2015 HSC Economics

HIGHER SCHOOL CERTIFICATE EXAMINATION2015

1030

Economics

General Instructions

•Readingtime–5minutes

•Workingtime–3hours

•Writeusingblackpen

•Board-approvedcalculatorsmaybeused

Total marks – 100

Section I Pages2–10

20 marks

•AttemptQuestions1–20

•Allowabout35minutesforthissection

Section II Pages13–23

40 marks

•AttemptQuestions21–24

•Allowabout1hourand15minutesforthissection

Section III Pages25–26

20 marks

•AttempteitherQuestion25orQuestion26


Section IV Page27

20 marks

•AttempteitherQuestion27orQuestion28


–2–

Section I

20 marksAttempt Questions 1–20Allow about 35 minutes for this section

Usethemultiple-choiceanswersheetforQuestions1–20.

1 Assumethatforeignproducersaresellingcannedtomatoes inAustraliaatbelowtheircostofproduction.Domesticproducersaskthegovernmenttoimposeatariffontheseimports.

Whatisthemostlikelyreasonforthisrequest?

(A) Topreventdumping

(B) Toimprovenationaldefence

(C) Tosupportaninfantindustry

(D) Tomaintaindomesticemployment

2

(

Whichofthefollowingeconomicpolicieshastheshortesttimelagforimplementation?

A) Fiscalpolicy

(B) Monetarypolicy

(C) Labourmarketpolicies

(D) Microeconomicreform

3 Whichofthefollowingismostlikelytoincreasegrossworldproduct?

(A) Increasedratesbycentralbanks

(B) Increasedmigrationtodevelopingcountries

(C) Increasedprotectionbyadvancedeconomies

(D) Increasedinvestmentbytransnationalcorporationsindevelopingcountries

4 Whichof the followingcouldbeanegative impactof foreigndirect investment inanemergingeconomy?

(A) Increasedprovisionofpublicgoods

(B) Increasedspendingontransportinfrastructure

(C) Anincreaseinthecountry’sHumanDevelopmentIndexfrom0.6to0.8

(D) Anincreaseintheinfluenceoftransnationalcorporationsongovernmentregulation

–3–

5 Australiaprovidesforeignaidtobuildschoolsinadevelopingcountry.

ThiswillbeenteredinAustralia’sBalanceofPaymentsasa

(A) debitinthecapitalaccount.

(B) creditinnetprimaryincome.

(C) creditinthefinancialaccount.

(D) debitinnetsecondaryincome.

6 A government wants to increase the efficiency of its domestic industries in order toimprovetheirinternationalcompetitiveness.

Whichcombinationoftradepolicieswouldbemostlikelytoachievethis?

Import quotaSubsidy to domestic

producers

(A) Decrease Decrease

(B) Increase Increase

(C) Increase Decrease

(D) Decrease Increase

7 The table showsGrossDomesticProduct (GDP)growth, inflationandunemploymentratedataforanadvancedeconomywithaninflationtargetof2–3%.

Year GDP growth (%)

Inflation (%)

Unemployment rate (%)

1 4.0 2.7 5

2 4.5 3.8 4.5

With reference to the data in the table, which policy response would be best for thiseconomy?

(A) Expansionaryfiscalandexpansionarymonetarypolicy

(B) Expansionaryfiscalandcontractionarymonetarypolicy

(C) Contractionaryfiscalandexpansionarymonetarypolicy

(D) Contractionaryfiscalandcontractionarymonetarypolicy

–4–

8 Which of the following is most likely to operate as an automatic stabiliser during anupswingintheAustralianeconomy?

(A) Incometax

(B) Companytax

(C) Tariffrevenue

(D) Goodsandservicestax

9 Thediagramshowschangesinthedemandfor,andsupplyof,Australiandollars($A).

S

D

0 Quantity of $A

$A in termsof $US

D1

Whichofthefollowingstatementsismostlikelytoexplainthechangeintheequilibriumvalueofthe$Aillustratedinthediagram?

(A) The$AhasappreciatedbecauseofanincreaseindemandforAustralianexports.

(B) The $A has depreciated because of reduced microeconomic reform in the USeconomy.

(C) The$AhasappreciatedbecauseofariseinthenumberofoverseastouristsvisitingAustralia.

(D) The $A has depreciated because of a rise in foreign interest rates relative toAustralianinterestrates.

–5–

10 Thetableshowsdataforahypotheticaleconomy.

Year Import price index Export price index Trade weighted index

1 100 100 60

2 110 100 70

What is the effect of the changes from Year 1 to Year 2 on the terms of trade andinternationalcompetitivenessofthiseconomy?

