactions can be reversed.
Capital account - Answer (+ or -)Foreign conditional & IP rights & franchise
Net direct investment - Answer (+ or -) Fund new investment or >10% shares 'controlling' interest Reserve assets - Answer (+ or -)Transactions related to RBA
Net errors & omissions - Answer The statistical discrepencies. Usually incl. in KAFAaccount. It is included because under floating exchange rate sustem, BOP should balance to zero. Cyclical factors - Answer Factors which vary w/ lvl of ec activity (linked to business cycle) Structural Factors - Answer Factors which are underlying, persostent influences on theBOP
Terms of trade (TOT) - Answer Measure the relative movements in the $ of an economy'simports & exports over a period of time.
Global Financial Crisis (GFC) - Answer The period of extreme volatility on world financialmrkts in 2008-2009 that caused the deepest glbl recession since the Great Depression 1930s Ex stability - Answer An aim of gov policy that seeks to promote sustainability on the exaccounts so that economies can service tgeir foreign debts M/LT
Valuation effect - Answer Where an appreciation of the currency causes immediatedecrease in the $A value of foreign debt
The BOP CONSTRAINT - Answer the extent to which an economys capacity to grow isconstrained by it's need to keep the CAD at a sustainable level
Exchange rate - Answer The price of Australias currency in terms of another country'scurrency
Floating X rate - Answer The value of the currency dtrmnd by demand&supply in mrkt.Dtrmn equilibrium value. This equilibrium changes regularly (hr/hr)
International competitiveness - Answer A measure of the ability if Aus producers to
period of time 'Real' ec growth % - Answer (Real GDP cYr-Real GDP pYr) ➗ (Real GDP pYr) X 100 Real GDP - Answer Nominal GDP ➗ CPI X 100 Target 'sustainable' growth - Answer 3-4% growth rate target Aggregate demand - Answer Total demand for g&s within the economy Aggregate supply - Answer Total productive capacity of the economy Circular flow of income model (CFYM) - Answer Shows that certain economic factors canbe identified as either injections or leakages in the overall level of ec activity
Aggregate demand (AD) - Answer Total level of expenditure in the economy over a givenperiod of time. Includes consumption, investment, gov expend, (X-M)
Aggregate supply (Y) - Answer Total lvl of Y in the economy over a given period of time.Part of national income is collected by gov through tax, rest spent on g&s or saved
AD= - Answer = C+I+G+(X-M)
Income (Y)= - Answer C+S+T Av propensity to consume (APC) - Answer Proportion of total income spent onconsumption
Av propensity to save APS - Answer The proportion of total income that is not spent butis saved for future consumption
Multiplier process - Answer Explains how increase in AD will increase overall national yby much mire than the initial increase.
The multiplier - Answer The greater than proportional increase in national incomeresulting from an increase in AD
MPC/MPS - Answer The proportion of each additional dollar that is saved/ spent onconsumer goods
MPC + MPS = - Answer = The multiplierK= - Answer =
➗ 1-MPC
MPC= - Answer 🔼(Change in) consumption ➗ 🔼 Y
Working age popn (15+)X 100
Participation rate % 2017 - Answer 65.0% Underemployment - Answer The people who work for <full time hrs /week but would liketo work longer hours
Cyclical unemployment - Answer Occurs because of ⬇ lvl ec activity Structural unemployment - Answer Occurs because of mismatch btwn skills ofunemployed & skills required in job vacancies
Frictional unemployment - Answer Occurs when ppl are temporarily unemployed as theychange jobs
Seasonal unemployment - Answer Occurs at predictable times & regulr intervals in the yrbecause of the seasonal nature of some jobs
Non accelerating rate of unenploymentNAIRU - Answer A concept used by economists to refer to the minimum rate of unemployment that can be sustained without inflationary pressureNatural rate of unemployment
Inflation - Answer A sustained increase in the general level of prices in an economy NAIRU rate in Aus % - Answer 5-6% Inflation rate % - Answer 'Measures the % 🔼 in the prices of consumer goods (as
measured by CPI) and therefore reflects any change in the cost of living CPI Consumer price indec - Answer Compiled from calculrions of theof g&s" weighted according to purchasing patterns of Aus HH 🔼 in prices of "a basket
Underlying inflation - Answer Excludes one off and volatile changes in prices andprovides a measure of ongoing price pressures in the economy
Inflation rate % = - Answer = CPI (cYr) - CPI (pYr) ➗ CPI (pYr)X 100
Demand-pull inflation - Answer When AD> productive capacity of the economy, prices wilrise to ⬇ demand
Cost-push inflation - Answer When there is an increase in the production costs,producers will pass these on through ⬆ prices= inflation
Inflationary expectations - Answer When ind expectan ⬆ in inflation ⬆ inflation they will act so as to cause
Australia's CAD - Answer Recorded when debits in the CA (M & Y payments o/s) are > thecredits (X & Y payments from o/s)
Savings and investment gap - Answer A shortage of domestic savings and excess ofinvestment: domestic economy cannot fund domestic investment
inequality in an economy. Calculated by degree which lorenz curve deviates from line ofequality
Gini coefficient = - Answer = A ➗ A+B Environment - Answer Totality of the physical environment in which human society lives,and includes land, water, climate, flora, fauna
Ecologically sustainable developmentESD - Answer concept that maintaining a lvl and qual of ec growth that doesnt result in LT damadge to enviro or depletn of lmtd resouces Market failure - Answer When the price mechanism takes account of private benefits &costs of prodn to consumers and producers but fails to account for indirect costs/benefits to society Negative externality - Answer An unintended negative outcome of ec activity whose costis not reflected in the op of the price mechanism
Tragedy of the commons - Answer The situation when ppl share things and over xploitthem as a result of FOMO
Example of The tragedy of the commons... - Answer If a number of fishers all fish thesame river, their self interest makes them take more fish than they need = LT scarcity of fish Private goods - Answer Those g&s produced by privt producers to max profit, consumdby 1 indvdl at 1 point in time
Characteristics of private goods - Answer Excludable& Rival Excludable - Answer Indivdl unable/unwilling to pay 4 a g/s is 'excluded' from using/obtaining it.
