TOPIC 4 2019

2018

2017

2016

Answers could include:• definition of Labour Force• participation Rate• regulated vs deregulated wage determination• current policy initiatives• minimum wages• national employment standards• award determination• role of Fair Work Australia• enterprise agreements.

BOSTES 2016 HSC Economics Marking GuidelinesLabour force – employed• protection of minimum standards• guaranteed working conditions• workplace flexibility• FWA – Better of Overall Test (BOOT)• lower wages• lower cost push inflation• increased inequality.Labour force – unemployed• training• increased participation

• unfair dismissal• better matching• aggregate supply increase• childcare• employment subsidies• anti-discrimination.

2015

2014

2013

Candidates showed strength in these areas:

explaining the effects of current macroeconomic policy on both economic growth and inflation in Australia

integrating economic terms, concepts and theory related to the use of macroeconomic policy mix

Candidates need to improve in these areas:

answering the question rather than writing about a key concept such as macroeconomic policy

integrating data from the stimulus relating to the effects of the macroeconomic policy mix

understanding the difference between describing types of policy and clearly explaining the effects of policy on both economic growth and inflation

2012

Question 28 Answers could include: Economic objectives

Economic growth and quality of life Full employment Price stability Environmental sustainability Distribution of income

• Conflicting economic objectives Economic policies (students do not have to discuss all policies)

Fiscal policy -Automatic stabiliser -Discretionary budget stimulus

Monetary policy -Changing interest rates/market operations -Role of banks in passing on interest rates

Labour market policy/Income policy -Fair Work Australia -Decentralisation of the labour market -Education and Training programs

Microeconomic policies -Deregulation -Competition policies -Innovation and industry policies

Environmental management policies -Regulation -Market-based policies – the carbon tax

Effectiveness criteria - Time lags - Political constraints - Global influences, business cycles, exchange rates, economic shocks - Did the policy achieve the objectives? - Successful implementation

- Policy mixQuestion 28

In better responses, candidates provided a clear and comprehensive description of the government’s economic objectives. They demonstrated a strong understanding of a range of policies the government uses to achieve these objectives, such as fiscal and monetary policies and microeconomic policies.

These candidates extensively discussed the effectiveness of the government’s use of these policies in achieving their objectives, often supporting their arguments by drawing on contemporary examples and through the aid of correctly labelled and explained diagrams and data. In these responses, the candidates made substantial reference to the suitability and limitations of each type of policy.

In weaker responses, candidates tended to be more descriptive and general in nature. They described some economic objectives and government policies. These candidates made little or no use of data or reference to current government policies or policy objectives, and provided either superficial or no discussion of the effectiveness of these policies.

These candidates sometimes made use of diagrams, but their explanations of these diagrams were generally inaccurate, inadequate or non-existent.

2011

Question 25

Answers could include: • Economic growth rates • Progressive income taxation • Unemployment benefits • Welfare payments • Company taxation • Business cycle • Discretionary and non-discretionary changes in fiscal policy • Surplus and deficit budgets • Automatic stabilisers • Expansionary and contractionary stance • GFC

• Fiscal stimulus • Income inequality • Gini coefficient • Booms and recessions • Inflationary pressures • Counter-cyclical policy • Fiscal outcome • Underlying cash outcome • Headline cash outcome • Multiplier • Aggregate demand • Changes in consumption and investment

Question 25Most candidates provided an adequate distinction between contractionary and expansionary fiscal policy. Better responses distinguished between the changing stance of fiscal policy and simplistic budget deficit/surplus analysis. Many responses merely stated that a budget deficit/surplus is expansionary/contractionary without any explanation or reasoning as to how this occurs.

Better responses integrated solid theory on how fiscal policy affects economic activity and income distribution with application to the current budget and reference to the stimulus material. Weaker responses tended to only describe aspects of the current Commonwealth Government budget, providing little or no reference to theory or explanation as to how these aspects were relevant to answering the question.

Many responses made a clear distinction between discretionary and non-discretionary fiscal policy, relating this to the fiscal stimulus package put in place by the Rudd Government in 2008 in response to the GFC. Better responses linked the effects of automatic stabilisers (social security and progressive income taxes) to income distribution. They distinguished between the non-discretionary effects of automatic stabilisers and the effects of discretionary changes in tax rates, unemployment benefits and pensions.