Terms of trade

International competitiveness

(A) Increased Decreased

(B) Decreased Decreased

(C) Increased Increased

(D) Decreased Increased

11 Whichofthefollowinggovernmentpolicieswouldbemostlikelytoreduceaneconomy’sGinicoefficient?

(A) Adecreaseinthegoodsandservicestaxrateandadecreaseintransferpayments

(B) Adecreaseinexpenditureonhealthandanincreaseinderegulationofthelabourmarket

(C) Anincreaseinchildcaresubsidiesforlow-incomeearnersandanincreaseinthehighestmarginalincometaxrate

(D) An increase in the income tax free threshold and a decrease in compulsoryemployersuperannuationcontributions

–6–

12 A firm invests in a new, environmentally sustainable method for recycling usedaluminiumsoftdrinkcans.

Whichofthefollowingbestdescribesthelikelyeconomicoutcomethatwillresultfromthisinnovation?

(A) Apositiveexternalityandareductioninsocialcosts

(B) Anegativeexternalityandanincreaseinsocialcosts

(C) Apositiveexternalityandareductioninsocialbenefits

(D) Anegativeexternalityandanincreaseinsocialbenefits

13 The graph shows aggregate demand (AD) and aggregate supply (AS) curves for aneconomy.

AS

AD

Q

P

0

Whichofthefollowingismostlikelytoreflectgovernmentpolicydesignedtoincreaseefficiencyandequilibriumoutput?

(A) AScurveshiftstotheleft.

(B) ADcurveshiftstotheleft.

(C) AScurveshiftstotheright.

(D) ADcurveshiftstotheright.

–7–

14 Thetableshowslabourmarketdataforahypotheticaleconomy.

Year Unemployment rate Participation rate

1 7% 65%

2 5% 60%

WhichofthefollowingreasonswouldaccountforthesechangesfromYear1toYear2?

Reason for change in theunemployment rate

Reason for change in theparticipation rate

(A) GlobaleconomicrecessionAreductioninthenumberofskilledmigrants

(B)Fewerincentivestohirethelong-termunemployed

Increasedjobtrainingfortheunemployed

(C)Increasedgovernmentspendingoninfrastructure

Anincreaseinchildcaresubsidypayments

(D) Increasedconsumerconfidence Increaseinschoolretentionrates

15 Which of the following could lead to a deterioration in the structural component ofAustralia’scurrentaccountdeficit?

(A) Anincreaseinnetforeignliabilities

(B) Adecreaseinportfolioinvestmentbyforeignfirms

(C) Adecreaseinexportvolumesduetoaweakeningglobaleconomy

(D) Anincreaseinimportsresultingfromanimprovementinthetermsoftrade

–8–

16 Thetablereferstoahypotheticaleconomy.

YearNational income

($)Savings

($)

1 1000 400

2 1500 500

3 2000 600

Ifthegovernmentwishestoraisethelevelofnationalincomeby$1000inYear4,byhowmuchwillithavetoincreaseinvestment?

(A) $100

(B) $200

(C) $500

(D) $800

17 The Reserve Bank of Australia purchases Commonwealth Government Securities inordertoalterthecashrate.

Whichofthefollowingisthemostlikelyresultofthisdecision?

Australian dollar Australian GDP

(A) Appreciates Falls

(B) Depreciates Falls

(C) Depreciates Rises

(D) Appreciates Rises

–9–

18 ThetablecontainsnominaldataonthecomponentsofGrossDomesticProduct(GDP)forahypotheticaleconomy.

Year C I G X M

1 500 200 300 100 100

2 550 250 300 200 200

Assumethattheconsumerpriceindexforthiseconomyincreasesfrom100inYear1to110inYear2.

WhatisthegrowthrateofrealGDPinYear2?

(A) 0%

(B) 1%

(C) 10%

(D) 14%

19 Thetablereferstoahypotheticaleconomy.

Year Headline inflation(%)

Underlying inflation(%)

1 2 1.7

2 2.4 1.4

3 3.2 1.2

WhichcombinationofreasonsismostlikelytoaccountforchangesintheheadlineandunderlyinginflationratesfromYear1toYear3?

Reason for change in headline inflation

Reason for change in underlying inflation

(A) Decreasedglobaloilproduction Expansionaryfiscalpolicy

(B) Floodinginagriculturalareas Increasedmicroeconomicreform

(C) Increasedtariffs Increasedminimumwage

(D) IncreasedglobaloilproductionAppreciationofthedomesticcurrency

–10–

20 ThetableshowsBalanceofPaymentsdataforahypotheticaleconomywithaflexibleexchangerate.

$ Billion

FinancialDerivatives 5

NetPrimaryIncome –200

DirectInvestment 50

ReserveAssets 10

BalanceonGoodsandServices 50

NetSecondaryIncome 25

PortfolioInvestment 45

CapitalAccount ?

Usingthedataabove,whatisthevalueofthecapitalaccount?

(A) $15billiondeficit

(B) $15billionsurplus

(C) $25billiondeficit

(D) $25billionsurplus

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© 2015 Board of Studies, Teaching and Educational Standards NSW

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Centre Number

Student Number

–13–

67413102931031 15110

2015 HIGHER SCHOOL CERTIFICATE EXAMINATION

Economics

Section II

40 marksAttempt Questions 21–24Allow about 1 hour and 15 minutes for this section

Answer the questions in the spacesprovided. These spaces provideguidance for the expected length ofresponse.

