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HSC Economics Examinations - Combined 1995-2023

Combined HSC Economics Exams with Answer Key links for all multiple choice sections.

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Andrew O'Halloran

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0% found this document useful (0 votes)

31 views662 pages

HSC Economics Examinations - Combined 1995-2023

Combined HSC Economics Exams with Answer Key links for all multiple choice sections.

Uploaded by

Andrew O'Halloran

We take content rights seriously. If you suspect this is your content, claim it here.

Available Formats

Download as PDF, TXT or read online on Scribd

You are on page 1/ 662

Centre Number

NSW Education Standards Authority Student Number

2023 HIGHER SCHOOL CERTIFICATE EXAMINATION

2023
Economics
General • Reading time – 5 minutes
Instructions • Working time – 3 hours
• Write using black pen
• Calculators approved by NESA may be used
• Write your Centre Number and Student Number at the top of this
page

Total marks: Section I – 20 marks (pages 2–10)

100 • Attempt Questions 1–20
• Allow about 35 minutes for this section

Section II – 40 marks (pages 13–24)

• Attempt Questions 21–24
• Allow about 1 hour and 15 minutes for this section

Section III – 20 marks (pages 25–27)

• Attempt either Question 25 or Question 26
• Allow about 35 minutes for this section

Section IV – 20 marks (page 28)

• Attempt either Question 27 or Question 28
• Allow about 35 minutes for this section

2060
Section I

20 marks
Attempt Questions 1–20
Allow about 35 minutes for this section

Use the multiple-choice answer sheet for Questions 1–20.

1 What is the role of the Organisation for Economic Co-operation and Development
(OECD)?

A. To provide interest-free loans to developing economies

B. To promote sustainable growth and employment for member countries
C. To boost global financial liquidity during financial crises and global downturns

2023
D. To provide a forum for leaders and finance ministers of the seven largest economies

2 Which of the following is the largest export industry in terms of value for Australia?

A. Manufacturing
B. Mining
C. Rural
D. Services

3 An economy’s labour force participation rate falls from 65% to 60%.

What is a possible reason for this change?

A. An increase in this economy’s GDP

B. An increase in funding for childcare places
C. The official school leaving age has been increased from 16 to 18 years
D. The official retirement age of workers has been increased from 65 to 68 years
4 The diagram shows the aggregate demand and supply curves for an economy.

Price
level

P2
P1
AD2
AD1

Y1 Y2 National income

2023
(real GDP)

What may have caused the shift from AD1 to AD2?

A. A decrease in taxation
B. An increase in imports
C. A decrease in consumption
D. An increase in capacity constraints

5 To protect its domestic farmers, Country A has increased tariffs on imports of agricultural
products from Country B.

Which row of the table shows the effect of the higher tariff on each country?

Consumer prices for agricultural Producer’s income in

products in Country A Country B
A. Higher Increased
B. Higher Decreased
C. Lower Increased
D. Lower Decreased
6 What is a likely effect on Australia of signing a multilateral free trade agreement?

A. An increase in trade with non-member countries

B. An increase in tariff revenue for the government
C. An increase in long-run real gross domestic product
D. Lower levels of short-term structural unemployment

7 Which of the following is an example of a public good?

A. Clean air
B. Public housing
C. Internet access

2023
D. Government buses

8 Which of the following represents a contractionary change in fiscal stance from Year 1
to Year 2?

Budget outcome Budget outcome

Year 1 Year 2
A. $15 million surplus $5 million surplus
B. $10 million deficit $10 million deficit
C. $15 million deficit $20 million deficit
D. $10 million surplus $20 million surplus
9 The table shows data for Country A.

Country A Human development index

Year 1 0.46
Year 2 0.57
Year 3 0.62

It is likely that Country A has experienced

A. increased levels of protection.

B. decreased access to technology.
C. greater access to transport and communication.

2023
D. decreased levels of international financial flows.

10 A country has decided to decrease its import quota on a particular good.

What is the most likely reason for this decision?

A. To reduce dumping on domestic markets

B. To reduce its current account surplus in the long term
C. To increase the standard of living and income of its citizens
D. To encourage specialisation in the industry in which it has a comparative advantage
11 The following diagram shows a foreign exchange market for Australian dollars.

Price of S2
$A in $US
S1

D
Quantity of $A

2023
Which of the following is most likely to have caused the shift in supply of $A from S1
to S2?

A. An increase in commodity prices

B. A decrease in interest rates in Australia
C. A decrease in Australia’s demand for imports
D. A decrease in investment opportunities in Australia

12 If the Reserve Bank of Australia adjusts the interest rate corridor to decrease the cash rate
target, which of the following is most likely to occur?

Asset prices Investment

A. Decrease Decrease
B. Decrease Increase
C. Increase Decrease
D. Increase Increase
13 The table shows hypothetical data for Country X.

Loans owed by Country X to foreigners $1200 billion

Loans owed by foreigners to Country X $300 billion
Foreign assets owned by Country X $200 billion
Country X assets owned by foreigners $500 billion

What is the value of Net Foreign Liabilities for Country X?

A. $600 billion
B. $800 billion
C. $900 billion

2023
D. $1200 billion

14 A government imposes a tax to reduce a negative externality of production.

How does this seek to correct the market failure?

A. Increases the marginal private cost

B. Decreases the marginal private cost
C. Increases the marginal private benefit
D. Decreases the marginal private benefit

15 A country has experienced a significant deterioration in its terms of trade (ToT).

What combination of events could have caused this?

Export price index Import price index

A. 10% decrease 20% increase
B. 20% decrease 20% decrease
C. 10% increase 20% decrease
D. 20% increase 20% increase
16 The diagram shows the fixed exchange rate for a hypothetical economy.

Exchange
rate in $US S

1.00

0.75

0.50 Fixed exchange rate

D
Quantity

2023
What action will the central bank of this economy need to undertake to maintain this
rate?

A. Increase interest rates

B. Buy foreign currency
C. Buy domestic currency
D. Restrict currency outflows

17 The table shows CPI data for an economy.

Expenditure Weighting factor in CPI CPI by expenditure group

group (%) (base year = 100)
Education 15 115
Food 35 110
Health 20 125
Housing 16 130

Which expenditure group made the greatest contribution to inflation?

A. Education
B. Food
C. Health
D. Housing
18 The table shows national income data for a hypothetical economy.

Year National income Consumption Savings

($ million) ($ million) ($ million)
1 1000 750 250
2 1100 830 270
3 ? – –

If the government increased its level of expenditure by $50 million in Year 3, what would
be the new level of national income?

A. $1150 million
B. $1200 million

2023
C. $1350 million
D. $1600 million

19 The graph shows the demand and supply for T-shirts in Country X at the world price
of $5.

Market for T-shirts in Country X

Price
($) S

25
20
15
10
5 World price
D
25 50 75 100 125 150 175 Quantity (’000)

Country X would like to reduce the number of imported T-shirts by 50 000.

What subsidy would Country X need to pay its domestic producers per T-shirt to achieve
this reduction in the number of imports?

A. $5
B. $10
C. $15
D. $20
20 The table shows trade weightings for five of Australia’s trading partners.

Currency Trade weight (%)

Chinese renminbi 31
Japanese yen 13
European euro 9
US dollar 8
South Korean won 7

Which pair of movements would cause a decrease in the Trade Weighted Index?

2023
10% appreciation of 10% depreciation of
the $A against the the $A against the
A. Chinese renminbi European euro
B. Japanese yen South Korean won
C. European euro US dollar
D. US dollar Japanese yen
2023
BLANK PAGE
2023
BLANK PAGE

– 12 –
© 2023 NSW Education Standards Authority
2023 HIGHER SCHOOL CERTIFICATE EXAMINATION

Centre Number

Economics
Student Number
Section II Answer Booklet

2023
40 marks
Attempt Questions 21–24
Allow about 1 hour and 15 minutes for this section
Do NOT write in this area.

Instructions • Write your Centre Number and Student Number at the top of this
page.

• Answer the questions in the spaces provided. These spaces

provide guidance for the expected length of response.

• Extra writing space is provided at the back of this booklet.

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

Please turn over

– 13 –

2061 15110
Question 21 (10 marks)

(a) Outline TWO roles of the World Trade Organization (WTO). 2

...............................................................................................................................

(b) Explain why countries trade. 3

...............................................................................................................................

2023
...............................................................................................................................

...............................................................................................................................

Do NOT write in this area.

...............................................................................................................................

Question 21 continues on page 15

– 14 –
Question 21 (continued)

...............................................................................................................................

2023
...............................................................................................................................

...............................................................................................................................
Do NOT write in this area.

...............................................................................................................................

End of Question 21

– 15 –
Question 22 (10 marks)

(a) The data shows the balance of payments for an economy under a floating 1
exchange rate.

Components Dollars
billion
Export goods 20
Import goods 10
Net services 30
Net primary income 30
Net secondary income ?

2023
Capital account 10
Financial account –70

Do NOT write in this area.

Calculate the value of net secondary income (dollars billion) for the balance of
payments data shown.

...............................................................................................................................

(b) Explain the relationship between the current account and the capital and 3
financial account in this economy.

...............................................................................................................................

Question 22 continues on page 17

– 16 –
Question 22 (continued)

...............................................................................................................................

2023
...............................................................................................................................

...............................................................................................................................
Do NOT write in this area.

...............................................................................................................................

End of Question 22

– 17 –
Question 23 (10 marks)

(a) The diagram shows a Lorenz curve for a hypothetical economy. 1

Cumulative % of national income

y
lit
ua
eq
of
ne
Li

2023
Cumulative % of households
ranked by income

Do NOT write in this area.

The Gini coefficient for this economy has decreased. Sketch the new Lorenz
curve on the diagram above.

(b) Outline ONE way a government could decrease income inequality. 2

...............................................................................................................................

(c) How can family structure contribute to income inequality? 2

...............................................................................................................................

Question 23 continues on page 19

– 18 –
Question 23 (continued)

(d) Analyse the economic and social costs of an increase in income inequality. 5

...............................................................................................................................

2023
...............................................................................................................................

...............................................................................................................................
Do NOT write in this area.

...............................................................................................................................

End of Question 23

– 19 –
Question 24 (10 marks)

(a) Outline ONE benefit of training and employment programs for the Australian 2
economy.

...............................................................................................................................

(b) Explain how the use of individualised methods of determining employment 3

contracts may benefit employers and employees.

2023
...............................................................................................................................

...............................................................................................................................

Do NOT write in this area.

...............................................................................................................................

Question 24 continues on page 21

– 20 –
Question 24 (continued)

(c) Assess the effectiveness of using microeconomic policies to reduce 5

unemployment in Australia.

...............................................................................................................................

2023
...............................................................................................................................

...............................................................................................................................
Do NOT write in this area.

...............................................................................................................................

End of Question 24

– 21 –
Section II extra writing space
If you use this space, clearly indicate which question you are answering.

2023 Do NOT write in this area.

– 22 –
Section II extra writing space
If you use this space, clearly indicate which question you are answering.

2023
Do NOT write in this area.

– 23 –
Section II extra writing space
If you use this space, clearly indicate which question you are answering.

2023 Do NOT write in this area.

– 24 – © 2023 NSW Education Standards Authority

Office Use Only – Do NOT write anything, or make any marks below this line.
9410310299
2023 HIGHER SCHOOL CERTIFICATE EXAMINATION

Economics

Section III

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

Your answer will be assessed on how well you:

2023
● demonstrate knowledge and understanding relevant to the question
● use the information provided
● apply relevant economic terms, concepts, relationships and theory
● present a sustained, logical and cohesive response

Please turn over

2062 – 25 –
Question 25 (20 marks)

Analyse how changes to the value, composition and direction of Australia’s trade have affected
its economic performance. In your answer, refer to the information provided.

In June 2019, Australia recorded its first current account surplus in 44 years
– a trend that has continued to the present (May 2023). The surplus has been
driven by Australia’s exports, fuelled by record-high commodity prices. As
a result, exports have contributed strongly to Australia’s economic growth
and external stability.

© Commonwealth of Australia/Services Australia

Exports by destination
Annual share of total values

2023
%

0
2001 2005 2009 2013 2017 2021

KEY
China Japan India
EU* US

*The graph has been revised to exclude the UK

Reserve Bank of Australia, January 2023

– 26 –
Question 26 (20 marks)

Analyse the possible effects on the Australian economy of pursuing the goal of environmental
sustainability. In your answer, refer to the information provided.

The sustainable use of energy and energy security is becoming an increasing

issue for countries seeking social cohesion and economic prosperity. In
Australia, as demand for energy increases there will be a greater emphasis in
optimising energy efficiency.

Services Australia, Environmental Sustainability Policy, November 2022

Australian coal exports scenario

Annual exports

2023
Current policies
400
Tonnes (million)

300

200

Net-zero 2050

100

2020
0
2005 2014 2023 2032 2041 2050

Reserve Bank of Australia, August 2022

Please turn over

Section IV

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

Your answer will be assessed on how well you:

● demonstrate knowledge and understanding relevant to the question
● apply relevant economic information, terms, concepts, relationships and theory
● present a sustained, logical and cohesive response

2023
Question 27 (20 marks)

Evaluate the impact of globalisation in achieving economic growth and development on an

economy other than Australia.

Question 28 (20 marks)

Evaluate the effectiveness of Australia’s macroeconomic policies in achieving economic

growth and price stability.

End of paper

© 2023 NSW Education Standards Authority

NSW Education Standards Authority

2022 HIGHER SCHOOL CERTIFICATE EXAMINATION

2022
Economics
General • Reading time – 5 minutes
Instructions • Working time – 3 hours
• Write using black pen
• Calculators approved by NESA may be used

Total marks: Section I – 20 marks (pages 2–8)

100 • Attempt Questions 1–20
• Allow about 35 minutes for this section

Section II – 40 marks (pages 9–20)

• Attempt Questions 21–24
• Allow about 1 hour and 15 minutes for this section

Section III – 20 marks (pages 21–23)

• Attempt either Question 25 or Question 26
• Allow about 35 minutes for this section

Section IV – 20 marks (page 24)

• Attempt either Question 27 or Question 28
• Allow about 35 minutes for this section

2060
Section I

20 marks
Attempt Questions 1–20
Allow about 35 minutes for this section

Use the multiple-choice answer sheet for Questions 1–20.

1 Which of the following is responsible for the promotion of global financial stability?

A. World Bank
B. United Nations
C. International Monetary Fund

2022
D. Organisation for Economic Cooperation and Development

2 A jobless person has now stopped looking for work due to the lack of suitable job
vacancies.

Which row of the table shows how this person would now be counted in official labour
force data?

Unemployed In the labour force

A. No No
B. No Yes
C. Yes No
D. Yes Yes

3 Which of the following will NOT contribute to the process of globalisation?

A. Increase in international migration

B. Increase in international financial flows
C. Trade policies which are less protectionist
D. Decrease in significance of transnational corporations

–2–
4 Full employment is said to occur when the unemployment rate is

A. equal to zero.
B. low and unemployment is only cyclical.
C. low and unemployment is only structural.
D. low and consistent with a non-accelerating rate of inflation.

5 Which of the following is most likely to result from a depreciation in a nation’s currency?

A. Its imports become cheaper and its inflation decreases.

B. Its imports become more expensive and its inflation increases.
C. Its exports become cheaper and its inflation decreases.

2022
D. Its exports become more expensive and its inflation increases.

6 Farmers purchase and trade permits for water use along a river.

This is an example of environmental management through the use of

A. targets.
B. regulations.
C. market-based policies.
D. international agreements.

7 An Australian company buys shares in a European bank to the value of $1 million.

Where would this be recorded on the Capital and Financial Account?

A. Direct investment
B. Portfolio investment
C. Financial derivatives
D. Other investment

–3–
8 The diagram shows a shift in aggregate demand for an economy.

Average
price AS
level

AD
AD1
Real GDP

All other things being equal, which of the following factors is NOT likely to have caused
this shift?

2022
A. An increase in exports
B. An increase in imports
C. A decrease in business investment
D. A decrease in government expenditure

9 Why might a government look to end a short-term wage subsidy?

A. To expand the economy

B. To reduce the government budget deficit
C. To reduce the government budget surplus
D. To discourage employers from hiring new employees

10 A government denies a proposed merger between two airlines.

What is this an example of?

A. Regulation being used to enhance competition in a factor market

B. Regulation being used to enhance competition in a product market
C. Deregulation being used to enhance competition in a factor market
D. Deregulation being used to enhance competition in a product market

–4–
11 The table shows selected information for the balance of payments for a country with a
floating exchange rate.

Component Amount
($ billion)
Net goods 80.5
Net services 10.2
Primary income −63.8
Secondary income −4.3
Capital account −13.2
Financial account −17.5
Net error and omissions 8.1

2022
What is the balance on the Current Account?

A. $22.6 billion
B. −$22.6 billion
C. $30.7 billion
D. −$30.7 billion

12 What would be the likely impact of a change in a goods and services tax (GST) from 10%
to 15%?

A. Decreased Gini coefficient and greater income equality

B. Decreased Gini coefficient and greater income inequality
C. Increased Gini coefficient and greater income equality
D. Increased Gini coefficient and greater income inequality

13 Which of the following is most likely to increase the labour force participation rate?

A. A decrease in the tax-free threshold

B. An increase in the childcare subsidy
C. An increase in the highest marginal tax rate
D. An increase in the minimum school leaving age

–5–
14 Which row of the table shows the combination of shifts in the aggregate demand (AD)
and aggregate supply (AS) curves that is most likely to lower gross domestic product
(GDP)?

Shift in aggregate Shift in aggregate

demand curve supply curve
A. Right Right
B. Right Left
C. Left Right
D. Left Left

2022
15 Which of the following would most likely cause the non-accelerating inflation rate of
unemployment (NAIRU) to fall?

A. Increased interest rates

B. Increased company tax rate
C. Increased government spending on welfare payments
D. Increased government spending on vocational training

16 In Year 1, four countries each had real GDP of $20 billion.

The figures for Year 2 for each country are shown in the table.

Nominal GDP CPI

($ billion)
Country A 18 90
Country B 22 110
Country C 23 118
Country D 27 130

Which country experienced negative economic growth in real terms in Year 2?

A. Country A
B. Country B
C. Country C
D. Country D

–6–
17 The table shows data for a three-sector economy.

Year Income (Y) Consumption (C)

($ million) ($ million)
1 2000 1600

2 2400 1920

What will be the level of income in Year 3 if investment falls by $30 million?

