St Leonard's College



Note to teachers:We strongly suggest that you review the tests and?solutions for Outcome 2 and 3 prior to distribution to students to check that they fit current economic conditions?and to amend them to reflect real time conditions if needed.PESECONOMICS UNIT 3 – 2017Outcome 2Domestic macroeconomic goalsFormat of task:SectionNumber of QuestionsQuestions to be answeredMarksShort answer3330Duration of Task:45 minutes, plus 5 minutes reading timeInstructions:Answer all questions in the space providedOutcome 2On completion of this unit the student should be able to analyse key contemporary factors that may have influenced the Australian Government’s domestic macroeconomic goals over the past two years and discuss how achievement of these goals may affect living standards.This outcome will contribute 30 marks out of 100 allocated to School Assessed Coursework for Unit 3.Question 1 (10 marks)Refer to the table below for the question that follows.Year-ended percentage changeConsumer price indexOther consumer price measuresDateAll groups (headline)Excluding volatile items (underlying)Weighted medianTrimmed mean2014/15Sep2.32.12.62.4Dec1.72.12.32.2Mar1.32.32.52.3Jun1.52.02.32.22015/16Sep1.52.12.12.1Dec1.72.11.92.1Mar1.31.71.31.7Jun1.01.61.31.7Source: .auOutline the overall trend in the underlying rate of inflation from September 2014 to June 2016, as shown in the data above. 2 marksExplain how the government can use both headline and underlying (core) rates of inflation to assess inflationary pressures and help maximise material living standards. 4 marks Outline the likely effect of each of the following on demand inflation OR cost inflation over the past two years: 4 marksSlowing economic growth in ChinaUnusually favourable weather conditionsQuestion 2 (9 marks) -2540487680(Reserve Bank of Australia Board) members noted that there had been little change to the outlook for GDP growth, which was expected to be around 2?–3? per cent over 2016 before rising to around 3–4 per cent by 2018 (above estimates of potential growth). This outlook reflected the effects of low interest rates and the depreciation of the exchange rate since early 2013, which were supporting the rebalancing of economic activity towards non-resource sectors of the economy.Source: Minutes of the Reserve Bank of Australia (RBA) Monetary Policy Meeting, 2 August 2016020000(Reserve Bank of Australia Board) members noted that there had been little change to the outlook for GDP growth, which was expected to be around 2?–3? per cent over 2016 before rising to around 3–4 per cent by 2018 (above estimates of potential growth). This outlook reflected the effects of low interest rates and the depreciation of the exchange rate since early 2013, which were supporting the rebalancing of economic activity towards non-resource sectors of the economy.Source: Minutes of the Reserve Bank of Australia (RBA) Monetary Policy Meeting, 2 August 2016Refer to the excerpt for the questions below.Outline how the depreciation of the exchange rate has likely influenced aggregate demand and rates of GDP growth in Australia over the past two years. 2 marks Explain how one aggregate supply factor (apart from the exchange rate) may have contributed to the growth in GDP over the past two years. 2 marksExplain the effect that continued growth in GDP is likely to have on the goal of full employment. 3 marksExplain how an improvement in economic growth increases the ability of the government to provide essential services. 2 marksQuestion 3 (11 marks)Consider the data below for a hypothetical labour market. Calculate the following economic indicators. Round percentages to the closest whole number. 4 marksNumber of people (millions)Unemployed1Underemployed1Employed19Population of working age30Total population40Labour force: _______________________________ Unemployment rate: _______________________________Participation rate: _______________________________Underutilisation rate: _______________________________Explain why the underutilisation rate is likely to provide a more accurate indication of labour market conditions than the unemployment rate. 3 marksExplain two likely consequences of not meeting the goal of full employment. 4 marks(i)(ii)END OF PAPERExtra space for responsesClearly number all responses in this space ................
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