Year 12 ATAR Economics Unit 4

In a situation where monetary policy is changed, the transmission mechanism will depend on

• changes to the structure of the economy over time

• asset and wealth values of high-income households.

• the substitutability of imports and domestic goods and services.

• whether households and firms respond by saving more now or later.

Assume the Australian Government tightens regulations on working holiday visas. The economic effect of this policy would be (ceteris paribus)

• a fall in the supply of seasonal labour.

• a rise in the supply of seasonal labour.

• a fall in the demand for seasonal labour.

• a rise in the demand for seasonal labour.

In Australia, taxation bracket creep

• is the result of indexing income tax bands to inflation.

• compensates taxpayers on the threshold taxation levels.

• raises tax revenue without explicitly increasing tax rates.

• occurs when tax revenue and expenditure work in opposition.

Within a total government budget of $300 billion, the planned surplus for the year was $4 billion. In that year, the actual budget recorded an unplanned increase of $6 billion in government expenditure. In the following year, the planned deficit was $2 billion. This suggests that

• the budget outcome is expansionary.

• the budget outcome is contractionary.

• the government is aiming to repay debt.

• the government expects a recession in the following year.

Which diagram best represents the trade-offs that should be considered with demand management policies at different points of the economic cycle?

• A

• B

• C

• D

Which statement does not describe a relationship between an equitable distribution of income and economic growth?

• Higher aggregate supply leads to greater equality of income over time.

• Economic growth over time may reduce equality of income in market-based economies.

• Income inequality lowers aggregate demand due to the different propensities to consume.

• Some level of income inequality should encourage business investment and economic activity.

Identify the most likely outcome of the movement in interest rates discussed in the statement.

• Household consumption levels in Australia would continue to rise.

• Production pressures in the Australian economy would decrease.

• The Australian economy would be moved from its equilibrium.

• The Australian dollar would depreciate against the US dollar.

Consider the following data

• Employment in public administration and education has risen by 2. 5 percentage points.

• Employment in recreation and retail has fallen by 2.3 percentage points.

Which statement correctly identifies the economic problem and the response required?

• Resources are underutilised so fiscal policy should be contractionary.

• Total unemployment has fallen so demand management should be neutral.

• Cyclical economic activity is slowing so monetary policy should be expansionary.

• Structural unemployment has decreased so aggregate supply policies should be used.

Identify the components of the key in the graph.

• Black: Company tax, Stripe: GST tax, White: Capital gains tax

• Black: Family tax benefit, Stripe: GST tax, White: Personal income tax

• Black: Disability payment, Stripe: Age pension, White: Personal income tax

• Black: Unemployment benefits, Stripe: Capital gains tax, White: Company tax

Which of the following best describes the rationale for macroeconomic policy in Australia?

• to obtain a budget surplus

• to allow the economy to find its own level

• to minimise fluctuations in the economic cycle

• to keep aggregate demand from equalling aggregate supply