Extra writing space is provided onpages22and23.Ifyouusethisspace,clearly indicate which question youareanswering.

Write your Centre Number andStudent Number at the top of thispage.

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Question 21 (10marks)

(a) Distinguishbetweenrenewableandnon-renewableresources.

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(b) ForaneconomyotherthanAustralia,outlineONEimpactofglobalisationonitsenvironmentalsustainability.

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–15–

Question21(continued)

(c) Explain how market-based policies can be used to address market failure inrelationtoenvironmentalmanagement.

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5654310295


(a) Australia’sbudgetdeficit isprojectedtodecreasefrom2.5%ofGDPto2.1%ofGDP.

ExplainONEpossiblereasonforthischange.

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(b) ComparetheimpactofTWOdifferentmethodsoffinancingabudgetdeficitondomesticinterestratesintheAustralianeconomy.

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8839310293

Question22(continued)

(c) AnalysehowONEpossible strategy to reduce thebudgetdeficit couldaffectincomedistribution.

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–18–

2984310298

Question 23 (10 marks)

(a) HowisthemeasurementoftheunemploymentrateinAustraliainfluencedbyhiddenunemployment?

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(b) Howwouldanappreciationof theUSdollar relative to theAustraliandollaraffectinflationinAustralia?

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1918310294

Question 23 (continued)

(c) A country’s economy is operating at the non-accelerating inflation rate of unemployment (NAIRU).

What are the policy implications of this for the country’s government if its aim is to reduce unemployment?

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(a) Howdoestheinternationaldivisionoflabourcontributetoglobalisation?

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4957310290

Question 24 (continued)

(b) Explain TWO reasons why economies experience different levels of economic development.

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If you use this space, clearly indicate which question you are answering.

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Section II extra writing space

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–24– © 2015 Board of Studies, Teaching and Educational Standards NSW

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9410310299

– 25–1032

2015 HIGHER SCHOOL CERTIFICATE EXAMINATION

Economics

Section III

20 marksAttempt either Question 25 or Question 26Allow about 35 minutes for this section

Answer thequestion in theSections IIIand IVWritingBooklet.Extrawritingbookletsareavailable.

Youranswerwillbeassessedonhowwellyou:n demonstrateknowledgeandunderstandingrelevanttothequestionn usetheinformationprovidedn applyrelevanteconomicterms,concepts,relationshipsandtheoryn presentasustained,logicalandcohesiveresponse


Discuss the continuing role of microeconomic reform in achieving Australia’s economicobjectives.Inyourresponse,youshouldrefertotheeconomicinformationprovided.

Therearemanyareasoftheeconomythatarestillinneedofreform.Theprovisionof public services in health, education, utilities and transport come to mind. I doworrythatwithoutthemotivationtoreformthatwehadinthe1980s,weriskmovingtooslowly...Onthelabourmarketforinstance...itiscriticaltoourfuturesuccessthatwebewillingtochangewherethatissensible.

December2014

1995–96 1999–2000 2003–04 2007–08 2011–12

0

2

4.9

–2

–4.6

Productivity growth in Australia(% per annum), 1996–2013% change

per year

Labour productivity Capital productivity

OR

Source: Australian Government, The Treasury

Based on Australian Bureau of Statistics data

– 26–


AnalysethechangingsourcesofeconomicgrowthandtheireffectsontheAustralianeconomy.Inyourresponse,youshouldrefertotheeconomicinformationprovided.

TheAustralianeconomyneedstoshifttobroadersourcesofgrowth...akeyriskofbelow-trendgrowthisthattheeconomywillnotgenerateenoughjobsgrowthto[employ]newentrantstothelabourmarket.

November2014

Mining

Manufacturing

Services

Total

2011–12–30–30

00

3030

6060

% changeper year

% changeper year

2012–13

Changes in business investmentin Australian industry sectors, 2011–2015

2013–14 2014–15

Source: Australian Government, The Treasury

Data previews: Aus 2014/15 & 2015/16 Capex Expectations. CAPEX PLANS by Industry. Reproduced with permission by Westpac Institutional Bank.

–27–

Section IV

20 marksAttempt either Question 27 or Question 28Allow about 35 minutes for this section

Answer thequestion in theSections IIIand IVWritingBooklet.Extrawritingbookletsareavailable.

Youranswerwillbeassessedonhowwellyou:

n demonstrateknowledgeandunderstandingrelevanttothequestion

n applyrelevanteconomicinformation,terms,concepts,relationshipsandtheory

n presentasustained,logicalandcohesiveresponse


Discuss the contributions of international organisations and trade agreements to globaleconomicgrowthanddevelopment.

OR


AnalysehowmacroeconomicpolicycanbeusedtoachieveexternalstabilityintheAustralianeconomy.

End of paper

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© 2015 Board of Studies, Teaching and Educational Standards NSW

–28–

Documents

2015 HSC Economics