A. $1970 million
B. $2250 million
C. $2370 million

2022
D. $2400 million

18 The table shows selected information for a hypothetical economy.

Year Export price index Import price index

1 100 100
2 115 105
3 110 85

Which row of the table below shows the change in terms of trade (ToT) from Year 2 to
Year 3 and a corresponding possible reason for this change?

ToT Reason
A. Improves Reduction in foreign labour costs
B. Improves Increase in global demand for exports
C. Deteriorates Decrease in global demand for exports
D. Deteriorates Increase in the supply of foreign raw materials

–7–
Refer to the following diagram to answer Questions 19−20.

The diagram shows the market for a good in a particular economy.

S
18
16
14
12
Price
($) 10
8
6 D
4

2022
2

10 20 30 40 50 60 70 80
Quantity (millions)

This economy initially had a tariff of $6 placed upon the world price of $8 for this good.

The government has now reduced the tariff from $6 to $4.

19 All else remaining unchanged, what is the impact of this change in tariff on government
revenue?

A. Increase of $80 million

B. Decrease of $80 million
C. Increase of $240 million
D. Decrease of $240 million

20 All else remaining unchanged, by how much does the revenue of foreign producers of
this good change as a result of this lower tariff?

A. $40 million
B. $80 million
C. $160 million
D. $240 million

–8–
© 2022 NSW Education Standards Authority
2022 HIGHER SCHOOL CERTIFICATE EXAMINATION

Centre Number

Economics
Student Number
Section II Answer Booklet

2022
40 marks
Attempt Questions 21–24
Allow about 1 hour and 15 minutes for this section
Do NOT write in this area.

Instructions • Write your Centre Number and Student Number at the top of this
page.

• Answer the questions in the spaces provided. These spaces

provide guidance for the expected length of response.

• Extra writing space is provided at the back of this booklet.

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

Please turn over

–9–
Office Use Only – Do NOT write anything, or make any marks below this line.
6741310293
2061 15110
Question 21 (10 marks)

(a) Define the term fiscal policy. 2

...............................................................................................................................

(b) Explain a possible consequence of ONE method of financing a budget deficit. 3

Name of method: ............................................................................................

2022
...............................................................................................................................

Do NOT write in this area.

...............................................................................................................................

Question 21 continues on page 11

– 10 –
Office Use Only – Do NOT write anything, or make any marks below this line.
0730310295
Question 21 (continued)

...............................................................................................................................

2022
...............................................................................................................................

...............................................................................................................................
Do NOT write in this area.

...............................................................................................................................

End of Question 21

– 11 –
Office Use Only – Do NOT write anything, or make any marks below this line.
8668310293
Question 22 (10 marks)

(a) Using examples, distinguish between a public good and a private good. 2
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................

(b) Explain how the use of solar panels by households can create a positive 3
externality.

2022
...............................................................................................................................
...............................................................................................................................

Do NOT write in this area.

Question 22 continues on page 13

– 12 –
Office Use Only – Do NOT write anything, or make any marks below this line.
5654310295
Question 22 (continued)

(c) Explain how a government’s objective of environmental sustainability may 5

conflict with its other economic objectives.
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................

End of Question 22

– 13 –
Office Use Only – Do NOT write anything, or make any marks below this line.
8839310293
Question 23 (10 marks)

(a) Outline how the value of a currency is determined under a floating exchange 2
rate system.

...............................................................................................................................

(b) Explain the impact of an increase in a country’s cash rate on its exchange rate. 3
...............................................................................................................................

...............................................................................................................................

2022
...............................................................................................................................

...............................................................................................................................

Do NOT write in this area.

...............................................................................................................................

Question 23 continues on page 15

– 14 –
Office Use Only – Do NOT write anything, or make any marks below this line.
2984310298
Question 23 (continued)

(c) Explain likely changes to the structure of industry in Australia as a result of 5

current trends in the global economy.

...............................................................................................................................

2022
...............................................................................................................................

...............................................................................................................................
Do NOT write in this area.

...............................................................................................................................

End of Question 23

– 15 –
Office Use Only – Do NOT write anything, or make any marks below this line.
1918310294
Question 24 (10 marks)

(a) Consider an economy other than Australia.

Name of economy: ..........................................................................................

(i) Explain ONE positive impact that trade has had on this economy. 3
...................................................................................................................

...................................................................................................................

2022
...................................................................................................................

...................................................................................................................

Do NOT write in this area.

...................................................................................................................

(ii) Explain ONE negative impact that trade has had on this economy. 3
...................................................................................................................

...................................................................................................................

Question 24 continues on page 17

– 16 –
Office Use Only – Do NOT write anything, or make any marks below this line.
7407310293
Question 24 (continued)

(b) A country has decided to increase its quota of imported beef. 4

Discuss the likely impact of this increase on this country’s economy.

...............................................................................................................................

2022
...............................................................................................................................

...............................................................................................................................
Do NOT write in this area.

...............................................................................................................................

End of Question 24

– 17 –
Office Use Only – Do NOT write anything, or make any marks below this line.
4957310290
Section II extra writing space
If you use this space, clearly indicate which question you are answering.

2022 Do NOT write in this area.

– 18 –
Office Use Only – Do NOT write anything, or make any marks below this line.
4792310297
Section II extra writing space
If you use this space, clearly indicate which question you are answering.

2022
Do NOT write in this area.

– 19 –
Office Use Only – Do NOT write anything, or make any marks below this line.
5461310291
Section II extra writing space
If you use this space, clearly indicate which question you are answering.

2022 Do NOT write in this area.

– 20 – © 2022 NSW Education Standards Authority

Office Use Only – Do NOT write anything, or make any marks below this line.
9410310299
2022 HIGHER SCHOOL CERTIFICATE EXAMINATION

Economics

Section III

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

Your answer will be assessed on how well you:

2022
● demonstrate knowledge and understanding relevant to the question
● use the information provided
● apply relevant economic terms, concepts, relationships and theory
● present a sustained, logical and cohesive response

Please turn over

2062 – 21 –
Question 25 (20 marks)

Analyse the impact of changes in the components of the balance of payments on the value of
the Australian dollar. In your answer, refer to the information provided.

The current account surplus reached another record high in the March quarter
2021, driven by a record $5.2 billion increase in the balance on goods and services
surplus. Exports of goods and services rose $7.8 billion (7 per cent), while imports
of goods and services rose $2.6 billion (3 per cent). The net primary income deficit
rose by $3.1 billion to $6.0 billion in the March quarter 2021.
Australian Bureau of Statistics, 2021
©Australian Bureau of Statistics

Australian dollar/US dollar exchange rate 2012–2022

2022
1.1

1.0

0.9

0.8

0.7

0.6

2012 2014 2016 2018 2020 2022

Australian Bureau of Statistics, 2022

Current account as a % of GDP

–2

–4

–6
2012 2014 2016 2018 2020

Reserve Bank of Australia

©RBA
OR

– 22 –
Question 26 (20 marks)

Analyse the impact of labour market policies on economic growth and the distribution of
income and wealth in Australia. In your answer, refer to the information provided.

While aggregate wages growth has picked up recently, it has only returned to
the low rates prevailing before the pandemic . . . This partly reflects elements
of Australia’s wage-setting processes, which create inertia [lack of change] in
aggregate wage outcomes. These processes include enterprise agreements that
tend to only get renegotiated once every two to three years, the annual review
of award wages by the Fair Work Commission and public sector wages policies.
Speech delivered by Phillip Lowe, Governor, RBA, December 2021
© Australian Bureau of Statistics

Productivity 2016–17 2017–18 2018–19 2019–20 2020–21

2022
GDP per hour worked 0.8 0.2 –0.1 1.5 1.2
Gross value added per hour 1.4 0.3 0.0 1.8 1.2
worked market sector

Real unit labour costs –4.0 0.1 –0.7 –1.7 –2.9

Australian Bureau of Statistics, 2021

©Australian Bureau of Statistics

Wages and GDP growth rates, 2012–2022

–2

–4

–6
–8
2012 2014 2016 2018 2020 2022

KEY
Wages growth GDP growth

Adapted from Australian Bureau of Statistics, 2021

©Australian Bureau of Statistics

Please turn over

– 23 –
Section IV

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

Your answer will be assessed on how well you:

2022
Question 27 (20 marks)

Compare how inflation affects individuals, firms and government in Australia.

Question 28 (20 marks)

Analyse reasons for the differences that exist between nations in terms of economic growth
and development.

End of paper

– 24 –
© 2022 NSW Education Standards Authority
NSW Education Standards Authority

2021 HIGHER SCHOOL CERTIFICATE EXAMINATION

2021
Economics
General • Reading time – 5 minutes
Instructions • Working time – 3 hours
• Write using black pen
• Calculators approved by NESA may be used

Total marks: Section I – 20 marks (pages 2–8)

100 • Attempt Questions 1–20
• Allow about 35 minutes for this section

Section II – 40 marks (pages 9–20)

• Attempt Questions 21–24
• Allow about 1 hour and 15 minutes for this section

Section III – 20 marks (pages 21–23)

• Attempt either Question 25 or Question 26
• Allow about 35 minutes for this section

Section IV – 20 marks (page 24)

• Attempt either Question 27 or Question 28
• Allow about 35 minutes for this section

2060
Section I

20 marks
Attempt Questions 1–20
Allow about 35 minutes for this section

Use the multiple-choice answer sheet for Questions 1–20.

1 What is a role of the World Trade Organisation?

A. To resolve trade disputes

B. To provide low interest loans
C. To set tariff rates and subsidy levels
D. To organise countries into trading blocs

2021
2 A hypothetical economy has a small population, a wide export base and a high per capita
income.

How would this economy be classified?

A. Emerging
B. Advanced
C. Developing
D. Economic forum

3 Which of the following is NOT contained in the National Employment Standards?

A. Annual leave
B. Public holidays
C. National minimum wage
D. Requests for flexible working arrangements

–2–
4 A government budgets for a deficit but then there is an unexpected decrease in the level
of economic activity.

Which row of the table shows the most likely change in tax revenue and the deficit that
results?

Tax revenue Deficit

A. Fall Increase
B. Fall Decrease
C. Rise Increase
D. Rise Decrease

5 Which of the following reflects deliberate changes in fiscal policy?

2021
A. Cyclical component
B. Structural component
C. Headline cash balance
D. Underlying cash balance

6 The Gini coefficient of a hypothetical economy has changed from 0.2 to 0.3.

An increase in which of the following is most likely to have caused this?

A. The tax-free threshold

B. A tax on consumption
C. Business spending on training
D. Government spending on welfare

7 Which of the following is a correct statement about an automatic stabiliser?

A. An increase in marginal income tax rates slows economic growth.

B. An increase in infrastructure spending increases economic growth.
C. A reduction in unemployment benefit rates slows economic growth.
D. Taxpayers moving into higher tax brackets slows economic growth.

–3–
8 Which of the following would lead to an increase in free trade?

A. Decrease in export incentives and increase in tariffs

B. Increase in export incentives and decrease in subsidies
C. Increase in size of existing quotas and decrease in tariffs
D. Decrease in size of existing quotas and decrease in subsidies

9 A hypothetical economy has moved from a Current Account Deficit to a Current Account
Surplus.

Which of the following is most likely to explain this?

A. A decrease in net saving and depreciation of the currency

2021
B. A decrease in the price of imports and depreciation of the currency
C. An increase in export prices and an increase in debt servicing costs
D. An increase in business investment and a decrease in portfolio investment

10 The graph shows the business cycle for an economy.

GDP

X
Y

Time

Which row of the table shows the combination of changes that would most likely move
GDP from X to Y ?

Taxation Cash rate

A. Rise Fall
B. Fall Fall
C. Fall Rise
D. Rise Rise

–4–
11 The table shows data for a hypothetical economy.

Year Consumer Price Index (CPI)

1 130
2 140
3 148

What is the inflation rate for Year 3?

A. 5.4%
B. 5.7%
C. 6.2%

2021
D. 8.0%

12 In a hypothetical economy, there is an increase in the marginal propensity to save (MPS).

Which row of the table shows the likely effects on both the national income and the
simple multiplier?

National income Simple multiplier

A. Increased Increased
B. Increased Decreased
C. Decreased Increased
D. Decreased Decreased

13 Which of the following statements is most correct in relation to public goods?

A. Each additional user of a public good affects the amount available to others.
B. Private companies supply public goods because they make a profit from them.
C. Anyone can benefit from using public goods without paying directly for them.
D. Low income earners are disadvantaged because they cannot afford public goods.

–5–
14 Migrant workers in Australia often send money back to their families overseas.

How is this recorded in Australia’s Current Account?

A. Primary Income debit

B. Primary Income credit
C. Secondary Income debit
D. Secondary Income credit

15 Which of the following is most likely to cause an increase in both the participation rate
and the unemployment rate?

A. An increase in the minimum wage

2021
B. An increase in government spending
C. An increase in hidden unemployment
D. An increase in the age of school leavers

16 A new tollway eliminates 24 sets of traffic lights.

Which of the following is NOT an externality as a result of the new tollway?

A. More noise pollution

B. More traffic on local streets
C. Increased value of nearby land
D. Decreased travel times for users

–6–
17 The table shows data for a hypothetical economy.

Labour force Part-time Unemployed Working-age

employed population
(million) (million) (million) (million)
Year 1 13.6 2.7 2.5 25
Year 2 14.3 2.9 2.3 26

Which of the following best describes the changes to the unemployment rate and the
participation rate from Year 1 to Year 2?

Unemployment rate Participation rate

A. Decreased Increased

2021
B. Increased Decreased
C. Decreased Decreased
D. Increased Increased

18 The table shows Balance of Payments data for a hypothetical economy.

Balance of Payments category $ billion

Imports of goods and services $110
Exports of goods and services $125
Net Primary Income –$30
Net Secondary Income –$20
Capital Account –$45
Financial Account Z

What is the value of the Balance of Goods and Services (BOGS) and the value of Z ?

BOGS Z
A. –$15 –$95
B. –$15 $80
C. $15 –$95
D. $15 $80

–7–
19 A hypothetical economy is operating under a managed exchange rate. The exchange rate
is to be maintained between $0.60–$0.70 USD. There has been an increase in demand
for the domestic currency leading to its value moving outside the central bank’s range.

How should the central bank intervene to move the exchange rate towards its range?

A. Increase cash rate to appreciate the currency

B. Decrease cash rate to depreciate the currency
C. Sell foreign currency to appreciate the currency
D. Buy domestic currency to depreciate the currency

20 The table shows data for a hypothetical economy.

2021
Nominal Gross Domestic Consumer Price Index (CPI)
Product (GDP) ($bn)
Year 1 200 100
Year 2 250 115
Year 3 300 125

What is the real economic growth rate for this economy in Year 3?

A. 8.7%
B. 9.6%
C. 10.4%
D. 20%

–8–
© 2021 NSW Education Standards Authority
2021 HIGHER SCHOOL CERTIFICATE EXAMINATION

Centre Number

Economics
Student Number
Section II Answer Booklet

2021
40 marks
Attempt Questions 21–24
Allow about 1 hour and 15 minutes for this section
Do NOT write in this area.

Instructions • Write your Centre Number and Student Number at the top of this
page.

• Answer the questions in the spaces provided. These spaces

provide guidance for the expected length of response.

• Extra writing space is provided at the back of this booklet.

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

Please turn over

–9–
Office Use Only – Do NOT write anything, or make any marks below this line.
6741310293
2061 15110
Question 21 (10 marks)

(a) Outline ONE influence of the G20 on the global economy. 2

...............................................................................................................................

(b) Distinguish between trading blocs and monetary unions. 2

...............................................................................................................................

2021
...............................................................................................................................

...............................................................................................................................

Do NOT write in this area.

...............................................................................................................................

Question 21 continues on page 11

– 10 –
Office Use Only – Do NOT write anything, or make any marks below this line.
0730310295
Question 21 (continued)

(c) Evaluate strategies used to promote economic development in an economy other 6

than Australia.

Economy: ........................................................................................................

...............................................................................................................................

2021
...............................................................................................................................
Do NOT write in this area.

...............................................................................................................................

End of Question 21

– 11 –
Office Use Only – Do NOT write anything, or make any marks below this line.
8668310293
Question 22 (10 marks)

(a) The diagram shows the private costs and private benefits of producing plastic 1
bottles.

Price
Private cost

Private benefit

2021
Quantity

On the diagram, draw the curve that would include the total cost to society of

Do NOT write in this area.

producing these bottles.

(b) Explain how ONE market-based policy can affect environmental sustainability 4
in Australia. Support your answer with an example.

...............................................................................................................................

Question 22 continues on page 13

– 12 –
Office Use Only – Do NOT write anything, or make any marks below this line.
5654310295
Question 22 (continued)

(c) Explain the limitations of economic policies in relation to Australia’s ability to 5

achieve environmental sustainability.

...............................................................................................................................

2021
...............................................................................................................................

...............................................................................................................................
Do NOT write in this area.

...............................................................................................................................

End of Question 22

– 13 –
Office Use Only – Do NOT write anything, or make any marks below this line.
8839310293
Question 23 (10 marks)

(a) Outline the impact of an increase in the minimum wage on cost inflation. 2
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................

(b) Explain the effects of low inflation on the Australian economy. 4

2021
...............................................................................................................................
...............................................................................................................................

Do NOT write in this area.

Question 23 continues on page 15

– 14 –
Office Use Only – Do NOT write anything, or make any marks below this line.
2984310298
Question 23 (continued)

(c) How can microeconomic policies reduce the non-accelerating inflation rate of 4
unemployment (NAIRU)? Support your answer with an Australian example.
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................

End of Question 23

– 15 –
Office Use Only – Do NOT write anything, or make any marks below this line.
1918310294
Question 24 (10 marks)

(a) Outline how an increase in protectionist policies in the global economy could 2
affect the demand for the Australian dollar.
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................

(b) Explain how the Australian dollar can both appreciate against the US dollar and 3
depreciate against the trade weighted index at the same time.
...............................................................................................................................

Do NOT write in this area.

Question 24 continues on page 17

– 16 –
Office Use Only – Do NOT write anything, or make any marks below this line.
7407310293
Question 24 (continued)

(c) Analyse the effects of an appreciation of the Australian dollar on the Australian 5
economy.
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................