Better responses were well structured and gave equal weighting to the effects of fiscal policy on both economic activity and income distribution. The use of relevant and correctly explained diagrams was a feature of such responses. Some weaker responses were characterised by incorrectly drawn and/or poorly explained diagrams, or diagrams that were not adequately linked to answering the question.

In some better responses, candidates referred to the twin deficits hypothesis, the effects of fiscal policy on currency exchange rates (via its effect on economic activity), the balanced budget multiplier, and the effects of various specific expenditure initiatives in education and other areas.

Some weaker responses seemed to be prepared responses, which resulted in the candidates not adequately addressing the question.

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Question 26

Answers could include: • Cash rate • Domestic Market Operations • Consumer Price Index (CPI) • Demand–pull inflation • Cost–push inflation • Aggregate demand • Full employment • Target inflation rate • Sustained level of economic growth • Reserve Bank of Australia (RBA)

• Exchange rate changes • Money supply • Short-term money market • Exchange Settlement Accounts • Secondhand Commonwealth Government Securities • Transmission mechanism • Multiplier • Interest rates • Time lag • Expansionary, contractionary and neutral stance • Inflationary expectations • Wages growth • External forces • Cyclical unemployment

Question 26In better responses, candidates wrote specifically on the links between the changes in the cash rate and the corresponding effects on both inflation and unemployment. These candidates often referred to the various channels of the transmission mechanism, including consumption, savings, investment, cash flow, expectations, exchange rate and asset prices. They also considered the trade-offs between inflation and unemployment using the short- and long-run Phillips curves, and referred to concepts such as cyclical unemployment and the NAIRU (Non-Accelerating Inflation Rate of Unemployment).

In better responses, candidates referred to the Reserve Bank of Australia’s (RBA) inflation target, and differentiation was made between the headline and underlying rates of inflation. Use of the stimulus was sound and often led to a discussion of the problems associated with monetary policy, with particular reference to both inflation and unemployment. Better responses integrated economic theory with both the stimulus material and their own data, and considered the three most recent key phases of the Australian economy in detail: pre-GFC, the GFC itself, and post-GFC to the present day. These responses included key definitions and were well structured and sustained. Relevant diagrams were used, which were labelled clearly and carefully explained.

In weaker responses, candidates answered the question in a much more descriptive, general manner, often with too much emphasis on the mechanics of domestic market operations. The connection between the cash rate and inflation was treated superficially, and usually only referred to aggregated demand in simple terms without specifically working through the various links of the transmission mechanism. Unemployment was often only treated as a secondary issue. The integration of the stimulus material into the responses was also general and often not related to the question. Many candidates simply chose to copy out parts of the quote provided without any further discussion. Diagrams tended to be poorly drawn and not explained. The use of statistics, from both the stimulus and candidates’ own knowledge, was similarly limited.

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Question 27

Answers could include: • Supply side economics

• Environmental targets • Allocative technical and dynamic efficiency • Structural change • Deregulation, financial sector, agricultural industries • National Competition Policy • Reforms to public trading enterprises • Privatisation • Corporatisation • Economic growth • Living standards • Labour market reforms • Productivity growth • Lower unemployment in the long term • COAG reform agenda • Long-term benefits • Short-term costs • External balance • Australian Competition and Consumer Commission (ACCC) • International competitiveness • Lower costs of production

Question 27Most responses provided a clear definition of microeconomic reform (MER). Many contained the definition of MER with examples, and provided a diagram showing the increase of aggregate supply arising from MER. The majority of candidates had a good understanding of the goals of MER and of the historical developments in microeconomic reform. These responses were distinguished by a thoughtful integration of economic concepts pertaining to MER. They defined microeconomic reform in relation to increases in aggregate supply and allocative, technical and dynamic efficiency. They clearly distinguished between product and factor markets, and discussed a range of MERs and their effects on these markets. They also gave a variety of examples of the effect of MER on markets, including linking increased wages to increased productivity, increased human capital, increased competition, decreased prices and costs, innovation, structural change and structural unemployment. Such responses often highlighted the effect of a microeconomic policy initiative on, say, a factor market, and how the reformed factor market subsequently affected a product market.

In weaker responses, candidates defined MER and suggested examples of microeconomic reforms; however, they needed to distinguish between factor and product markets. These responses generally provided a discussion of specific examples of microeconomic reform and their effects on the economy as opposed to product and factor markets. They also provided general information pertaining to MER, and sometimes provided a limited discussion on the benefits and costs of microeconomic reform in relation to the Australian economy.

