Year 12 Economics AOS 2 unit 4 supply side policies [2]

Which of the following aggregate supply policies is most likely to help promote lower unemployment in the long term?

• Cutting government R&D grants and removing tax concessions for firms involved in research

• Decreasing government spending on VET training and education

• Increasing government investment spending on infrastructure

• Increasing the rate of company tax

Concerning the effects of immigration policy, which statement is least correct?

• Immigration has grown the size of Australia’s labour force, allowing for a rise in labour resources and productive capacity.

• The level and composition of entrants can be varied according to domestic economic conditions and the labour market.

• Immigration has overall increased wages for skilled workers.

• The emphasis on attracting young workers means they may make an economic contribution and ease pressure on the budget for some years to come.

Comparing aggregate supply policies with aggregate demand policies, which statement is correct?

• Aggregate supply policies usually seek to lift efficiency, cut costs and expand productive capacity, while aggregate demand policies are about regulating the growth in expenditure.

• Aggregate supply policies help affect the long-term capacity or sustainable speed limit for economic growth, whereas aggregate demand policies affect the extent to which a nation’s productive capacity is actually utilised.

• Both (A) and (B) are correct.

• Neither (A) nor (B) are correct.

Which aggregate supply policy solution may affect structural unemployment (currently running at perhaps 5 per cent of Australia’s labour force)?

• Expansionary monetary measures

• Cuts in revenue collected from indirect taxes

• Government strategies that increase government consumption spending on Australian-made goods and services

• Cost-cutting, productivity-promoting measures that increase the competitiveness of Australian firms

Which of the following policy measures designed to boost Australia’s potential or sustainable rate of economic growth is probably least effective, especially in the long term?

• Continuously expansionary budgetary deficits to stimulate AD

• Reductions in company, capital gains and personal tax rates, and deregulation of the labour market

• Immigration policy to increase the skills of the labour force

• Large infrastructure projects and budget measures to boost national savings to help keep interest rates down

Which of the following would have the greatest negative effect on Australia’s AS line?

• A slowdown in China

• A lower level of household optimism

• The imminent closure of Ford, Toyota and Holden plants in Australia by 2017

• Lower interest rates on borrowed credit

Which statement about the Australian government’s investment in economic infrastructure is least correct?

• It improves incentives and lowers time and other costs for suppliers of goods and services.

• It reduces bottlenecks that can restrict the growth of businesses.

• It can strengthen business profitability and competitiveness.

• It involves spending on health and schools

Which statement about Australia’s recent mixture of aggregate demand and aggregate supply policies is least correct?

• Aggregate supply policies are best when used to lower natural unemployment, whereas aggregate demand polices are most effective in helping to lower cyclical unemployment.

• Aggregate supply policies are best when used to cut the size of cyclical unemployment, whereas aggregate demand polices are more effective in helping to make local producers more competitive and lower structural unemployment.

• Aggregate supply policies are best when used to increase Australia’s productive potential and long-term or sustainable rate of economic growth, whereas aggregate demand polices are effective in helping to ensure that our productive capacity is not wasted.

• Aggregate supply policies are best when used to lower cost inflation, whereas aggregate demand polices are effective in helping to lower inflation caused by excess expenditure.

Which statement about Australia’s recent mixture of aggregate demand and aggregate supply policies is least correct?

• Infrastructure outlays in the budget include G2 and impact on the level of aggregate demand, as well as affecting the nation’s productive capacity.

• Reductions in marginal rates of personal income tax may help increase incentives to participate in the labour force and grow productive capacity, as well as lift levels of household consumption and AD.

• Welfare outlays in the budget can impact on the level of consumption spending, as well as the participation rate and Australia’s level of productive capacity.

• A rise in the rate of the GST from 10 to 15 per cent would be likely to affect the level of AS more than the level of AD.

Which of the following is not a weakness of aggregate supply policies?

• Their general inability to increase productive capacity faster than AD

• A long impact lag

• A long implementation lag

• The possibility of adverse voter reactions, especially in an election year