End of Question 24

2021 Do NOT write in this area.

2021
Do NOT write in this area.

2021 Do NOT write in this area.

– 20 – © 2021 NSW Education Standards Authority

Office Use Only – Do NOT write anything, or make any marks below this line.
9410310299
2021 HIGHER SCHOOL CERTIFICATE EXAMINATION

Economics

Section III

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

Your answer will be assessed on how well you:

● demonstrate knowledge and understanding relevant to the question

2021
● use the information provided
● apply relevant economic terms, concepts, relationships and theory
● present a sustained, logical and cohesive response

Please turn over

2062 – 21 –
Question 25 (20 marks)

Evaluate the effectiveness of Australia’s fiscal policy in managing unemployment, income

distribution and external stability. In your answer, refer to the information provided.

Australian Government Budget Balance

2.5

0.0
Percent of nominal GDP (%)

–2.5

–5.0

2021
–7.5

–10.0

–12.5
07/08 11/12 15/16 19/20 23/24
Estimate

Reserve Bank of Australia 2021

Reproduced by permission of the Reserve Bank of Australia

The Government’s economic response was designed to support Australian

households and businesses through an exceptionally difficult period. It has helped
keep businesses in business and Australians in jobs through the JobKeeper
Payment and Boosting Cash Flow for Employers, and supported Australians in
need with the Coronavirus Supplement and Early Release of Superannuation.

The Government’s response is now transitioning to ensure the Australian economy

recovers strongly by targeting additional temporary support measures to boost
household incomes, bring forward business and infrastructure investment activity,
and drive the unemployment rate back down.

Australian Federal Budget 2020–21

– 22 –
Question 26 (20 marks)

Evaluate the effectiveness of Australia’s monetary policy in managing economic growth,

income distribution and external stability. In your answer, refer to the information provided.

Australian Cash Rate Target

6
Cash rate (%)

2021
2

0
2005 2010 2015 2020

Reserve Bank of Australia 2020

Reproduced by permission of the Reserve Bank of Australia

The Reserve Bank Board reduced the cash rate twice in March 2020, to 0.25 per
cent, and to 0.1 per cent on 3 November 2020. This is boosting the cash flow
of businesses and the household sector as a whole. It is also helping Australia’s
trade-exposed industries through the exchange rate. At the same time, low interest
rates do have negative consequences for some people, especially those relying on
interest income. The Reserve Bank Board has discussed these consequences, but
the evidence is that lower interest rates do benefit the community as a whole.

Reserve Bank of Australia 2020

Reproduced by permission of the Reserve Bank of Australia

Please turn over

– 23 –
Section IV

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

Your answer will be assessed on how well you:

Question 27 (20 marks)

2021
Assess the effects, over the last ten years, of free trade agreements and protectionist policies
on the global economy.

Question 28 (20 marks)

Assess the effects, over the last ten years, of changes in the global economy on Australia’s
trade and financial flows.

End of paper

– 24 –
© 2021 NSW Education Standards Authority
NSW Education Standards Authority

2020 HIGHER SCHOOL CERTIFICATE EXAMINATION

2020
Economics
General • Reading time – 5 minutes
Instructions • Working time – 3 hours
• Write using black pen
• Calculators approved by NESA may be used

Total marks: Section I – 20 marks (pages 2–9)

100 • Attempt Questions 1–20
• Allow about 35 minutes for this section

Section II – 40 marks (pages 13–24)

• Attempt Questions 21–24
• Allow about 1 hour and 15 minutes for this section

Section III – 20 marks (pages 25–27)

• Attempt either Question 25 or Question 26
• Allow about 35 minutes for this section

Section IV – 20 marks (page 28)

• Attempt either Question 27 or Question 28
• Allow about 35 minutes for this section

1060
Section I

20 marks
Attempt Questions 1–20
Allow about 35 minutes for this section

Use the multiple-choice answer sheet for Questions 1–20.

1 Which of the following identifies two economic objectives of monetary policy?

A. Price stability and full employment

B. Economic growth and external stability
C. Price stability and distribution of income
D. Economic growth and environmental sustainability

2020
2 Which international organisation is responsible for maintaining financial stability in
global financial markets?

A. World Bank
B. World Trade Organisation
C. International Monetary Fund
D. Asia–Pacific Economic Cooperation

3 Which of the following is most likely to be a feature of a decentralised wage determination

system?

A. Increased income equality

B. Wage increases are linked to inflation
C. Government policy determines wage outcomes
D. Employment contracts can vary from one workplace to another

4 A developing economy is most likely to be characterised by

A. low productivity and low population growth.

B. low employment and low infant mortality rate.
C. inadequate access to education and underprovision of public goods.
D. inadequate access to health care and GDP dominated by the provision of services.

–2–
5 A country imposes a quota on wheat imports. Assume that it does not allow any imports
of wheat beyond the quota.

Which of the following is most likely to occur if this country decides to reduce this quota
on wheat imports?

A. Increased wheat prices within the country

B. Increased export revenue for foreign wheat exporters
C. Decreased income for wheat producers within the country
D. Decreased government revenue from the change in the volume of imports

6 The table represents data for a hypothetical economy.

2020
Year Import price index Export price index
1 125 100
2 160 80

Which of the following shows the value of the terms of trade index in Year 2 and the
terms of trade trend from Year 1 to Year 2?

Terms of trade index Terms of trade trend

A. 50 Increased
B. 50 Decreased
C. 200 Increased
D. 200 Decreased

7 A foreign business purchases the rights to sell an Australian-designed product overseas.

How will this transaction be recorded in Australia’s Balance of Payments?

A. Debit in the capital account

B. Credit in the capital account
C. Debit in the financial account
D. Credit in the financial account

–3–
8 Which of the following is likely to cause a decrease in the labour force participation rate?

A. A decrease in the rate of unemployment

B. A decrease in the number of discouraged workers
C. An increase in the level of hidden unemployment
D. An increase in the value of transfer payments made to the unemployed

9 The following diagram shows two aggregate demand curves for a hypothetical economy.

Price level

2020by an increase in

A.
B.
C.
D.
the income tax-free threshold.
AD2

business investment in training programs.

the cash rate of the hypothetical economy.
AD1

Total output

All other things being equal, the shift from AD1 to AD2 is most likely to have been caused

employment in the economy of a major trading partner.

–4–
10 The table shows hypothetical data for the Australian economy over a two-year period.

Year 1 Year 2
Consumer price index (CPI) 100 103
Employed persons (’000) 1800 2000
Unemployed persons (’000) 200 125
Population (’000) 2008 2095

Which row of the table below best accounts for the changes in CPI and unemployment
rate from Year 1 to Year 2?

Reason for change Reason for change in

2020
in CPI unemployment rate
A. Reduction in the cash rate Removal of government
initiatives for education and
training
B. Appreciation of the Australian Increase in domestic investment
dollar
C. Increase in import tariffs Global economic downturn
D. Increase in consumer confidence An appreciation in the currency
of a major trading partner

11 A central bank’s monetary policy stance results in a depreciation of the economy’s

exchange rate.

All other things being equal, which of the following best identifies the stance and a
possible effect on the economy of the depreciation in the exchange rate?

Monetary policy stance Effect on economy

A. Expansionary Increase in the level of foreign direct
investment by domestic businesses
B. Expansionary Increase in the cost of international
borrowing
C. Contractionary Increase in the number of service-based
exports
D. Contractionary Increase in the balance on the net primary
income account

–5–
12 The table shows data for a hypothetical economy.

Year Real GDP growth rate Unemployment rate

1 2.10% 5.20%
2 2.90% 5.20%

Assume the economy is operating at the non-accelerating inflation rate of unemployment

(NAIRU).

Which of the following describes the most likely relationship between the changes in the
economy’s real GDP growth rate and level of unemployment?

A. Lower aggregate supply leading to a reduction in dynamic efficiencies

2020
B. Lower aggregate supply accompanied by a decrease in technical efficiencies
C. Higher aggregate demand accompanied by a decrease in underemployment
D. Higher aggregate demand leading to a reduction in structural unemployment

13 A domestic economy has experienced a decline in its net foreign liabilities as a percentage
of Gross Domestic Product (GDP).

Which of the following is most likely to have increased, contributing to this decline?

A. Debt servicing costs

B. Exchange rate volatility
C. Foreign investment into the domestic economy
D. Returns on international investments by domestic businesses

14 Under a floating exchange rate, the capital and financial account for an economy in
Year 1 is $10.6 bn surplus. In Year 2 the current account balance is in a $3.5 bn surplus.

Which of the following represents the outcome of the capital and financial account in
Year 2 and the change in size of this account from Year 1 to Year 2?

Outcome of capital and Change in size

financial account in Year 2 ($bn)
A. Deficit 7.1
B. Deficit 14.1
C. Surplus 7.1
D. Surplus 14.1

–6–
15 An economy has a headline inflation rate of 2.3% while its underlying inflation rate
is 2.6%.

Which factor could best account for this?

A. Increased minimum wage

B. Short-term oversupply of petrol
C. Reduced supply of fruit due to drought
D. Increased demand for the domestic currency

16 The table shows data for a hypothetical economy.

Year Nominal GDP Consumer price

2020
($bn) index (CPI)
1 400 100
2 420 105

All other things being equal, which statement is most likely to be true for this economy?

A. Real GDP remains unchanged due to a decrease in global economic activity.

B. Nominal GDP has increased due to an appreciation of the economy’s exchange
rate.
C. Nominal GDP has increased due to a decrease in the tariff applied to imported
products.
D. Real GDP remains unchanged due to increases in the cost of production for
businesses.

17 An initial increase in government spending of $10 million leads to a final increase in

national income of $25 million.

What is the value of marginal propensity to consume (MPC)?

A. 0.25
B. 0.4
C. 0.6
D. 0.75

–7–
18 At equilibrium, when there is no international trade, an economy consumes 30 000 kg of
cotton.

The government opens the economy to trade and introduces a tariff of $5 per kg on
cotton, resulting in imports of 10 000 kg and a total consumption of 35 000 kg of cotton.
The world price for cotton is $20 per kg.

What is the change in the domestic production of cotton and in government revenue?

Change in domestic production Change in government revenue

A. Decreased by 5 000 kg Increased by $50 000
B. Decreased by 5 000 kg Increased by $200 000
C. Decreased by 10 000 kg Increased by $50 000

2020
D. Decreased by 10 000 kg Increased by $200 000

19 The table shows exchange rate movements for the Australian economy and United States
economy.

Year Australian dollar US dollar

(AUD) (USD)
1 1 0.9
2 0.9 1

All other things being equal, which of the following best accounts for the fluctuation of
the exchange rate between Year 1 and Year 2?

A. There has been a depreciation of the AUD caused by an upturn in the international
business cycle.
B. There has been a depreciation of the AUD caused by a downturn in domestic
economic activity.
C. There has been a depreciation of the USD caused by an increase in Australia’s cash
rate relative to the US cash rate.
D. There has been a depreciation of the USD caused by a decrease in the deficit of the
net income component of the US balance of payments.

–8–
20 The diagram shows the demand and supply curves of labour for a hypothetical economy.

The government of this economy has introduced a minimum wage (Wl ) set above the
equilibrium wage rate (We ).

Wage
($) SL

Wl
We

2020
Labour

The introduction of this minimum wage has an impact on the Lorenz curve of this
economy.

The most likely impact on the Lorenz curve will be a shift

A. inwards as all employees receive a higher wage.

B. inwards as there is an increase in the level of employment.
C. outwards as all employees receive a higher wage.
D. outwards as there is an increase in the level of unemployment.

–9–
2020
BLANK PAGE

– 10 –
2020
BLANK PAGE

– 11 –
2020
BLANK PAGE

– 12 –
© 2020 NSW Education Standards Authority
2020 HIGHER SCHOOL CERTIFICATE EXAMINATION

Centre Number

Economics
Student Number
Section II Answer Booklet

2020
40 marks
Attempt Questions 21–24
Allow about 1 hour and 15 minutes for this section
Do NOT write in this area.

Instructions • Write your Centre Number and Student Number at the top of this
page.

• Answer the questions in the spaces provided. These spaces

provide guidance for the expected length of response.

• Extra writing space is provided at the back of this booklet.

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

Please turn over

– 13 –
Office Use Only – Do NOT write anything, or make any marks below this line.
6741310293
1061 15110
Question 21 (11 marks)

(a) The table shows economic information for a hypothetical economy. 2

Year Gini coefficient Human development index

1 0.87 0.35
2 0.74 0.36

With reference to the given data, outline ONE possible reason for the change
in the distribution of income from Year 1 to Year 2 for this economy.

...............................................................................................................................

2020
...............................................................................................................................

Do NOT write in this area.

(b) A developing economy has entered into a multilateral free trade agreement 2
with advanced economies.

Outline ONE disadvantage to the developing economy of entering into this

trade agreement.
...............................................................................................................................

...............................................................................................................................

Question 21 continues on page 15

– 14 –
Office Use Only – Do NOT write anything, or make any marks below this line.
0730310295
Question 21 (continued)

(d) Economic growth does not always lead to an improvement in economic 4

development.

Explain TWO factors that could cause this.

...............................................................................................................................

2020
...............................................................................................................................

...............................................................................................................................
Do NOT write in this area.

...............................................................................................................................

End of Question 21

– 15 –
Office Use Only – Do NOT write anything, or make any marks below this line.
8668310293
Question 22 (9 marks)

(a) Distinguish between structural unemployment and cyclical unemployment. 2

...............................................................................................................................

(b) Describe how ONE government policy has been used to address a skills shortage 3
in the Australian labour market.
...............................................................................................................................

2020
...............................................................................................................................

...............................................................................................................................

Do NOT write in this area.

...............................................................................................................................

Question 22 continues on page 17

– 16 –
Office Use Only – Do NOT write anything, or make any marks below this line.
5654310295
Question 22 (continued)

(c) Explain how a decrease in aggregate demand can lead to underemployment of 4

labour in an economy.

...............................................................................................................................

2020
...............................................................................................................................

...............................................................................................................................
Do NOT write in this area.

...............................................................................................................................

End of Question 22

– 17 –
Office Use Only – Do NOT write anything, or make any marks below this line.
8839310293
Question 23 (9 marks)

(a) Outline ONE reason for the protection of domestic industries. 2

...............................................................................................................................

(b) A government wants to protect the sugar industry by introducing a subsidy. 1

The diagram below shows the market before the introduction of the subsidy.

2020
On the diagram, draw the curve to show the effect of a subsidy with imports
equal to zero.

Do NOT write in this area.

Price per S
unit ($)

Domestic price

World price

Q1 Q2 Q3 Quantity

Question 23 continues on page 19

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2984310298
Question 23 (continued)

(c) Discuss Australia’s involvement in ONE bilateral trade agreement. 6

Bilateral trade agreement: ...............................................................................

...............................................................................................................................

2020
...............................................................................................................................

...............................................................................................................................
Do NOT write in this area.

...............................................................................................................................

End of Question 23

– 19 –
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1918310294
Question 24 (11 marks)

(a) Describe the relationship between microeconomic reform and aggregate supply. 3
...............................................................................................................................

...............................................................................................................................

(b) With reference to a specific product market, explain how ONE microeconomic 4

2020
reform has led to increased efficiencies.

Do NOT write in this area.

Product market: ...............................................................................................

...............................................................................................................................

Question 24 continues on page 21

– 20 –
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7407310293
Question 24 (continued)

...............................................................................................................................

2020
...............................................................................................................................

...............................................................................................................................
Do NOT write in this area.

...............................................................................................................................

End of Question 24

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4957310290
Section II extra writing space
If you use this space, clearly indicate which question you are answering.

2020 Do NOT write in this area.

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Section II extra writing space
If you use this space, clearly indicate which question you are answering.

2020
Do NOT write in this area.

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9410310299
2020 HIGHER SCHOOL CERTIFICATE EXAMINATION

Economics

Section III

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

Your answer will be assessed on how well you:

● demonstrate knowledge and understanding relevant to the question

2020
● use the information provided
● apply relevant economic terms, concepts, relationships and theory
● present a sustained, logical and cohesive response

Please turn over

1062 – 25 –
Question 25 (20 marks)

Assess the impact of exchange rate fluctuations on the external stability of the Australian
economy. In your response, refer to the information provided.

Due to copyright restrictions, this material cannot be displayed

until permission has been obtained.

Due to copyright restrictions, this material cannot be displayed

until permission has been obtained.

2020
OR

– 26 –
Question 26 (20 marks)

Assess the effectiveness of government economic policies and international agreements in

the management of the environment in Australia. In your response, refer to the information
provided.

Due to copyright restrictions, this material cannot be displayed

until permission has been obtained.

2020
Due to copyright restrictions, this material cannot be displayed
until permission has been obtained.

Please turn over

– 27 –
Section IV

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

Your answer will be assessed on how well you:

Question 27 (20 marks)

2020
Assess the effectiveness of macroeconomic policies in achieving economic growth and full
employment in the Australian economy.

Question 28 (20 marks)

To what extent do limitations of economic policies affect the achievement of economic growth
and a more equal distribution of income in the Australian economy?

End of paper

– 28 –
© 2020 NSW Education Standards Authority
NSW Education Standards Authority

2019 HIGHER SCHOOL CERTIFICATE EXAMINATION

2019
Economics
General • Reading time – 5 minutes
Instructions • Working time – 3 hours
• Write using black pen
• Calculators approved by NESA may be used

Total marks: Section I – 20 marks (pages 2–8)

100 • Attempt Questions 1–20
• Allow about 35 minutes for this section

Section II – 40 marks (pages 9–20)

• Attempt Questions 21–24
• Allow about 1 hour and 15 minutes for this section

Section III – 20 marks (pages 21–23)

• Attempt either Question 25 or Question 26
• Allow about 35 minutes for this section

Section IV – 20 marks (page 24)

• Attempt either Question 27 or Question 28
• Allow about 35 minutes for this section

2060
Section I

20 marks
Attempt Questions 1–20
Allow about 35 minutes for this section

Use the multiple-choice answer sheet for Questions 1–20.

1 Which of the following is a feature of globalisation?

A. International division of labour

B. Higher levels of trade protection
C. Greater inefficiencies in global markets
D. Decreased levels of economic integration

2019
2 The G20 is best described as

A. a trading bloc.
B. a regional free-trade agreement involving Australia.
C. a monetary union that has adopted a common currency.
D. a government forum for coordination of economic policies.

3 Which of the following describes a benefit of an appreciation of the Australian dollar to

the Australian economy?