2010

Question 25In better responses, candidates provided a comprehensive discussion of the reasons for the Australian government’s formulation of policies to manage the environment. Economic concerns about market failure, negative externalities, free riders, common property (tragedy of the commons), and ecological sustainable development featured prominently in these responses through a discussion of relevant microeconomic theory.

Discussion about the price mechanism and the market failure to price environmental resources at their social or opportunity cost rather than allowing a private cost regime to prevail was typical. Government policies to address this failure through market-based mechanisms such as the ETS approach, a taxation regime such as the carbon tax, or some form of regulatory regime (direct intervention) was also evident. In these responses, candidates typically made reference to recent approaches to environmental policy, such as the use of renewable energy targets and subsidies for low-emission technologies as preferred strategies to the issue of carbon pollution.

In better responses, candidates also provided a macroeconomic approach to the question by providing a comprehensive discussion of the impacts of the Australian government’s formulation of policies to manage the environment. Economic concerns about the impacts on economic growth, inflation, unemployment and external stability as a result of government environmental management policies, were discussed. Budgetary impacts of such policies were also addressed.

Accurate and relevant diagrams commonly supported these better responses.

In weaker responses, candidates provided a description of some economic concerns faced by governments when formulating environmental management policies. These candidates described economic concerns about the impact of government environmental management policies and were general in nature.

In weaker responses, candidates often referred to relevant microeconomic theory such as free riders, common property (tragedy of the commons) and externalities but failed to relate these sources of market failure to various policy instruments appropriate for their correction. They provided a general description of more recent 'topical' government programs or initiatives

directed towards environmental issues such as 'cash for clunkers’, ceiling insulation batts, the option of a carbon tax and direct intervention type programs.

2009

Question 25The majority of responses made use of or referred to the economic information provided.

Better responses identified and explained a range of microeconomic reforms implemented in Australia over time. These responses typically developed clear and comprehensive arguments linking the microeconomic reforms to their positive and/or negative impacts on Australia’s economic performance. A common feature of these responses was the incorporation of relevant economic theory and diagrams related to changes in aggregate supply and prices. Better responses typically referred to both the short-term and long-term impacts of microeconomic reform on Australia’s economic performance. These responses often linked these changes over time to the data provided in the stimulus. They identified and explained the impacts on internal economic performance, such as lower inflation and more sustainable economic growth, as well as improved international competitiveness. These responses typically demonstrated sophisticated literacy skills, synthesising arguments in a sustained and well-structured response.

Weaker responses were typically general, simply describing different types of microeconomic reform. These responses sometimes offered a limited explanation of the link between microeconomic reforms and economic performance. For example, they may have stated that microeconomic reforms reduced inflation but did not demonstrate an understanding of how particular reforms might have increased efficiency for businesses and lowering their costs, which may translate into lower prices. Some candidates relied on the stimulus material too much, rather than using it to support particular arguments. These responses typically made little or no reference to relevant economic theory.

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Question 27The best responses demonstrated an ability to identify and explain relationships between the macroeconomic policy mix and the issues of inflation and unemployment in the Australian economy, and to draw out the implications of these.

Better responses gave a balanced coverage of both monetary and fiscal policies as the main components of the government’s macroeconomic policy mix and the impacts of these policies on the issues of inflation and unemployment. They provided clearly described relationships between these policies and issues, and many included relevant and well-labelled diagrams such as the Phillips curve and Keynesian diagrams. Many also looked at the limitations of the use of monetary and fiscal policies in addressing inflation and unemployment.

Most of these responses made detailed and accurate reference to the impact of the global financial crisis on the Australian economy and provided a substantial quantity of data in relation to this. Some responses also made reference to the use of the macroeconomic policy mix in managing the issues of inflation and unemployment prior to the global financial crisis.

A small number of candidates decided to leave monetary policy out of their response, as it is administered by the Reserve Bank of Australia, not the Federal Government.

Many weaker responses did not provide a balanced coverage of the policies (monetary and fiscal) or the impact of these policies on the issues (inflation and unemployment). Many did not demonstrate a clear link or explanation as to how the policies impacted on the issues. In addition, these candidates tended to provide generalised responses that lacked specific detail or accurate descriptions as to the operation of monetary and fiscal policies in the Australian economy.