Rival - Answer If one person consumes the g, it is not availbl for consumption by another.1 persons consmptn of the g ⬇ the amt left (physically) 4 others 2 consume & benefit from
Public goods - Answer A g/s that cannot be provided xclusively to those who agree 2 payfor it, consmed jointly by more than 1 indvdl at no addtnl cost
Example of a public good... - Answer A clean environment Characteristics of a public good - Answer Non excludable& Non rival Non excludable - Answer The benefits of a g/s cannot be confined to only those who havepaid. Non payers can enjoy benefits of consumption at no $ cost. Free rider problem
The free rider problem - Answer The benefits of a g/s cannot be confined to only thosewho have paid. Non payers can enjoy benefits of consumption at no $ cost.
Non rival - Answer Consumption of the good by indvdl consumer doesnt reduce theavlblity of the g to everyone else
Pollution - Answer When the Natural environment is degraded in some way such as byhelpful chemical substances, noise or untreated rubbish
Inflation rate targeting began - Answer 1993 Balance of payments constraint - Answer The extent to which a high CAD limits the speedat which the economy can grow
Micro economic policies - Answer improve the opern indvdl firms & industries. Thesepolicies tend to jnfluence the AS of the ec
Fiscal policy - Answer Macro policy influence resource allocation, redistribute Y andreduce fluctuations of BC. Instruments incl gov spending & tax & budget outcome
The budget - Answer The tool of gov gor excercise if fiscal policy. It shows the govsplanned exp and revenue for the next fincl yr
Budget surplus - Answer A positive balance that occurs when the commonwealth govanticipates that total rev of gov (T) will exceed total expend (G)
Surplus= - Answer =T>G Budget deficit - Answer Negative balance that occurs when total exp exceeds totalrevenue
Deficit= - Answer =G>T Balanced budget - Answer A zero balance that occurs when total gov expenditure isequal to total revenue
Balanced= - Answer =G=T
Budget stance - Answer Gives indication of overall impact of fiscal policy on the state ofthe economy
Expansionary budget stance - Answer When the gov plans to increase ec activity Contractionary - Answer When the gov plans to decrease economic activity Neutral - Answer When the gov plans to keep ec activity stable Cyclical/ non discretionary changes - Answer Changes in economic conditions and theimpact on gov
Automatic stabilisers - Answer Policy instruments in the gov budget that counterbalanceec activity. In a boom they decrease ec activity in reces increase ec activity
Countercyclical - Answer Policies designed to smooth fluctuations in BC.Macroeconomic policies such as fiscal policy and monetary policy usually used as countercyclical policies Structural/ discretionary changes - Answer Changes in gov policy T-G-I= - Answer = Fiscal outcome Crowding out effect - Answer Where gov spending is funded through borrowing from prvtsector, ^ pressure on IR & crowds out prvt sector I can't borrow at ^ IR
Monetary policy - Answer Involves actions by the RBA to influence the cost & supply ofmoney & credit in domst Ec, to achieve gov policy objectives
DMOs
MP early 2000s - Answer ContractionaryTightened due to mining boom & intro of GST
MP mid 2000s - Answer EXPANSIONARYsupport growth in mild downturn (GFC)
2011-12 MP - Answer EXPANSIONARY cash rate falls to 3.5% by mid 2012Low dom inflation / uncertain global outlook
2013/ current MP - Answer EXPANSIONARY cash rate falls BELOW emergency rate of 3% in response to high dollar (currenlty 1.5%)
Microeconomic policies - Answer Policies aimed at indvdl industries seeking toimprov efficiency & productivity of producers ⬆️ AS by
⬇️ G&S produced at Costs + ⬆️ Efficiency = shifts AS curve... - Answer = shifts AS curve to the right = ⬇️ Prices ⬆️
Allocative efficiency - Answer The economy's ability to shift resources to where they aremost valued and can be used most efficiently
Technical efficiency - Answer The economy's ability to max lvl of output for a givenquantity of inputs
Dynamic efficiency - Answer The economy's ability to shift resources btwn industries inresponse to changing patterns of consumer demand
Deregulation - Answer Removal of legislation& other rules that constrain the operation of
market forces. Aims to improve the efficiency of industries Deregulated markets since the 1980s - Answer Financial mkts & services TelecommunicationElectricity, gas, aviation & agricultural industries
Financial deregulation took place... - Answer ...in the 1980s to ⬆️ efficiency & competition Deregulation involved - Answer Floating the dollarRemoval of RBA direct control Removal of barriers to foreign banks entering Aus Agricultural deregulation involved - Answer Removing gov/ industry cooperativemonopolies on produce & farmers given new incentive to innovate & diversify their product Aviation industry deregulated in... - Answer ... 1990, w/ QANTAS now facing competitionfrom other airlines
Telecommunications industry deregulated in... - Answer ...1990s, new businesses anddramatically ⬇️ Costs
Workable competition - Answer The govs objective to achieve max lvl of comp within anindustry that is comparable w/ the mrkt structure and spec condtns of the industry
Monopolisation - Answer Occurs when a firm uses it's dominant mrkt pos to eliminatecomp
Price discrimination - Answer Occurs. When a firm sells the same g/a in diff mkts at diffprices (no diff in costs)