A. Increased trade deficit

B. Decreased import volume
C. Decreased foreign debt repayments
D. Increased international competitiveness

4 Which policy in Australia is least likely to be influenced by political constraints?

A. Fiscal
B. Monetary
C. Labour market
D. Microeconomic

–2–
5 Which of the following is most likely to be the cause of a rise in the participation rate?

A. More people are retiring earlier

B. More parents are returning to the workforce
C. More unemployed people are joining the defence force
D. More students are choosing to continue with further education

6 If there is an increase in interest rates, which of the following is most likely to happen?

A. Economic growth will decrease and consumer spending will decrease.

B. The money supply will increase and the rate of inflation will decrease.
C. Business investment will increase and consumer spending will decrease.

2019
D. Unemployment will decrease and the rate of economic growth will decrease.

7 Which of the following is NOT a reason for low wage growth in an economy?

A. Low inflation
B. Low unemployment
C. Low economic growth
D. Low productivity growth

8 Which pair of sectors contribute most to Australia’s export income?

A. Mining and Services

B. Mining and Agriculture
C. Services and Agriculture
D. Services and Manufacturing

–3–
9 The table shows hypothetical data for an economy.

S G M T I X
200 400 350 300 350 250

Which row of the table is correct for this economy?

Trade balance Economic growth

A. Surplus Positive
B. Surplus Negative
C. Deficit Positive
D. Deficit Negative

2019
10 The central bank of a hypothetical economy reduces the cash rate.

All other things being equal, what is the likely effect of this action?

A. A decrease in consumer expenditure

B. An increase in the rate of unemployment
C. An appreciation of the economy’s exchange rate
D. An increase in the price of assets in the economy

–4–
11 The following diagram shows the level of income in an economy over two years.

Cumulative proportion of
total income (%) Year 1

Year 2

Cumulative proportion of
persons ranked by income (%)

2019
What changes in the top marginal rate of tax and the goods and services tax (GST) would
have caused this shift in the Lorenz curve from Year 1 to Year 2?

Top marginal rate of tax Goods and services tax (GST)

A. Increase Increase
B. Increase Decrease
C. Decrease Increase
D. Decrease Decrease

12 The table shows information for a hypothetical economy.

CAD $50 billion

Net foreign debt $900 billion
Net foreign equity $100 billion
GDP $1800 billion

What is the Net Foreign Liabilities for this economy as a percentage of GDP?

A. 2.8%
B. 44.4%
C. 50.0%
D. 55.6%

–5–
13 Inflation in a hypothetical economy has decreased from 3% in Year 1 to 2% in Year 2.

Based on this information, which statement is true?

A. Prices are increasing on average.

B. Prices are decreasing on average.
C. Unemployment is at the non-accelerating inflation rate of unemployment (NAIRU).
D. Unemployment is below the non-accelerating inflation rate of unemployment
(NAIRU).

14 The following information is for a hypothetical economy.

Working age population 10 000 000

2019
Full-time employed 4 000 000
Participation rate 50%
Unemployment rate 10%

How many people are employed part time in this economy?

A. 500 000
B. 1 000 000
C. 4 000 000
D. 4 500 000

15 The table shows data for national income (Y ) and savings (S) in $ billion for a hypothetical
economy.

Year Y S
1 250 50
2 450 100

All other things being equal, what is the new equilibrium level of income (Y ) in Year 3
if investment increases by $35 billion?

A. $497 billion
B. $590 billion
C. $600 billion
D. $650 billion

–6–
16 Which of the following is an example of a fiscal policy that is both contractionary and
discretionary?

A. Decreased tax-free threshold

B. Increased infrastructure spending in rural regions
C. Increased spending due to unexpectedly higher unemployment
D. Decreased unemployment expenditure due to higher than forecasted economic
growth

17 The Australian government provides financial aid to build a road in a neighbouring

country. Residents in Australia receive pension payments from overseas.

How will these debit and credit transactions be recorded in Australia’s balance of
payments?

2019
Debit Credit
A. Secondary income Primary income
B. Capital account Primary income
C. Capital account Secondary income
D. Secondary income Secondary income

18 Which combination of factors is most likely to result in an increase in Australia’s Trade

Weighted Index?

Terms of trade Global interest rates relative to

Australian interest rates
A. Increase Increase
B. Increase Decrease
C. Decrease Increase
D. Decrease Decrease

–7–
Use the diagram to answer Questions 19 and 20.

The diagram shows the domestic demand and supply for a particular good within an economy.
The world price is $3.

8
S
7
6
5
Price ($) 4
3
D
2

2019
1
0
10 20 30 40 50 60 70
Quantity (thousands)

19 The government is considering imposing a tariff that would have the same impact on
domestic production as an import quota of 20 000 items.

What is the total tariff revenue that will be generated?

A. $0
B. $10 000
C. $20 000
D. $40 000

20 Assume the government decides to only use subsidies as a form of protection.

What is the subsidy per unit that would result in no imports?

A. $0
B. $2
C. $3
D. $4

–8–
© 2019 NSW Education Standards Authority
2019 HIGHER SCHOOL CERTIFICATE EXAMINATION

Centre Number

Economics
Student Number
Section II Answer Booklet

2019
40 marks
Attempt Questions 21–24
Allow about 1 hour and 15 minutes for this section
Do NOT write in this area.

Instructions • Write your Centre Number and Student Number at the top of this
page.

• Answer the questions in the spaces provided. These spaces

provide guidance for the expected length of response.

• Extra writing space is provided at the back of this booklet.

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

Please turn over

–9–
Office Use Only – Do NOT write anything, or make any marks below this line.
6741310293
2061 15110
Question 21 (10 marks)

The diagram shows movements in the Australian dollar against the US dollar.

$A in terms S0
of $US
S1
0.70

0.60

2019
0 Q0 Q1 Quantity of $A

Do NOT write in this area.

(a) Outline a reason for the change in supply of the Australian dollar as shown in 2
the diagram.

...............................................................................................................................

(b) Explain why Australia’s exchange rate against the US dollar might NOT move 3
in the same direction as Australia’s Trade Weighted Index.

...............................................................................................................................

Question 21 continues on page 11

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0730310295
Question 21 (continued)

...............................................................................................................................

2019
...............................................................................................................................

...............................................................................................................................
Do NOT write in this area.

...............................................................................................................................

End of Question 21

– 11 –
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8668310293
Question 22 (10 marks)

(a) Outline the relationship between economic growth and economic development. 2
...............................................................................................................................

...............................................................................................................................

(b) Examine TWO reasons for the difference in living standards between nations. 4
...............................................................................................................................

2019
...............................................................................................................................

...............................................................................................................................

Do NOT write in this area.

...............................................................................................................................

Question 22 continues on page 13

– 12 –
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5654310295
Question 22 (continued)

(c) Assess the effectiveness of ONE strategy used to promote economic 4

development in a country other than Australia.

Selected country ..............................................................................................

...............................................................................................................................

2019
...............................................................................................................................
Do NOT write in this area.

...............................................................................................................................

End of Question 22

– 13 –
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8839310293
Question 23 (10 marks)

(a) Outline a cost that may be associated with achieving ecologically sustainable 2
development.

...............................................................................................................................

(b) Why may a public beach NOT be considered a public good? 2

2019
...............................................................................................................................

...............................................................................................................................

Do NOT write in this area.

...............................................................................................................................

(c) How does market failure create negative externalities? 2

...............................................................................................................................

Question 23 continues on page 15

– 14 –
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2984310298
Question 23 (continued)

(d) Explain how market-based policies can be used to preserve the natural 4
environment.

...............................................................................................................................

2019
...............................................................................................................................

...............................................................................................................................
Do NOT write in this area.

...............................................................................................................................

End of Question 23

– 15 –
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1918310294
Question 24 (10 marks)

Use the table to answer parts (a) and (b).

The following information refers to a hypothetical economy.

Year Real GDP Consumer Unemployment rate Current account

($ billion) price index (% workforce) balance
(CPI) (as a % of real GDP)
1 1000 100 8.9 –4
2 1100 110 6.2 –4.5
3 1220 132 3.5 –5.5

(a) Calculate the inflation rate in Year 3. 1

2019
...............................................................................................................................

Do NOT write in this area.

...............................................................................................................................

(b) Justify an appropriate monetary policy stance for this economy. Support your 4
answer with reference to the economic indicators provided.

Monetary policy stance ...................................................................................

...............................................................................................................................

Question 24 continues on page 17

– 16 –
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7407310293
Question 24 (continued)

...............................................................................................................................

2019
...............................................................................................................................

...............................................................................................................................
Do NOT write in this area.

...............................................................................................................................

End of Question 24

2019 Do NOT write in this area.

2019
Do NOT write in this area.

2019 Do NOT write in this area.

– 20 – © 2019 NSW Education Standards Authority

Office Use Only – Do NOT write anything, or make any marks below this line.
9410310299
2019 HIGHER SCHOOL CERTIFICATE EXAMINATION

Economics

Section III

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

Your answer will be assessed on how well you:

● demonstrate knowledge and understanding relevant to the question

2019
● use the information provided
● apply relevant economic terms, concepts, relationships and theory
● present a sustained, logical and cohesive response

Question 25 (20 marks)

Please turn over

2062 – 21 –
Question 25 (20 marks)

Discuss the effects of sustained budget deficits on economic growth and external stability in
the Australian economy. In your response, refer to the economic information provided.

Since 2008, the policies implemented in response to the GFC have encouraged greater
economic activity. This has resulted in public and private sector borrowing to fund
investment, consumption and imports which have contributed to Australia’s uninterrupted
economic growth. Over the same period, Australia has experienced record high asset
prices and household debt, net foreign debt in excess of $1 trillion and the lowest rates of
household savings since December 2007.

Australian Government budget balance

2019
(%)
2
budget balance (as % of GDP)
Australian Government

1
0
–1
–2
–3
–4
–5
2001 2009 2017
Year

General Government net debt

(%)
60
General Government net debt

50
(as a % of GDP)

40
30
20
10
0
–10
2001 2009 2017
Year

– 22 –
Question 26 (20 marks)

Discuss the effects of microeconomic policies on employment and inflation in the Australian
economy. In your response, refer to the economic information provided.

The economic reforms undertaken in Australia have opened markets to increased competition
and have transformed a relatively closed and regulated economy into one that is more
efficient, flexible and open. This has reduced the size and number of industries supported
by large ongoing subsidies and high tariffs, notably in manufacturing.

Labour productivity

(%)
5
Decade average

2019
4
Labour productivity

3
2
1
0
–1
–2
1980 1990 2000 2010 2017
Year

CPI inflation

(%)
12
RBA’s target range
10
8
CPI inflation

6
4
2
0
–2
1980 1990 2000 2010 2017
Year

Please turn over

– 23 –
Section IV

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

Your answer will be assessed on how well you:

Question 27 (20 marks)

2019
Explain the causes and effects of unequal distribution of income and wealth in Australia.

Question 28 (20 marks)

Explain the effects of protectionist policies on both the Australian and the global economy.

End of paper

– 24 –
© 2019 NSW Education Standards Authority
NSW Education Standards Authority

2018 HIGHER SCHOOL CERTIFICATE EXAMINATION

Economics

2018
General • Reading time – 5 minutes
Instructions • Working time – 3 hours
• Write using black pen
• Calculators approved by NESA may be used

Total marks: Section I – 20 marks (pages 2–8)

100 • Attempt Questions 1–20
• Allow about 35 minutes for this section

Section II – 40 marks (pages 9–20)

• Attempt Questions 21–24
• Allow about 1 hour and 15 minutes for this section

Section III – 20 marks (pages 21–23)

• Attempt either Question 25 or Question 26
• Allow about 35 minutes for this section

Section IV – 20 marks (page 24)

• Attempt either Question 27 or Question 28
• Allow about 35 minutes for this section

2040
2018
Section I

20 marks
Attempt Questions 1–20
Allow about 35 minutes for this section

Use the multiple-choice answer sheet for Questions 1–20.

1 A key objective of decentralised wage determination is to increase

A. work–life balance.
B. equality of income.
C. labour productivity.
D. full-time employment.

2 From which of the following would a developing economy be most likely to receive

2018
funds to build a bridge?

A. World Bank
B. World Trade Organisation
C. International Monetary Fund
D. Organisation for Economic Cooperation and Development

3 The value of trade between countries A and B increases while the value of trade between
countries A and C decreases.

All other things being equal, this most likely occurred because country A

A. implemented a free trade agreement with country B.

B. implemented a free trade agreement with country C.
C. raised import tariffs on both country B and country C.
D. reduced import tariffs on both country B and country C.

4 A reduction in a country’s company tax rate is most likely to

A. depreciate the country’s currency.

B. reduce the profitability of the country’s firms.
C. increase frictional unemployment in the country.
D. increase foreign direct investment in the country.

2018 –2–
5 A country’s central bank wishes to improve the international competitiveness of the
country’s exports.

Which combination of actions by the central bank is most likely to achieve this objective?

Foreign exchange transaction Official interest rate movement

A. Sell domestic currency Increase
B. Buy domestic currency Increase
C. Sell foreign currency Decrease
D. Buy foreign currency Decrease

6 Residents in a country town experience a significant slow-down in the speed of their

internet service as a result of a large increase in usage from newly-connected households.

The slower internet speed is most likely a result of

2018
A. free riding.
B. rivalry in consumption.
C. non-excludability in usage.
D. the internet being a public good.

7 There is a significant increase in official interest rates in the United States of America
(US).

All other things being equal, which of the following would be true?

Impact on foreign exchange Value of Australian dollar

markets in terms of $US
A. Increased demand for $US Depreciates
B. Decreased demand for $US Depreciates
C. Increased supply of $US Appreciates
D. Decreased supply of $US Appreciates

2018 –3–
8 Country A’s Lorenz curve is closer to the line of perfect equality than Country B’s
Lorenz curve.

All other things being equal, which of the following is true?

A. Country A has a larger Gini coefficient than country B.

B. Country B has a more equitable distribution of income than country A.
C. Country A’s Lorenz curve will move closer to country B’s Lorenz curve if
country A’s top marginal income tax rate is decreased.
D. Country B’s Lorenz curve will move closer to country A’s Lorenz curve if
country B’s top marginal income tax rate is decreased.

9 An Australian company purchases a foreign company that pays a dividend to Australian

shareholders.

How would these transactions be recorded on Australia’s balance of payments?

2018
Purchase of the company Payment of the dividend
A. Debit on the financial account Credit on the current account
B. Credit on the financial account Debit on the current account
C. Credit on the capital account Debit on the financial account
D. Debit on the capital account Credit on the current account

10 Alex has worked full time for the last two years at her current place of work.

Under Australia’s national system for determining minimum employment standards, and
assuming all other things being equal, Alex is NOT guaranteed

A. redundancy pay.
B. four weeks annual leave per year.
C. notice of termination of her employment.
D. protection against unfair dismissal by her employer.

2018 –4–
11 Which change in budget outcomes from Year 1 to Year 2 represents an expansionary
fiscal stance?

Budget outcome in Year 1 Budget outcome in Year 2

A. $5 billion surplus $10 billion surplus
B. $10 billion deficit $5 billion deficit
C. $10 billion deficit $15 billion surplus
D. $10 billion surplus $5 billion deficit

12 The Fair Work Act 2009 (Cth) facilitated the move from a state-based to a national
system of industrial relations.

Which of the following provides the best justification for this move?

A. To reduce the power of national employee unions

2018
B. To reduce compliance costs for state governments
C. Because private sector companies employ workers in many states
D. Because state governments typically employ workers only in their own state

13 Which of the following statements about government regulation is most correct?

A. All government regulations reduce efficiency.

B. Regulations restricting the behaviour of firms can increase efficiency.
C. Microeconomic reform requires the removal of government regulation.
D. Government regulations restrict the entry of transnational corporations.

14 In Australia, returns to enterprise typically represent a lower proportion of household

income than returns to labour because

A. the company tax rate is higher than some marginal personal income tax rates.
B. lower interest rates have significantly reduced household income from interest.
C. most workers are employed by firms and many family businesses make a loss or
small profit.
D. households usually comprise at least one worker and most workers are employed
by large firms.

2018 –5–
15 The diagram shows the relationship between a country’s consumption and income in
Year 1 and Year 2.

Consumption Year 1

Year 2

0 Income

Which of the following could explain the change from Year 1 to Year 2?

A. A rise in asset prices

B. A rise in interest rates

2018
C. A fall in the unemployment rate
D. A fall in the goods and services tax rate

16 The table shows economic information for a hypothetical economy.

Year Terms of trade (TOT) Trade weighted index (TWI)

1 100 50
2 110 60

Which of the following best explains the changes in the TOT and the TWI from Year 1
to Year 2?

A. There is an increase in global demand for the goods this economy exports and
imports.
B. The economy’s central bank increases the official cash rate relative to global
interest rates.
C. Global demand for the goods this economy imports has increased relative to global
demand for the goods this economy exports.
D. Global demand for the goods this economy exports has increased relative to global
demand for the goods this economy imports.

2018 –6–
17 For a particular country, the underlying inflation rate is greater than the headline inflation
rate.

This is most likely to have been caused by a significant

A. reduction in electricity production.

B. expansion in global oil production.
C. depreciation of the domestic currency.
D. increase in the country’s minimum wage.

18 The table shows economic information for a hypothetical economy experiencing

cyclical unemployment.

Non-accelerating inflation rate of

5%
unemployment (NAIRU)
Marginal propensity to consume (MPC) 0.8

2018
Change in national income (Y) required to
$5 billion
reach full employment

The government of this hypothetical economy increases its expenditure by $1 billion.

All other things being equal, what will be the consequence of this action?

A. National income will rise by $1 billion.

B. The rate of unemployment will equal the NAIRU.
C. The NAIRU will exceed the rate of unemployment.
D. The economy will experience a rapid increase in inflation.

2018 –7–
19 Country A and country B have flexible exchange rates and are considering forming a
monetary union. Country A is currently experiencing a recession while country B is
currently experiencing a boom.

Which of the following is most likely to be true immediately after country A and
country B form the monetary union?

A. Imported inflation will be lower in country B.

B. It will be cheaper for foreign tourists to visit country A.
C. It will be cheaper for foreign firms to acquire assets in country B.
D. The international competitiveness of country A’s exporters will increase.

20 The diagram shows domestic demand and supply curves for a hypothetical economy.

Price
S
($)

2018
10

World price = 6

0 100 200 300 400 500 Quantity

As a result of a change in trade policy in this economy, government revenue increases

by $400, the revenue of local producers declines by $1400 and the revenue of foreign
producers increases by $1600.

Which of the following is most likely to describe the change in trade policy that occurred?

A. A tariff of $0 has been replaced with a tariff of $2.

B. A tariff of $4 has been replaced with a quota of 200.
C. A quota of zero has been replaced with a tariff of $2.
D. A quota of zero has been replaced with a quota of 200.

2018 –8–
© 2018 NSW Education Standards Authority
2018 HIGHER SCHOOL CERTIFICATE EXAMINATION

Centre Number

Economics
Student Number
Section II Answer Booklet

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

2018
Do NOT write in this area.

Instructions • Write your Centre Number and Student Number at the top of this
page.

• Answer the questions in the spaces provided. These spaces

provide guidance for the expected length of response.

• Extra writing space is provided at the back of this booklet.

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

Please turn over

–9–
2018 Office Use Only – Do NOT write anything, or make any marks below this line.
6741310293
2041 15110
Question 21 (10 marks)

(a) Outline ONE cause of recent low wage growth in Australia. 2

...............................................................................................................................

(b) Explain how a low unemployment rate can co-exist with a high level of 4
underemployment.

...............................................................................................................................

2018
Do NOT write in this area.
...............................................................................................................................

...............................................................................................................................

Question 21 continues on page 11

– 10 –
2018 Office Use Only – Do NOT write anything, or make any marks below this line.
0730310295
Question 21 (continued)

(c) Explain the effects of low wage growth on the Australian economy. 4
...............................................................................................................................

...............................................................................................................................

2018
Do NOT write in this area.

...............................................................................................................................

End of Question 21

– 11 –
2018 Office Use Only – Do NOT write anything, or make any marks below this line.
8668310293
Question 22 (10 marks)

(a) Increased efficiency is a rationale for microeconomic reform. 1

Define efficiency in this context.

...............................................................................................................................

(b) Outline why reform of a single factor market is likely to have a greater impact 2
on the economy than reform of a single product market.

...............................................................................................................................

2018
Do NOT write in this area.
...............................................................................................................................

...............................................................................................................................

(c) Why might it be difficult to implement microeconomic reform during a period 3

of low economic growth?

...............................................................................................................................

Question 22 continues on page 13

– 12 –
2018 Office Use Only – Do NOT write anything, or make any marks below this line.
5654310295
Question 22 (continued)

(d) Explain how labour market reforms can help government achieve the objectives 4
of full employment and price stability in the long term.

...............................................................................................................................

2018
Do NOT write in this area.

...............................................................................................................................

End of Question 22

– 13 –
2018 Office Use Only – Do NOT write anything, or make any marks below this line.
8839310293
Question 23 (10 marks)

(a) Explain ONE cost and ONE benefit of globalisation. 4

...............................................................................................................................

2018
Do NOT write in this area.
...............................................................................................................................

...............................................................................................................................

Question 23 continues on page 15

– 14 –
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2984310298
Question 23 (continued)

(b) Explain how Australia has contributed to the process of globalisation. 6

...............................................................................................................................

2018
Do NOT write in this area.

...............................................................................................................................

End of Question 23

– 15 –
2018 Office Use Only – Do NOT write anything, or make any marks below this line.
1918310294
Question 24 (10 marks)

The table shows economic information for a hypothetical economy with a flexible
exchange rate.

2016 2017
CPI 100 105
Nominal GDP ($ billion) 1 000 1 050
Labour force (’000) 12 000 12 120
Full-time employed (’000) 8 000 7 920
Part-time employed (’000) 3 400 3 500
Net foreign debt ($ billion) 900 1 000
Net foreign liabilities ($ billion) 1 050 1 050

2018
Do NOT write in this area.
(a) With reference to the table, calculate the unemployment rate in 2016. Show all 2
working.

...............................................................................................................................

(b) With reference to the table, calculate the rate of growth in real GDP from 2016 2
to 2017. Show all working.

...............................................................................................................................

Question 24 continues on page 17

– 16 –
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7407310293
Question 24 (continued)

(c) Explain the relationship between net foreign debt and net foreign liabilities. 2
...............................................................................................................................

...............................................................................................................................

(d) Justify why the economy in the table is likely to have experienced a depreciation 4
of its exchange rate between 2016 and 2017.

...............................................................................................................................

2018
Do NOT write in this area.

...............................................................................................................................

End of Question 24

– 17 –
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4957310290
Section II extra writing space
If you use this space, clearly indicate which question you are answering.

2018
Do NOT write in this area.

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4792310297
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2018
Do NOT write in this area.

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

2018
Do NOT write in this area.

– 20 – © 2018 NSW Education Standards Authority

2018 Office Use Only – Do NOT write anything, or make any marks below this line.
9410310299
2018 HIGHER SCHOOL CERTIFICATE EXAMINATION

Economics

Section III

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

Your answer will be assessed on how well you:

● demonstrate knowledge and understanding relevant to the question
● use the information provided
● apply relevant economic terms, concepts, relationships and theory

2018
● present a sustained, logical and cohesive response

Question 25 (20 marks)

Please turn over

2042
2018 – 21 –
Question 25 (20 marks)

Assess the extent to which the move towards free trade restricts the Australian Government’s
ability to achieve its economic objectives of full employment, distribution of income and
external stability. In your response, refer to the economic information provided.

Due to copyright restrictions, this material cannot be displayed

until permission has been obtained.

Construction, manufacturing and total employment in Australia

(Index value = 100 in November 1984)
250
225
200
175

2018
150
125
100
75
Nov 1984
Mar 1986
Jul 1987
Nov 1988
Mar 1990
Jul 1991
Nov 1992
Mar 1994
Jul 1995
Nov 1996
Mar 1998
Jul 1999
Nov 2000
Mar 2002
Jul 2003
Nov 2004
Mar 2006
Jul 2007
Nov 2008
Mar 2010
Jul 2011
Nov 2012
Mar 2014
Jul 2015
Nov 2016
Manufacturing employment
Construction employment
Total employment

2018 – 22 –
Question 26 (20 marks)

Assess the extent to which Australia’s economic growth since the last recession in 1991 can
be attributed to macroeconomic policy decisions made by the Australian Government. In your
response, refer to the economic information provided.

Due to copyright restrictions, this material cannot be displayed

until permission has been obtained.

Australian official cash rate and federal government budget outcomes

Official cash rate Federal government
(%) budget outcome
($ billion)
18 30

2018
16 20
14 10
12 0
10 –10
8 –20
6 –30
4 –40
2 –50
0 –60
0

6
99

01
–1

–1

–2

–2
89

15
19

Federal government budget outcome ($ billion)

Official cash rate (%)

Please turn over

2018 – 23 –
Section IV

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

Your answer will be assessed on how well you:

Question 27 (20 marks)

Evaluate the success of government policies designed to achieve environmental sustainability

in Australia.

2018
OR

Question 28 (20 marks)

Assess the importance of factors that determine the size and composition of Australia’s current
account.

End of paper

2018 – 24 –
© 2018 NSW Education Standards Authority
HIGHER
SCHOOL
2017 CERTIFICATE
EXAMINATION

Economics

General
Instructions

Total marks:
100
2017
•
•
•
•
Reading time – 5 minutes
Working time – 3 hours
Write using black pen
NESA approved calculators may be used

Section I – 20 marks (pages 2–8)

• Attempt Questions 1–20
• Allow about 35 minutes for this section

Section II – 40 marks (pages 9–20)

• Attempt Questions 21–24
• Allow about 1 hour and 15 minutes for this section

Section III – 20 marks (pages 21–22)

• Attempt either Question 25 or Question 26
• Allow about 35 minutes for this section

Section IV – 20 marks (page 23)

• Attempt either Question 27 or Question 28
• Allow about 35 minutes for this section

2030
2017
Section I

20 marks
Attempt Questions 1–20
Allow about 35 minutes for this section

Use the multiple-choice answer sheet for Questions 1–20.

1 Which of the following is most likely to be of benefit to transnational corporations?

A. Increased trade barriers

B. Variations in regional business cycles
C. Restrictions on international financial flows
D. Migration laws that encourage international labour mobility

2 In theory, which of the following best describes the characteristics of a public good?

2017
A. Excludable and rival
B. Excludable and non-rival
C. Non-excludable and rival
D. Non-excludable and non-rival

3 Which statement about the time lags associated with government policies is most correct?

A. Fiscal policy has a longer implementation lag than monetary policy.

B. Microeconomic policies have a shorter impact lag than fiscal policy.
C. Monetary policy has a longer impact lag than microeconomic policies.
D. Microeconomic policies have a shorter implementation lag than monetary policy.

4 An economy is experiencing high unemployment and an inflation rate below the central
bank’s target rate.

Which macroeconomic policy mix is best for this economy?

A. Expansionary fiscal and monetary policy

B. Contractionary fiscal and monetary policy
C. Expansionary fiscal and contractionary monetary policy
D. Contractionary fiscal and expansionary monetary policy

2017 –2–
5 Other things being equal, Australia’s international competitiveness would be improved
by an increase in which of the following?

A. Australian inflation
B. Aggregate supply in Australia
C. Australian government spending
D. The value of the Australian dollar

6 Which of the following is most likely to be included in a market-based policy for the
management of air pollution?

A. Fines for firms that pollute

B. Firms buying and selling pollution permits
C. Domestic regulation that forces firms to meet certain emission targets
D. An international treaty that specifies emission targets and is legally enforceable

2017
7 Which of the following would most likely be driven by fluctuations in the business
cycle?

A. An increase in the GST rate

B. An increase in the tax free threshold
C. A decrease in company taxation receipts
D. A decrease in the top marginal income tax rate

8 Which of the following is most likely to occur if the Australian government finances a
budget deficit by borrowing funds in the domestic money market?

A. Upward pressure on interest rates

B. Increased domestic money supply
C. Depreciation of the Australian dollar
D. A rise in the Australian government’s share of foreign debt

2017 –3–
9 A government decides to reduce the import quota for a product.

Other things being equal, which of the following is most likely to occur in the domestic
market?

A. The revenue of foreign producers will increase.

B. The domestic price of the product will increase.
C. Domestic firms will produce less of the product.
D. The market share of foreign producers will increase.

10 Which of the following is the minimum requirement in order for an adult worker in
Australia to receive the National Minimum Wage?

A. They are legally employed.

B. They are a member of a trade union.
C. They are covered by an industrial award.

2017
D. They are covered by an enterprise agreement.

11 Which of the following must have happened if there has been a movement in Australia’s
Terms of Trade from 115 to 105?

A. The value of Australia’s imports increased relative to the value of Australia’s

exports.
B. The value of Australia’s imports decreased relative to the value of Australia’s
exports.
C. The price of Australia’s imports increased relative to the price of Australia’s
exports.
D. The price of Australia’s exports increased due to an appreciation in the Australian
dollar.

2017 –4–
12 Which of the following correctly ranks, from largest to smallest, the sources of income
as a percentage of Australian household income?

A. Returns to labour, returns to enterprise, returns to land and capital, transfer

payments
B. Returns to labour, transfer payments, returns to land and capital, returns to
enterprise
C. Returns to labour, transfer payments, returns to enterprise, returns to land and
capital
D. Returns to labour, returns to enterprise, transfer payments, returns to land and
capital

13 There is a downturn in the economy of a major importer of Australian goods and

services.

Which of the following is most likely to occur?

2017
A. A depreciation of the Australian dollar
B. An appreciation of the Australian dollar
C. A revaluation of the importer’s currency
D. A devaluation of the importer’s currency

14 The table shows hypothetical data for an economy.

G M T I X S
25 60 30 20 70 35

Which statement about this economy is correct?

A. It is expanding because exports are greater than imports.

B. It is contracting because savings are greater than taxation.
C. It is expanding because injections are greater than leakages.
D. It is contracting because leakages are greater than injections.

2017 –5–
15 The table shows employment data for a hypothetical economy.

Year Population Working age Number Number

population employed unemployed
(millions) (millions) (millions) (millions)
1 10 5 2 1
2 20 8 3 2
3 30 16 7 3
4 40 20 9 6

In which year is the unemployment rate 40% and the participation rate 62.5%?

A. 1
B. 2
C. 3
D. 4

2017
16 The table shows consumer price index (CPI) data for a hypothetical economy.

Year CPI
1 100
2 105
3 110

What happens to the prices of goods and services from Year 1 to Year 3?

A. They remain unchanged.

B. They increase at a constant rate.
C. They increase at a decreasing rate.
D. They increase at an increasing rate.

2017 –6–
17 The table shows hypothetical balance of payments data for a country.

Year 1 Year 2
(billions) (billions)
Exports of goods $100 $60
Imports of goods $110 $70
Net services –$20 –$30
Net primary income –$80 –$85
Net secondary income $10 –$5
Capital account $20 $30
Financial account $75 $90

Assuming a floating exchange rate, which of the following statements is true?

A. The balance of goods and services remains constant.

B. The current account deficit decreases from Year 1 to Year 2.

2017
C. The net errors and omissions are larger in Year 2 than in Year 1.
D. The capital and financial account surplus decreases from Year 1 to Year 2.

18 It can be argued that a book in a public library is NOT a public good.

Which of the following explanations best supports this argument?

A. People can borrow a different book.

B. Only one person can read the book at a time.
C. Anyone can become a member of the library and borrow the book.
D. The contents of the book do not change regardless of the number of times it has
been read.

2017 –7–
19 The table shows data for National Income (Y) and Consumption (C ) for a hypothetical
economy.

Year Y C
1 0 100
2 1000 Z
3 X 1300

If the value of the multiplier is 2.5, which row in the following table shows the missing
values for X and Z?

X Z
A. 1200 250
B. 1200 1100
C. 2000 600

2017
D. 2000 700

20 In 2019, one US dollar buys 1.25 Australian dollars. In 2020, one Australian dollar buys
0.75 US dollars.

Which statement is most correct?

A. There is no change in the exchange rate between 2019 and 2020.

B. Australian exports to the US are less expensive in 2020 compared to 2019.
C. Goods imported from the US are more expensive in 2019 compared to 2020.
D. For US investors, Australian assets are more expensive to buy in 2020 compared
to 2019.

2017 –8–
© 2017 NSW Education Standards Authority
HIGHER SCHOOL CERTIFICATE
2017 EXAMINATION

Centre Number

Economics
Student Number
Section II Answer Booklet

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

2017
Do NOT write in this area.

Instructions • Write your Centre Number and Student Number at the top of this
page.

• Answer the questions in the spaces provided. These spaces

provide guidance for the expected length of response.

• Extra writing space is provided at the back of this booklet.

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

Please turn over

–9–
2017 Office Use Only – Do NOT write anything, or make any marks below this line.
6741310293
2031 15110
Question 21 (10 marks)

(a) Why can dumping be used as a justification for trade protection? 2

...............................................................................................................................

(b) Explain the difference between subsidies and local content rules in discouraging 4
dumping.
...............................................................................................................................

2017
Do NOT write in this area.
...............................................................................................................................

...............................................................................................................................

Question 21 continues on page 11

– 10 –
2017 Office Use Only – Do NOT write anything, or make any marks below this line.
0730310295
Question 21 (continued)

(c) Compare and contrast the roles of the International Monetary Fund (IMF) and 4
the World Bank in international economic integration.

...............................................................................................................................

2017
Do NOT write in this area.

...............................................................................................................................

End of Question 21

– 11 –
2017 Office Use Only – Do NOT write anything, or make any marks below this line.
8668310293
Question 22 (10 marks)

(a) A large agricultural property in Australia is sold to a foreign investor. 2

Outline how this transaction can affect TWO components of Australia’s balance
of payments.

...............................................................................................................................

(b) Distinguish between direct investment and portfolio investment. 2

2017
Do NOT write in this area.
...............................................................................................................................

...............................................................................................................................

Question 22 continues on page 13

– 12 –
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5654310295
Question 22 (continued)

(c) Discuss the costs and benefits for Australia of foreign direct investment. 6
...............................................................................................................................

...............................................................................................................................

2017
Do NOT write in this area.

...............................................................................................................................

End of Question 22

– 13 –
2017 Office Use Only – Do NOT write anything, or make any marks below this line.
8839310293
Question 23 (10 marks)

(a) Distinguish between income and wealth. 2

...............................................................................................................................

(b) Explain TWO ways in which taxation can be used to change the Gini coefficient 4
from 0.5 to 0.2.

...............................................................................................................................

2017
Do NOT write in this area.
...............................................................................................................................

...............................................................................................................................

Question 23 continues on page 15

– 14 –
2017 Office Use Only – Do NOT write anything, or make any marks below this line.
2984310298
Question 23 (continued)

(c) Explain how age and gender affect wealth inequality in Australia. 4
...............................................................................................................................

...............................................................................................................................

2017
Do NOT write in this area.

...............................................................................................................................

End of Question 23

– 15 –
2017 Office Use Only – Do NOT write anything, or make any marks below this line.
1918310294
Question 24 (10 marks)

(a) Identify ONE type of unemployment that is present at full employment and 2
ONE type of unemployment that is not.

Present at full employment: .................................................................................

Not present at full employment: ..........................................................................

(b) Explain how unemployment affects economic growth in an economy. 4

...............................................................................................................................

2017
Do NOT write in this area.
...............................................................................................................................

...............................................................................................................................

Question 24 continues on page 17

– 16 –
2017 Office Use Only – Do NOT write anything, or make any marks below this line.
7407310293
Question 24 (continued)

(c) Contrast the use of fiscal policy for an economy at the non-accelerating inflation 4
rate of unemployment (NAIRU) with its use when the economy is above the
NAIRU.

...............................................................................................................................

2017
Do NOT write in this area.

...............................................................................................................................

End of Question 24

– 17 –
2017 Office Use Only – Do NOT write anything, or make any marks below this line.
4957310290
Section II extra writing space
If you use this space, clearly indicate which question you are answering.

2017
Do NOT write in this area.

– 18 –
2017 Office Use Only – Do NOT write anything, or make any marks below this line.
4792310297
Section II extra writing space
If you use this space, clearly indicate which question you are answering.

2017
Do NOT write in this area.

– 19 –
2017 Office Use Only – Do NOT write anything, or make any marks below this line.
5461310291
Section II extra writing space
If you use this space, clearly indicate which question you are answering.

2017
Do NOT write in this area.

– 20 – © 2017 NSW Education Standards Authority

2017 Office Use Only – Do NOT write anything, or make any marks below this line.
9410310299
HIGHER SCHOOL CERTIFICATE
2017 EXAMINATION

Economics

Section III

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

Your answer will be assessed on how well you:

demonstrate knowledge and understanding relevant to the question
use the information provided
apply relevant economic terms, concepts, relationships and theory
present a sustained, logical and cohesive response

2017
Question 25 (20 marks)

Analyse the implications of a decline in global economic activity for Australia’s economic
policies. In your response, refer to the economic information provided.

A flexible exchange rate helps soften the impact of external shocks on an

economy, such that monetary and fiscal policy can be directed towards achieving
domestic economic policy objectives.
Adapted from The Exchange Rate and the Reserve Bank’s
Role in the Foreign Exchange Market, February 2017
© Reserve Bank of Australia

Australia’s terms of trade and cash rate, 2010–2016

160.0 5
140.0 4.5
4
120.0
3.5
100.0 3
80.0 2.5
60.0 2
1.5
40.0
1
20.0 0.5
0.0 0
Mar-10

Mar-11

Mar-12

Mar-13

Mar-14

Mar-15

Mar-16

terms of trade cash rate

2032
2017 – 21 –
Question 26 (20 marks)

Analyse the role that the Australian government’s economic policies play in achieving price
stability in Australia. In your response, refer to the economic information provided.

Despite depreciation of the Australian dollar, inflation has declined due to

a range of factors including heightened retail competition, moderation in
conditions in housing markets and declines in the costs of business inputs such
as fuel and utilities.
Adapted from the Minutes of the Monetary Policy Meeting
of the Reserve Bank Board, 3 May 2016
© Reserve Bank of Australia

Australian TWI, wage growth, cash rate and CPI: 2010–2016

90 5
80 4.5
70 4
60 3.5
3
50
2.5

2017
40
2
30 1.5
20 1
10 0.5
0 0
Mar-10

Mar-11

Mar-12

Mar-13

Mar-14

Mar-15

cash rate trade weighted index (TWI) Mar-16

consumer price index (CPI) wage growth

2017 – 22 –
Section IV

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

Your answer will be assessed on how well you:

Question 27 (20 marks)

With reference to BOTH Australia AND one other economy, compare and contrast the effects
of globalisation on economic growth and environmental sustainability.

2017
OR

Question 28 (20 marks)

Explain how labour market policies can be used to achieve Australia’s economic objectives.

End of paper

2017 – 23 –
BLANK PAGE

2017

2017 – 24 –
© 2017 NSW Education Standards Authority
2016 HIGHER SCHOOL CERTIFICATE
EXAMINATION

Economics

2016 Total marks – 100

Section I

20 marks
Pages 2–8

• Attempt Questions 1–20

• Allow about 35 minutes for this section

General Instructions Section II Pages 9–19

• Reading time – 5 minutes 40 marks
• Working time – 3 hours • Attempt Questions 21–24
• Write using black pen • Allow about 1 hour and 15 minutes for this section
• Board-approved calculators may
be used Section III Pages 21–23

20 marks
• Attempt either Question 25 or Question 26
• Allow about 35 minutes for this section

Section IV Page 24

20 marks
• Attempt either Question 27 or Question 28
• Allow about 35 minutes for this section

2030
2016
Section I

20 marks
Attempt Questions 1–20
Allow about 35 minutes for this section

Use the multiple-choice answer sheet for Questions 1–20.

1 Which of the following is an example of a monetary union?

(A) EU
(B) APEC
(C) ASEAN
(D) NAFTA

2 Which of the following policies is mainly used to manage inflation?

2016
(A) Fiscal policy
(B) Monetary policy
(C) Competition policy
(D) Labour market policy

3 Which of the following is most likely to result in an increased budget surplus?

(A) Reduced government spending and reduced taxation

(B) Increased government spending and reduced taxation
(C) Reduced government spending and increased taxation
(D) Increased government spending and increased taxation

4 Other things being equal, which of the following is most likely to increase if Australia’s
major trading partners experience an economic slowdown?

(A) Australia’s GDP growth

(B) Australia’s unemployment rate
(C) Demand for Australia’s exports
(D) Australia’s consumer price index

2016 –2–
5 A government decides to reduce tariffs on imported goods.

Other things being equal, what will be the most likely impact on the domestic economy?

(A) Tariff revenue will increase.

(B) Tariff revenue will remain unchanged.
(C) There will be a redistribution of income from importers to local producers.
(D) There will be a redistribution of income from local producers to importers.

6 An increase in which of the following will most likely change a Gini coefficient from 0.3
to 0.4?

(A) Company tax rates

(B) The goods and services tax rate
(C) Marginal income tax rates for high income earners

2016
(D) Tax rates levied on the profits from the sale of property

7 Which of the following best describes a person experiencing frictional unemployment?

(A) A university student struggling to find work during a recession

(B) A summer fruit-picker undertaking full-time training to acquire new skills
(C) A self-employed worker whose business has shut down and who plans to start a
new business
(D) A factory worker who is employed part-time and who is actively seeking to
increase their hours of work

2016 –3–
8 The diagram refers to the change in the distribution of income in a hypothetical economy.

Cumulative proportion of
total income (%)
Year 1

Year 2

Cumulative proportion of
persons ranked by income (%)

Which of the following is most likely to increase as a result of the change in income
inequality from Year 1 to Year 2?

2016
(A) Consumption
(B) Labour force mobility
(C) Risk-taking by entrepreneurs
(D) Saving and capital investment

9 A government has recently decided to increase the age of retirement.

Which of the following are the most likely impacts of this decision on the labour force
participation rate and taxation revenue?

Impact on the labour force Impact on taxation

participation rate revenue
(A) Increase Decrease
(B) Increase Increase
(C) Decrease Increase
(D) Decrease Decrease

2016 –4–
10 All other things being equal, which of the following is most likely to shift the demand
curve for labour from DD to D1D1?

Wages D1

D S

D
0
Quantity of labour

(A) An economic downturn in the global economy

(B) An increase in the labour force participation rate

2016
(C) The establishment of minimum employment standards across all industries
(D) The implementation of a decentralised method of determining employment contracts

11 A government has changed the method of financing its budget deficit. Instead of
borrowing from the domestic private sector, it will now borrow from overseas.

All other things being equal, what is the most likely impact of this change on the domestic
economy?

(A) The foreign debt will decrease.

(B) The budget deficit will decrease.
(C) Current account deficit will increase.
(D) Domestic borrowing costs will increase.

2016 –5–
12 What is the most likely impact of an increase in the official cash rate on the domestic
economy?

(A) Lower inflationary expectations resulting from a depreciation of the domestic

currency
(B) Higher inflationary expectations resulting from an appreciation of the domestic
currency
(C) A redistribution of income and wealth towards those with a relatively high marginal
propensity to save
(D) A redistribution of income and wealth towards those with a relatively high marginal
propensity to consume

13 The Australian Government has received a repayment of an interest-free loan made to a

developing economy.

How will this be recorded in Australia’s balance of payments?

2016
(A) A debit in the secondary income account
(B) A credit in the secondary income account
(C) A debit in the capital and financial account
(D) A credit in the capital and financial account

14 Which of the following is most likely to result in a decline in Australia’s terms of trade?

Demand for Australia’s exports Supply of Australia’s exports

(A) Decreased Increased
(B) Increased Decreased
(C) Increased Increased
(D) Decreased Decreased

15 Which of the following is most likely to allow an infant industry in Australia to benefit
from globalisation?

(A) An increase in Australia’s import quotas

(B) A decrease in Australia’s levels of protection
(C) A decrease in Australia’s regulation of transnational corporations
(D) An increase in Australia’s recognition of international educational qualifications

2016 –6–
16 The table shows selected data for a hypothetical economy.

Year Money GDP Population CPI

($ millions) (millions)
1 1000 100 100
2 1500 150 110

All other things being equal, how are real Gross Domestic Product (GDP) and the Human
Development Index (HDI) most likely to change from Year 1 to Year 2?

(A) Real GDP and the HDI both increase.

(B) Real GDP and the HDI both decrease.
(C) Real GDP decreases and the HDI increases.
(D) Real GDP increases and the HDI decreases.

2016
17 An increase in which of the following is most likely to lower the non-accelerating
inflation rate of unemployment (NAIRU)?

(A) Official cash rate

(B) Government spending
(C) Infrastructure investment
(D) Use of centralised wage bargaining

18 The table shows hypothetical data for the Australian economy.

Year $A in terms of $US Headline inflation (%)

1 0.70 2
2 0.75 1

All other things being equal, how did the purchasing power of Australian consumers
change overseas and domestically from Year 1 to Year 2?

Purchasing power of Purchasing power of Australian

Australians travelling overseas consumers domestically
(A) Increased Increased
(B) Decreased Increased
(C) Increased Decreased
(D) Decreased Decreased

2016 –7–
19 The table shows hypothetical data for the Australian economy.

Loans owed by foreigners to Australians ($ billions) 150

Loans owed by Australians to foreigners ($ billions) 600

Australian assets owned by foreigners ($ billions) 100

Foreign assets owned by Australians ($ billions) 250

What is the value of Australia’s Net Foreign Liabilities?

(A) $300 billion

(B) $400 billion
(C) $600 billion
(D) $1100 billion

2016
20 It can be argued that a public road is NOT a public good because

(A) travel times vary with usage.

(B) the private sector can build and maintain roads.
(C) when one car uses the road another car can still use the road.
(D) the road is used by both public and private forms of transport.

2016 –8–
© 2016 Board of Studies, Teaching and Educational Standards NSW
2016 HIGHER SCHOOL CERTIFICATE EXAMINATION
Economics
Centre Number
Section II

40 marks
Attempt Questions 21–24 Student Number
Allow about 1 hour and 15 minutes
for this section

Answer the questions in the spaces

provided. These spaces provide
guidance for the expected length of
response.

Extra writing space is provided on

pages 18 and 19. If you use this space,
clearly indicate which question you
are answering.

2016
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Write your Centre Number and

Student Number at the top of this
page.

Please turn over

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Question 21 (10 marks)

(a) Why might a government prefer to protect an industry with a subsidy rather than 2
a tariff?

...............................................................................................................................

(b) Explain how removal of a subsidy might promote greater efficiency in an 3

economy.
...............................................................................................................................

2016
...............................................................................................................................

Do NOT write in this area.

...............................................................................................................................

Question 21 continues on page 11

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Question 21 (continued)

...............................................................................................................................

2016
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...............................................................................................................................

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Question 22 (10 marks)

(a) Outline the difference between a private benefit and a social benefit. 2
...............................................................................................................................

...............................................................................................................................

(b) Explain why developed and developing nations may take different approaches 4
to environmental sustainability.
...............................................................................................................................

...............................................................................................................................

2016
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...............................................................................................................................

...............................................................................................................................

Question 22 continues on page 13

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Question 22 (continued)

(c) Explain an advantage and a disadvantage of international environmental 4

agreements in addressing environmental sustainability in the global economy.

...............................................................................................................................

2016
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...............................................................................................................................

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8839310293
Question 23 (10 marks)

(a) On the diagram draw a new supply curve that shows a depreciation of the 1
Australian dollar.

$A in
terms of $US
S

D
0
Quantity of $A

2016
Do NOT write in this area.
(b) Briefly explain why there might be an increase in the supply of Australian 2
dollars.

...............................................................................................................................

Question 23 continues on page 15

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2984310298
Question 23 (continued)

(d) Assess the impacts of a depreciation in the Australian dollar on the level of 4
employment in Australia.

...............................................................................................................................

2016
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...............................................................................................................................

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1918310294
Question 24 (10 marks)

(a) In a hypothetical economy, MPC = 0.9. 1

What is the change in national income if investment declines by $100 million?

...............................................................................................................................

(b) Explain how changes in the MPC can affect an economy’s growth. 4
...............................................................................................................................

...............................................................................................................................

2016
...............................................................................................................................

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...............................................................................................................................

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9410310299
2016 HIGHER SCHOOL CERTIFICATE EXAMINATION
Economics
Section III

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

Your answer will be assessed on how well you:

■ demonstrate knowledge and understanding relevant to the question

■ use the information provided

■ apply relevant economic terms, concepts, relationships and theory

■ present a sustained, logical and cohesive response

2016
Question 25 (20 marks)

Please turn over

2032
2016 – 21 –
Question 25 (20 marks)

Explain how the Australian Government’s labour market policies affect both the employed and
the unemployed. In your response, refer to the economic information provided.

Without regulation and an ability to act collectively, many employees are likely to have
much less bargaining power than employers, with adverse outcomes for their wages
and conditions . . . [Awards in the Australian labour market have] some undesirable
inconsistencies and rigidities . . .
...
Wages paid are typically the key cost of employing labour… Businesses incur other
employment costs, such as workers compensation premiums, provision for leave,
superannuation and payroll taxes . . .
For employees, wages are often the main ‘return’ from working, such that an increase
in wages induces more people to enter the labour force to seek work . . .
Productivity Commission Inquiry Report, November 2015

2016
Labour force participation rates in Australia
February 1978 to February 2014

70 Males
Participation rate (%)

60 All persons

50 Females

40
February February February February February February February
1978 1984 1990 1996 2002 2008 2014

Adapted from Productivity Commission Inquiry Report,

November 2015

2016 – 22 –
Question 26 (20 marks)

Explain why an Australian Government may not be able to achieve all of its economic
objectives. In your response, refer to the economic information provided.

We are currently seeking permission to publish this material, but due

to copyright implications, it cannot be displayed until permission has
been obtained.

Where possible, a link to the original source has been provided

below.

Real GDP and CPI Inflation: Australia 2011–2015

5
4.5
4
3.5
3

2016
2.5
2
1.5
1
0.5
0
Mar 2011

Jun 2011

Sep 2011

Dec 2011

Mar 2012

Jun 2012

Sep 2012

Dec 2012

Mar 2013

Jun 2013

Sep 2013

Dec 2013

Mar 2014

Jun 2014

Sep 2014

Dec 2014

Mar 2015

Jun 2015

Sep 2015
Year end Real GDP growth Year end CPI Inflation

Please turn over

2016 – 23 –
Section IV

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

Your answer will be assessed on how well you:

■ demonstrate knowledge and understanding relevant to the question

■ apply relevant economic information, terms, concepts, relationships and theory

■ present a sustained, logical and cohesive response

Question 27 (20 marks)

Assess the impact of the Reserve Bank of Australia’s expansionary monetary policy on the
Australian economy.

2016
OR

Question 28 (20 marks)

Analyse the influence of different factors on Australia’s trade and financial flows.

End of paper

2016 – 24 –
© 2016 Board of Studies, Teaching and Educational Standards NSW
2015 HIGHER SCHOOL CERTIFICATE
EXAMINATION

Economics

2015 Total marks – 100

Section I

20 marks
Pages 2–10

• Attempt Questions 1–20

• Allow about 35 minutes for this section

General Instructions Section II Pages 13–23

20 marks
• Attempt either Question 25 or Question 26
• Allow about 35 minutes for this section

Section IV Page 27

20 marks
• Attempt either Question 27 or Question 28
• Allow about 35 minutes for this section

1030
2015
Section I

20 marks
Attempt Questions 1–20
Allow about 35 minutes for this section

Use the multiple-choice answer sheet for Questions 1–20.

1 Assume that foreign producers are selling canned tomatoes in Australia at below their
cost of production. Domestic producers ask the government to impose a tariff on these
imports.

What is the most likely reason for this request?

(A) To prevent dumping

(B) To improve national defence
(C) To support an infant industry

2015
(D) To maintain domestic employment

2 Which of the following economic policies has the shortest time lag for implementation?

(A) Fiscal policy

(B) Monetary policy
(C) Labour market policies
(D) Microeconomic reform

3 Which of the following is most likely to increase gross world product?

(A) Increased rates by central banks

(B) Increased migration to developing countries
(C) Increased protection by advanced economies
(D) Increased investment by transnational corporations in developing countries

4 Which of the following could be a negative impact of foreign direct investment in an

emerging economy?

(A) Increased provision of public goods

(B) Increased spending on transport infrastructure
(C) An increase in the country’s Human Development Index from 0.6 to 0.8
(D) An increase in the influence of transnational corporations on government regulation

2015 –2–
5 Australia provides foreign aid to build schools in a developing country.

This will be entered in Australia’s Balance of Payments as a

(A) debit in the capital account.

(B) credit in net primary income.
(C) credit in the financial account.
(D) debit in net secondary income.

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

improve their international competitiveness.

Which combination of trade policies would be most likely to achieve this?

Subsidy to domestic
Import quota
producers

2015
(A) Decrease Decrease
(B) Increase Increase
(C) Increase Decrease
(D) Decrease Increase

7 The table shows Gross Domestic Product (GDP) growth, inflation and unemployment
rate data for an advanced economy with an inflation target of 2–3%.

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 this
economy?

(A) Expansionary fiscal and expansionary monetary policy

(B) Expansionary fiscal and contractionary monetary policy
(C) Contractionary fiscal and expansionary monetary policy
(D) Contractionary fiscal and contractionary monetary policy

2015 –3–
8 Which of the following is most likely to operate as an automatic stabiliser during an
upswing in the Australian economy?

(A) Income tax

(B) Company tax
(C) Tariff revenue
(D) Goods and services tax

9 The diagram shows changes in the demand for, and supply of, Australian dollars ($A).

$A in terms
of $US S

2015
D1 D
0 Quantity
of $A

Which of the following statements is most likely to explain the change in the equilibrium
value of the $A illustrated in the diagram?

(A) The $A has appreciated because of an increase in demand for Australian exports.
(B) The $A has depreciated because of reduced microeconomic reform in the US
economy.
(C) The $A has appreciated because of a rise in the number of overseas tourists visiting
Australia.
(D) The $A has depreciated because of a rise in foreign interest rates relative to
Australian interest rates.

2015 –4–
10 The table shows data for a hypothetical economy.

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 and
international competitiveness of this economy?

Terms of International
trade competitiveness
(A) Increased Decreased
(B) Decreased Decreased
(C) Increased Increased
(D) Decreased Increased

2015
11 Which of the following government policies would be most likely to reduce an economy’s
Gini coefficient?

(A) A decrease in the goods and services tax rate and a decrease in transfer payments
(B) A decrease in expenditure on health and an increase in deregulation of the labour
market
(C) An increase in childcare subsidies for low-income earners and an increase in the
highest marginal income tax rate
(D) An increase in the income tax free threshold and a decrease in compulsory
employer superannuation contributions

2015 –5–
12 A firm invests in a new, environmentally sustainable method for recycling used
aluminium soft drink cans.

Which of the following best describes the likely economic outcome that will result from
this innovation?

(A) A positive externality and a reduction in social costs

(B) A negative externality and an increase in social costs
(C) A positive externality and a reduction in social benefits
(D) A negative externality and an increase in social benefits

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

P
AS

2015 0

efficiency and equilibrium output?

(A) AS curve shifts to the left.

AD
Q

Which of the following is most likely to reflect government policy designed to increase

(B) AD curve shifts to the left.

2015 –6–
14 The table shows labour market data for a hypothetical economy.

Year Unemployment rate Participation rate

1 7% 65%
2 5% 60%

Which of the following reasons would account for these changes from Year 1 to Year 2?

Reason for change in the Reason for change in the

unemployment rate participation rate
A reduction in the number of
(A) Global economic recession
skilled migrants
Fewer incentives to hire the long- Increased job training for the
(B)
term unemployed unemployed
Increased government spending on An increase in childcare subsidy
(C)

2015
infrastructure payments
(D) Increased consumer confidence Increase in school retention rates

15 Which of the following could lead to a deterioration in the structural component of

Australia’s current account deficit?

(A) An increase in net foreign liabilities

(B) A decrease in portfolio investment by foreign firms
(C) A decrease in export volumes due to a weakening global economy
(D) An increase in imports resulting from an improvement in the terms of trade

2015 –7–
16 The table refers to a hypothetical economy.

National income Savings

Year
($) ($)
1 1000 400
2 1500 500
3 2000 600

If the government wishes to raise the level of national income by $1000 in Year 4, by
how much will it have to increase investment?

(A) $100
(B) $200
(C) $500
(D) $800

2015
17 The Reserve Bank of Australia purchases Commonwealth Government Securities in
order to alter the cash rate.

Which of the following is the most likely result of this decision?

Australian dollar Australian GDP

(A) Appreciates Falls
(B) Depreciates Falls
(C) Depreciates Rises
(D) Appreciates Rises

2015 –8–
18 The table contains nominal data on the components of Gross Domestic Product (GDP)
for a hypothetical economy.

Year C I G X M
1 500 200 300 100 100
2 550 250 300 200 200

Assume that the consumer price index for this economy increases from 100 in Year 1 to
110 in Year 2.

What is the growth rate of real GDP in Year 2?

(A) 0%
(B) 1%
(C) 10%
(D) 14%

2015
19 The table refers to a hypothetical economy.

Year Headline inflation Underlying inflation

(%) (%)
1 2 1.7
2 2.4 1.4
3 3.2 1.2

Which combination of reasons is most likely to account for changes in the headline and
underlying inflation rates from Year 1 to Year 3?

Reason for change in Reason for change in

headline inflation underlying inflation
(A) Decreased global oil production Expansionary fiscal policy
(B) Flooding in agricultural areas Increased microeconomic reform
(C) Increased tariffs Increased minimum wage
Appreciation of the domestic
(D) Increased global oil production
currency

2015 –9–
20 The table shows Balance of Payments data for a hypothetical economy with a flexible
exchange rate.

$ Billion
Financial Derivatives 5
Net Primary Income –200
Direct Investment 50
Reserve Assets 10
Balance on Goods and Services 50
Net Secondary Income 25
Portfolio Investment 45
Capital Account ?

Using the data above, what is the value of the capital account?

2015
(A) $15 billion deficit
(B) $15 billion surplus
(C) $25 billion deficit
(D) $25 billion surplus

2015 – 10 –
BLANK PAGE

2015

2015 – 11 –
BLANK PAGE

2015

2015 – 12 –
© 2015 Board of Studies, Teaching and Educational Standards NSW
2015 HIGHER SCHOOL CERTIFICATE EXAMINATION
Economics
Centre Number
Section II

40 marks
Attempt Questions 21–24 Student Number
Allow about 1 hour and 15 minutes
for this section

Answer the questions in the spaces

provided. These spaces provide
guidance for the expected length of
response.

Extra writing space is provided on

pages 22 and 23. If you use this space,
clearly indicate which question you
are answering.

2015
Do NOT write in this area.

Write your Centre Number and

Student Number at the top of this
page.

Please turn over

– 13 –
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6741310293
1031 15110
Question 21 (10 marks)

(a) Distinguish between renewable and non-renewable resources. 2

��
��
��
��
��
��

(b) For an economy other than Australia, outline ONE impact of globalisation on its 3
environmental sustainability.

2015
Name of economy: ..........................................................................................

Do NOT write in this area.

��
��
��
��
��
��
��
��
��

Question 21 continues on page 15

– 14 –
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0730310295
Question 21 (continued)

(c) Explain how market-based policies can be used to address market failure in 5
relation to environmental management.
��
��
��
��
��
��
��
��
��

2015
Do NOT write in this area.

��
��
��
��
��
��

End of Question 21

– 15 –
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Question 22 (10 marks)

(a) Australia’s budget deficit is projected to decrease from 2.5% of GDP to 2.1% of 2
GDP.

Explain ONE possible reason for this change.

��

(b) Compare the impact of TWO different methods of financing a budget deficit on 4

2015
domestic interest rates in the Australian economy.

Do NOT write in this area.

��

��
��

��

Question 22 continues on page 17

– 16 –
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Question 22 (continued)

��

��
��

2015
Do NOT write in this area.

��

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8839310293
Question 23 (10 marks)

(a) How is the measurement of the unemployment rate in Australia influenced by 2

hidden unemployment?

��

(b) How would an appreciation of the US dollar relative to the Australian dollar 3
affect inflation in Australia?

2015
��

Do NOT write in this area.

��

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– 18 –
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2984310298
Question 23 (continued)

(c) A country’s economy is operating at the non-accelerating inflation rate of 5

unemployment (NAIRU).

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

��

2015
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��

End of Question 23

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Question 24 (10 marks)

(a) How does the international division of labour contribute to globalisation? 4

��

2015
��

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��

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Question 24 (continued)

(b) Explain TWO reasons why economies experience different levels of economic 6
development.

��

��
��

2015
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��

��
��

��

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2015
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2015 Office Use Only – Do NOT write anything, or make any marks below this line.
9410310299
2015 HIGHER SCHOOL CERTIFICATE EXAMINATION
Economics
Section III
20 marks
Attempt either Question 25 or Question 26
Allow about 35 minutes for this section

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.
Your answer will be assessed on how well you:
n demonstrate knowledge and understanding relevant to the question
n use the information provided
n apply relevant economic terms, concepts, relationships and theory
n present a sustained, logical and cohesive response

Question 25 (20 marks)

2015
Discuss the continuing role of microeconomic reform in achieving Australia’s economic
objectives. In your response, you should refer to the economic information provided.

There are many areas of the economy that are still in need of reform. The provision
of public services in health, education, utilities and transport come to mind. I do
worry that without the motivation to reform that we had in the 1980s, we risk moving
too slowly . . . On the labour market for instance . . . it is critical to our future success
that we be willing to change where that is sensible.
Source: Australian Government, The Treasury December 2014

Productivity growth in Australia

% change (% per annum), 1996–2013
per year
4.9

–2

–4.6

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

Labour productivity Capital productivity

Based on Australian Bureau of Statistics data

OR
1032
2015 – 25 –
Question 26 (20 marks)

Analyse the changing sources of economic growth and their effects on the Australian economy.
In your response, you should refer to the economic information provided.

The Australian economy needs to shift to broader sources of growth . . . a key risk
of below‑trend growth is that the economy will not generate enough jobs growth to
[employ] new entrants to the labour market.

Source: Australian Government, The Treasury November 2014

Changes in business investment

in Australian industry sectors, 2011–2015
% change % change
per year per year
Mining Services
60 Manufacturing Total 60

2015
30 30

0 0

–30 –30
2011–12 2012–13 2013–14 2014–15
Data previews: Aus 2014/15 & 2015/16 Capex Expectations. CAPEX PLANS by Industry. Reproduced with
permission by Westpac Institutional Bank.

2015 – 26 –
Section IV

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

Your answer will be assessed on how well you:

n demonstrate knowledge and understanding relevant to the question

n apply relevant economic information, terms, concepts, relationships and theory

n present a sustained, logical and cohesive response

Question 27 (20 marks)

Discuss the contributions of international organisations and trade agreements to global

economic growth and development.

2015
OR

Question 28 (20 marks)

Analyse how macroeconomic policy can be used to achieve external stability in the Australian
economy.

End of paper

2015 – 27 –
BLANK PAGE

2015

2015 – 28 –
© 2015 Board of Studies, Teaching and Educational Standards NSW
2014 HIGHER SCHOOL CERTIFICATE
EXAMINATION

Economics

2014 Total marks – 100

Section I
20 marks
Pages 2–9

• Attempt Questions 1–20

• Allow about 35 minutes for this section
General Instructions
Section II Pages 13–23
• Reading time – 5 minutes
40 marks
• Working time – 3 hours
• Attempt Questions 21–24
• Write using black or blue pen
Black pen is preferred • Allow about 1 hour and 15 minutes for this section
• Board-approved calculators may Section III Pages 25–26
be used
20 marks
• Attempt either Question 25 or Question 26
• Allow about 35 minutes for this section

Section IV Page 27
20 marks
• Attempt either Question 27 or Question 28
• Allow about 35 minutes for this section
1190
2014
Section I

20 marks
Attempt Questions 1–20
Allow about 35 minutes for this section

Use the multiple-choice answer sheet for Questions 1–20.

1 Which of the following is a trading bloc?

(A) The European Union (EU)

(B) The World Trade Organisation (WTO)
(C) The General Agreement on Tariffs and Trade (GATT)
(D) The Organisation for Economic Cooperation and Development (OECD)

2 Of which of the following groups is Australia a member?

2014
(A) The Group of 8 (G8)
(B) The Group of 20 (G20)
(C) The North America Free Trade Agreement (NAFTA)
(D) The Association of South-East Asian Nations (ASEAN)

3 Which of the following would be most likely to occur if there was a recession in the
domestic economy?

(A) Defence spending would increase.

(B) Transfer payments would decrease.
(C) GST taxation receipts would increase.
(D) Income taxation receipts would decrease.

4 In which of the following circumstances could the International Monetary Fund (IMF) be
called in to assist a country?

(A) A trade dispute

(B) A financial crisis
(C) A foreign investment dispute
(D) An infrastructure funding shortage

2014 –2–
5 In 1983 Australia moved from a fixed to a floating exchange rate.

Which of the following has been a disadvantage of the floating exchange rate?

(A) Lower foreign currency reserves

(B) Higher foreign currency reserves
(C) Increased exchange rate volatility
(D) Decreased exchange rate volatility

6 A second airport is to be built in Sydney.

Which of the following best describes a positive externality likely to arise from this
project?

(A) Reduced job opportunities around the second airport

(B) Increased traffic congestion around the second airport

2014
(C) Reduced traffic congestion around the existing airport
(D) Increased job opportunities around the existing airport

7 An economy is operating at its natural rate of unemployment.

What would be the long term effect on the unemployment rate and the participation rate
of an increase in labour market flexibility?

Unemployment rate Participation rate

(A) Increases Increases
(B) Decreases Increases
(C) Increases Decreases
(D) Decreases Decreases

2014 –3–
8 The table shows selected data for an economy.

Year Nominal GDP Real GDP

2013 100 100
2014 105 103

According to the data, what has happened to the consumer price index (CPI) between
2013 and 2014?

(A) The CPI has fallen by less than the change in nominal GDP.
(B) The CPI has fallen by more than the change in nominal GDP.
(C) The CPI has risen by less than the change in nominal GDP.
(D) The CPI has risen by more than the change in nominal GDP.

9 If a government stopped funding education, what would happen to the market

2014
equilibrium price and quantity of education?

Equilibrium price Equilibrium quantity

(A) Falls Rises
(B) Falls Falls
(C) Rises Rises
(D) Rises Falls

2014 –4–
10 The graph shows the demand for, and supply of, Australian dollars.

$A in terms
of $US S

0.90

D
0 Q Quantity
of $A

Which combination of shifts in the demand and supply curves must result in a
depreciation of the Australian dollar?

Demand curve shift Supply curve shift

2014
(A) Left Right
(B) Left Left
(C) Right Left
(D) Right Right

11 Which of the following best illustrates the effect of reduced competition on product
markets?

Equilibrium price Equilibrium quantity

(A) Decreases Increases
(B) Decreases Decreases
(C) Increases Increases
(D) Increases Decreases

2014 –5–
12 The table shows consumer price index (CPI) data for a hypothetical economy.

Year CPI
2011 145
2012 150
2013 156

What is the inflation rate for this economy for 2013?

(A) 3%
(B) 4%
(C) 5%
(D) 6%

2014
13 Australia’s mining boom has resulted in a significant increase in foreign investment.

Which of the following shows the effects of this increase on Australia’s Balance of
Payments?

Primary income account Capital and financial account

(A) Credit increase Debit increase
(B) Credit increase Credit increase
(C) Debit increase Debit increase
(D) Debit increase Credit increase

14 The Reserve Bank of Australia decides to implement an expansionary monetary policy.

Which of the following changes to commercial banks’ holdings of assets is most likely
to occur?

Commercial banks’ holdings of Commercial banks’ holdings of cash in

Commonwealth Government securities exchange settlement accounts
(A) Decrease Increase
(B) Increase Increase
(C) Decrease Decrease
(D) Increase Decrease

2014 –6–
15 The diagram shows the Lorenz curves for a hypothetical economy.

100

Cumulative proportion of
total income (%)
A B

0
100
Cumulative proportion of
persons ranked by income (%)

The Lorenz curve has shifted from A to B.

All other things being equal, which of the following changes might explain this shift?

2014
Change in the top marginal tax rate Change in business profits
(A) Decrease Increase
(B) Decrease Decrease
(C) Increase Increase
(D) Increase Decrease

16 The table shows components of the Balance of Payments for a hypothetical economy.

Components of the Balance of Payments $ billion (bn)

Balance of Goods and Services 10
Net Primary Income –20
Net Secondary Income –5
Balance on Capital Account 1
Balance on Financial Account ?

What is the balance on the Financial Account?

(A) A deficit of $14 billion

(B) A deficit of $16 billion
(C) A surplus of $14 billion
(D) A surplus of $16 billion

2014 –7–
17 Australia has a lower minimum wage for youth than for adults.

Which of the following is most likely to cause an increase in youth unemployment?

Minimum wage for youth Minimum wage for adults

(A) Unchanged Increase
(B) Unchanged Unchanged
(C) Increase Increase
(D) Increase Unchanged

18 The table shows National Accounts data for consumption (C ) and national income (Y)
for a hypothetical economy.

Year C ($ million) Y ($ million)

2014
1 240 320
2 280 370

An increase in exports lifted national income by $100 million in Year 3.

All other things being equal, what was the increase in exports?

(A) $20 million

(B) $25 million
(C) $75 million
(D) $80 million

2014 –8–
Use the following demand and supply diagram to answer Questions 19 and 20.

Price ($) D S

10
S D

20 30 40 50 60 70 80 Quantity
(millions)

19 Consider an economy in which there is a tariff of $15 in addition to the world price of
$10.

2014
If the government reduces the tariff from $15 to $10, what will be the change in tariff
revenue?

(A) $100 million

(B) $200 million
(C) $400 million
(D) $600 million

20 Consider an economy that operates a free trade policy.

The government is proposing to introduce a $5 tariff in addition to the world price of $10.

What import quota could the government introduce to have the same effect on domestic
output as a $5 tariff?

(A) 20 million units

(B) 30 million units
(C) 40 million units
(D) 60 million units

2014 –9–
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2014

2014 – 10 –
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2014

2014 – 11 –
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2014

2014 – 12 –
© 2014 Board of Studies, Teaching and Educational Standards NSW
2014 HIGHER SCHOOL CERTIFIC ATE EXAMINATION

Economics
Centre Number
Section II

40 marks
Attempt Questions 21–24 Student Number
Allow about 1 hour and 15 minutes
for this section


Answer the questions in the spaces

provided. These spaces provide
guidance for the expected length of
response.

Extra writing space is provided on

pages 22 and 23. If you use this space,
clearly indicate which question you
are answering.

2014
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Student Number at the top of this
page.

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Question 21 (10 marks)

(a) Distinguish between local content rules and export incentives. 2

...............................................................................................................................


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...............................................................................................................................

(b) The United States Government gives a subsidy to its farmers. 4

Explain the likely effects of this policy on farmers and consumers in Australia.
...............................................................................................................................

2014
Do NOT write in this area.
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

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Question 21 (continued)

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2014
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...............................................................................................................................

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Question 22 (10 marks)

(a) Briefly explain ONE cause of an exchange rate depreciation. 2

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
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...............................................................................................................................

(b) Explain how Australia’s trade weighted index (TWI) can decline even as the 3
Australian dollar appreciates against the euro.
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2014
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...............................................................................................................................

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Question 22 (continued)

(c) Analyse the effects of rising interest rates on both the current account and the 5
capital and financial account of the balance of payments.

...............................................................................................................................

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

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2014
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Question 23 (10 marks)

(a) What is the difference between the working age population and the labour force? 2

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
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(b) Explain why an economy’s labour force participation rate might decline. 4

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2014
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Question 23 continues on page 19

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Question 23 (continued)

(c) Explain how a change in the labour force participation rate can affect the federal 4
government’s revenues and expenditures.

...............................................................................................................................

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

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2014
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Question 24 (10 marks)

(a) Explain ONE cost and ONE benefit of microeconomic reform. 4

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2014
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Question 24 (continued)

(b) Explain the limitations of both fiscal policy and monetary policy in addressing 6
an economic slowdown.

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

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2014
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9410310299
2014 HIGHER SCHOOL CERTIFIC ATE EXAMINATION

Economics
Section III

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

In your answer you will be assessed on how well you:

■ demonstrate knowledge and understanding relevant to the question

■ use the information provided

■ apply relevant economic terms, concepts, relationships and theory

■ present a sustained, logical and cohesive response

2014
Question 25 (20 marks)

Explain how both labour market policies and fiscal policies can be used to reduce income
inequality and wealth inequality. In your response, you should refer to the economic
information provided.

An income safety net for all has been a long-term policy goal. The debate has been about
whether minimum wages and welfare payments achieve this objective or whether disincentive
effects mean that it has been counterproductive for some groups.

Distribution of Income, Taxes and Government Benefits in Australia, 2009–2010

(% shares of total income, taxes and benefits paid to/received by different income groups)

Share of the Share of the

poorest 20% of richest 20% of
income earners income earners

Income earned before tax (eg wages and salaries,

3.3% 45.0%
interest income)

Less taxes paid:

Income tax paid 1.2% 56.2%
Indirect taxes paid (eg GST, petrol taxes) 12.5% 30.1%

Plus government benefits received:

Transfer payments (eg pension, unemployment) 36.5% 2.5%
In-kind payments (eg free health, education) 22.0% 15.3%

Final Income 11.3% 34.7%

1192
2014 – 25 –
In your answer you will be assessed on how well you:
■ demonstrate knowledge and understanding relevant to the question

■ use the information provided

■ apply relevant economic terms, concepts, relationships and theory

■ present a sustained, logical and cohesive response

Question 26 (20 marks)

Explain the causes of inflation and its effects on the Australian economy. In your response, you
should refer to the economic information provided.

Australia has benefited from its return to low inflation in the 1990s but . . . inflation remains
an influence on the economy, markets and policy.

2014
Inflation, wages growth and interest rates in A ustralia 1980–2013

% %
20 20
CPI inflation (Annual)
18 18
Average Weekly Earnings
16 16
(wages, annual growth)
14 RBA Cash interest rate 14
12 12
10 10
8 8
6 6
4 4
2 2
0 0
–2 –2
1980

1985

1990

1995

2000

2005

2010

2013

2014 – 26 –
Section IV

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

In your answer you will be assessed on how well you:

■ demonstrate knowledge and understanding relevant to the question

■ apply relevant economic information, terms, concepts, relationships and theory

■ present a sustained, logical and cohesive response

Question 27 (20 marks)

For an economy other than Australia, discuss the strategies used to promote both economic
growth and development.

2014
OR

Question 28 (20 marks)

Discuss the role of government in attempting to achieve environmental sustainability in

Australia.

End of paper

2014 – 27 –
BLANK PAGE

2014

2014 – 28 –
© 2014 Board of Studies, Teaching and Educational Standards NSW
2013
H I G H E R S C H O O L C E R T I F I C AT E
E X A M I N AT I O N

Economics
Total marks – 100

Section I Pages 2–8

20 marks
• Attempt Questions 1–20
• Allow about 35 minutes for this section
General Instructions
Section II Pages 9–19
• Reading time – 5 minutes
40 marks
• Working time – 3 hours
• Attempt Questions 21–24
• Write using black or blue pen
Black pen is preferred • Allow about 1 hour and 15 minutes for this section
• Boardapproved calculators may Section III Pages 21–22
be used
20 marks
• Attempt either Question 25 or Question 26
• Allow about 35 minutes for this section

Section IV Page 23
20 marks
• Attempt either Question 27 or Question 28
• Allow about 35 minutes for this section
1190
2013
Section I

20 marks
Attempt Questions 1–20
Allow about 35 minutes for this section

Use the multiplechoice answer sheet for Questions 1–20.

1 Which of the following international organisations is most likely to be involved in

financing the construction of a dam in a developing country?

(A) The World Bank

(B) The World Trade Organisation
(C) The International Monetary Fund
(D) The Organisation for Economic Cooperation and Development

2 What is the most common reason given for a country to increase tariff protection?

(A) To increase trade volumes

(B) To maintain domestic employment
(C) To reduce the rate of domestic inflation
(D) To lower the level of domestic interest rates

2013 –2–
3 The diagram shows the Lorenz curves for Country A and Country B.

100

Cumulative proportion of
national income (%)
Country A

Country B

0 100
Cumulative proportion of
households ranked by income (%)

Which of the following statements is most likely to explain the different income
distribution in Country A and Country B?

(A) Country A has higher rates of saving than Country B.

(B) Country A has higher GDP per capita than Country B.
(C) Country A has higher social welfare spending than Country B.
(D) Country A has higher incentives for entrepreneurs than Country B.

4 Which of the following statements about free trade agreements is correct?

(A) They reduce trade between member countries.

(B) They treat member and nonmember countries in the same way.
(C) They can divert trade from efficient nonmember countries to inefficient member
countries.
(D) They prevent member countries entering into bilateral free trade agreements with
nonmembers.

5 Which of the following is likely to encourage the hidden unemployed to enter the labour
force?

(A) A reduction in childcare costs

(B) An increase in the unemployment rate
(C) An increase in marginal income tax rates
(D) A reduction in funding of traineeship programs

2013 –3–
6 Which of the following discretionary changes to taxation and transfer payments is most
likely to have the greatest expansionary effect on the economy?

Taxation Transfer payments

(A) Increases Increase
(B) Decreases Decrease
(C) Decreases Increase
(D) Increases Decrease

7 There is an increase in the minimum rate of employer superannuation contributions from

9% to 12% of wages.

Which of the following is the most likely effect of this increase?

(A) Increased cost inflation

(B) Decreased cost inflation
(C) Increased demand inflation
(D) Decreased demand inflation

8 The nonaccelerating inflation rate of unemployment (NAIRU) is most likely to be

reduced by increasing

(A) spending on retraining job seekers.

(B) the level of unemployment benefits.
(C) protection levels for domestic industries.
(D) spending on public infrastructure projects.

9 Which of the following describes the market equilibrium price and output in the presence
of a negative externality?

Price Output
(A) Too high Too high
(B) Too low Too low
(C) Too low Too high
(D) Too high Too low

2013 –4–
10 The table shows current account data for a hypothetical economy with a floating
exchange rate.

Components of the $ billion

current account ($bn)
Exports of goods and services 100

Imports of goods and services 120

Net primary income –140

Net secondary income –40

What is the balance on the capital account?

(A) A deficit of $160 billion

(B) A surplus of $160 billion
(C) A deficit of $200 billion
(D) A surplus of $200 billion

11 Which of the following types of unemployment is NOT affected by the rise in mining
sector activity or the decline in manufacturing sector activity?

(A) Seasonal
(B) Frictional
(C) Structural
(D) Longterm

12 Which of the following is most likely to increase a manufacturing firm’s productivity?

(A) An increase in personal income tax rates

(B) An increase in investment in capital goods
(C) A decrease in demand by consumers for the firm’s product
(D) A decrease in the size of the import quota for similar products

2013 –5–
13 Which combination of actions by the Reserve Bank of Australia is most likely to cause
a rise in the value of the Australian dollar?

Foreign currency Cash rate

(A) Buy Increase
(B) Sell Decrease
(C) Sell Increase
(D) Buy Decrease

14 Which combination of changes in interest rates and the value of the Australian dollar is
most likely to increase aggregate demand in the Australian economy?

Interest rates Value of the Australian dollar

(A) Increase Appreciates
(B) Decrease Depreciates
(C) Decrease Appreciates
(D) Increase Depreciates

15 There is a decline in the marginal propensity to consume (MPC).

Which combination of changes in the simple multiplier and equilibrium income is most
likely to result?

Simple multiplier Equilibrium income

(A) Increases Increases
(B) Decreases Decreases
(C) Decreases Increases
(D) Increases Decreases

2013 –6–
16 Australia’s interest rates are reduced while those of its major trading partners remain
unchanged.

Which combination of changes in the supply of $A and the trade weighted index is most
likely to result?

Supply of $A Trade weighted index

(A) Increases Increases
(B) Decreases Decreases
(C) Decreases Increases
(D) Increases Decreases

17 Which combination of actions does the Reserve Bank of Australia need to take in order
to implement a contractionary monetary policy?

Commonwealth Domestic
Government Securities money supply
(A) Buy Increase
(B) Sell Decrease
(C) Sell Increase
(D) Buy Decrease

18 Australia’s headline annual (CPI) inflation rate has fallen from 3% to 2%, while the
underlying annual inflation rate remains unchanged at 3%.

The divergence between these two measures of inflation is most likely due to

(A) a decrease in house prices.

(B) an increase in house prices.
(C) a decrease in world oil supply.
(D) an increase in world oil supply.

2013 –7–
19 The following table shows the volume and price of exports and imports for two years.

Exports Imports
Year Volume Price Volume Price
Year 1 100 100 100 100
Year 2 105 110 110 105

How have the terms of trade and the volume of net exports changed between Year 1 and
Year 2?

Terms of trade Net exports

(A) Risen Increased
(B) Fallen Decreased
(C) Fallen Increased
(D) Risen Decreased

20 The diagram shows the effect of a tariff on domestic supply (SS) and demand (DD). The
free trade price is $20. The current tariff is $10.

Price D S
(per unit)

S D

80 90 100 110 120 Quantity

If the government reduces the tariff to $5, which combination of outcomes is correct?

Tariff revenue Domestic output

(A) Rises Rises
(B) Falls Falls
(C) Falls Rises
(D) Rises Falls

2013 –8–
© Board of Studies NSW 2013
2013 HIGHER SCHOOL CERTIFIC ATE EXAMINATION

Economics
Centre Number
Section II

40 marks
Attempt Questions 21–24 Student Number
Allow about 1 hour and 15 minutes
for this section


Answer the questions in the spaces

provided. These spaces provide
guidance for the expected length of
response.

Extra writing space is provided on

pages 18 and 19. If you use this space,
clearly indicate which question you
are answering.
Do NOT write in this area.

Write your Centre Number and

Student Number at the top of this
page.

Please turn over



–9–
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6741310293
1191 15110
Question 21 (10 marks)

(a) A highway currently passes through a country town. The government is proposing 4
to build a bypass that diverts highway traffic away from the town.

Discuss the costs and benefits of this proposal.

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
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Question 21 continues on page 11

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0730310295
Question 21 (continued)

(b) Explain the effect that globalisation has had on environmental sustainability. 6

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

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End of Question 21
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Question 22 (10 marks)

(a) A hypothetical economy has a simple multiplier of 2.5.

Calculate the change in national income that would result from an increase in 1
investment of $100 million.

...............................................................................................................................


(b) Outline how economic growth in a major trading partner might influence 2
economic growth in Australia.

...............................................................................................................................

Do NOT write in this area.

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

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Question 22 continues on page 13

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5654310295
Question 22 (continued)

(d) Explain the effects of a reduced rate of economic growth on the Australian 4
Government budget.

...............................................................................................................................

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

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Do NOT write in this area.

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End of Question 22


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8839310293
Question 23 (10 marks)

(a) Distinguish between the current account deficit and foreign debt. 2
...............................................................................................................................

...............................................................................................................................


...............................................................................................................................

...............................................................................................................................

(b) Explain how the level of national savings can influence the size of the current 3
account.

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Do NOT write in this area.

...............................................................................................................................

Question 23 continues on page 15 

– 14 –
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2984310298
Question 23 (continued)

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

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End of Question 23


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1918310294
Question 24 (10 marks)

(a) The following diagram shows aggregate demand and aggregate supply curves 2
for a hypothetical economy.

P
AS


P0

AD
0 Q0 Q

On the diagram, draw the new curve that results if there is a fall in labour
productivity. Label the new equilibrium price P1 and the new equilibrium
quantity Q1.

Do NOT write in this area.

(b) Outline an effect of product market deregulation on inflation. 2
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................
...............................................................................................................................

(c) Outline a feature of a centralised labour market policy. 2

Question 24 continues on page 17

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7407310293
Question 24 (continued)

(d) Outline an advantage and a disadvantage of moving from a fixed exchange rate 4
to a floating exchange rate system.
...............................................................................................................................
...............................................................................................................................
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

...............................................................................................................................
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Do NOT write in this area.

End of Question 24


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4957310290
Section II Extra writing space

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

______________________________________________________________________________


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Do NOT write in this area.

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______________________________________________________________________________


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– 18 –
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4792310297
Section II Extra writing space

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

______________________________________________________________________________

______________________________________________________________________________


______________________________________________________________________________

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Do NOT write in this area.

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

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

– 20 – © Board of Studies NSW 2013

2013 Office Use Only – Do NOT write anything, or make any marks below this line.
9410310299
2013 HIGHER SCHOOL CERTIFIC ATE EXAMINATION

Economics
Section III

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

In your answer you will be assessed on how well you:

■ demonstrate knowledge and understanding relevant to the question

■ use the information provided

■ apply relevant economic terms, concepts, relationships and theory

■ present a sustained, logical and cohesive response

Question 25 (20 marks)

Explain how movements in the Australian dollar can affect the performance of the Australian
economy. In your response, you should refer to the economic information provided.

The high Australian dollar has had a major moderating effect on the resources boom.
In doing so, it has created some winners and some losers.

Australian dollar 1987–2012

vs. $US vs. $US
1.20 1.20
vs. US dollar
1.10 Long-term average 1987–2012 1.10
1.00 1.00
0.90 0.90
0.80 0.80
0.70 0.70
0.60 0.60
0.50 0.50
0.40 0.40
Dec 1987 Dec 1992 Dec 1997 Dec 2002 Dec 2007 Dec 2012

1192
2013 – 21 –
In your answer you will be assessed on how well you:
■ demonstrate knowledge and understanding relevant to the question

■ use the information provided

■ apply relevant economic terms, concepts, relationships and theory

■ present a sustained, logical and cohesive response

Question 26 (20 marks)

Explain the effects of Australia’s macroeconomic policy mix on economic growth and inflation
in the domestic economy. In your response, you should refer to the economic information
provided.

In early 2008, before the global financial crisis (GFC), inflation was the major
concern of policy makers. PostGFC, their focus has shifted to economic growth.

Australian unemployment and underlying inflation 2002–2012

Annual inflation Unemployment

rate (%) rate (%)
5.0 8.0
4.5 7.5
4.0 7.0
3.5 6.5
3.0 6.0
2.5 5.5
2.0 5.0
1.5 4.5
1.0 4.0
Underlying CPI annual inflation rate
0.5 3.5
Unemployment rate
0.0 3.0
Dec 2002 Dec 2004 Dec 2006 Dec 2008 Dec 2010 Dec 2012

2013 – 22 –
Section IV

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

Answer the question in the Sections III and IV Writing Booklet. Extra writing booklets are
available.

In your answer you will be assessed on how well you:

■ demonstrate knowledge and understanding relevant to the question

■ apply relevant economic information, terms, concepts, relationships and theory

■ present a sustained, logical and cohesive response

Question 27 (20 marks)

Analyse the effects of domestic AND global free trade and protection policies on the Australian
economy.

Question 28 (20 marks)

Analyse the causes of unemployment and its effects on the Australian economy.

End of paper

2013 – 23 –
BLANK PAGE

2013 – 24 –
© Board of Studies NSW 2013
2012
H I G H E R S C H O O L C E R T I F I C AT E
E X A M I N AT I O N

Economics
Total marks – 100

Section I Pages 2–8

20 marks
• Attempt Questions 1–20
• Allow about 35 minutes for this section
General Instructions
Section II Pages 9–19
• Reading time – 5 minutes
40 marks
• Working time – 3 hours
• Attempt Questions 21–24
• Write using black or blue pen
Black pen is preferred • Allow about 1 hour and 15 minutes for this section
• Board-approved calculators may Section III Pages 21–22
be used
20 marks
• Attempt either Question 25 or Question 26
• Allow about 35 minutes for this section

Section IV Page 23
20 marks
• Attempt either Question 27 or Question 28
• Allow about 35 minutes for this section
1120
2012
Section I

20 marks
Attempt Questions 1–20
Allow about 35 minutes for this section

Use the multiple-choice answer sheet for Questions 1–20.

1 Which of the following is classified as a trading bloc?

(A) United Nations (UN)

(B) European Union (EU)
(C) Group of Twenty (G20)
(D) Organisation for Economic Cooperation and Development (OECD)

2 What was one of the objectives of the national wage system established by the Fair Work
Act 2009?

(A) To reduce the number of awards

(B) To replace enterprise agreements
(C) To reduce the national minimum wage
(D) To remove the safety net protection for low paid workers

3 Which of the following is most likely to occur as a country becomes more economically
developed?

(A) Education levels decrease

(B) Labour productivity increases
(C) Reliance on foreign aid increases
(D) Agricultural production as a share of GDP increases

4 What are the Reserve Bank of Australia’s main objectives in implementing monetary
policy?

(A) Price stability and full employment

(B) Price stability and a reduction in national debt
(C) Full employment and an increase in national savings
(D) Full employment and a more equal distribution of income

2012 –2–
5 The table shows selected data for an economy.

Year Real GDP ($bn) Consumer Price Index Unemployment rate (%)
1 4000 100 5
2 3900 101 8

For Year 2, which policy mix is most appropriate for policy makers focused ONLY on
employment outcomes?

(A) Expansionary fiscal policy and expansionary monetary policy

(B) Contractionary fiscal policy and expansionary monetary policy
(C) Expansionary fiscal policy and contractionary monetary policy
(D) Contractionary fiscal policy and contractionary monetary policy

6 The table shows employment data for an economy.

Year 1 Year 2
Part-time employed persons 200 000 210 000
Full-time employed persons 600 000 640 000
Unemployed persons 100 000 110 000
Working age population 1500 000 1570 000

Based on the data in the table, what is the change in the labour force between Year 1 and
Year 2?

(A) 40 000
(B) 50 000
(C) 60 000
(D) 70 000

2012 –3–
7 The table shows selected data for an economy.

Components of National Income $ billion ($bn)

Savings 40
Government expenditure 50
Exports 80
Taxation 60
Investment 40
Imports 70

Based on the information in the table, which of the following is correct?

(A) There is a trade deficit.

(B) There is a budget surplus.
(C) Injections are greater than leakages.
(D) Leakages are greater than injections.

8 The unemployment rate rises from 4% to 6%. What is the most likely impact on the
Federal Government’s income tax revenues and social security payments?

Income tax revenues Social security payments

(A) Increase Increase
(B) Decrease Decrease
(C) Increase Decrease
(D) Decrease Increase

9 All other things being equal, what impact will a decrease in domestic interest rates have
on consumer spending and on the household savings rate?

Consumer spending Household savings rate

(A) Falls Falls
(B) Rises Rises
(C) Falls Rises
(D) Rises Falls

2012 –4–
10 The Reserve Bank of Australia sells government securities. What is the most likely effect
on the supply of cash in Exchange Settlement accounts and on interest rates?

Supply of cash in Interest rates

Exchange Settlement accounts
(A) Decrease Decrease
(B) Increase Decrease
(C) Decrease Increase
(D) Increase Increase

11 The table shows selected data for an economy with a floating exchange rate.

Balance of payments components $ billion ($bn)

Exports ?
Imports 700
Net Services 100
Net primary income (net income) –150
Net secondary income (net transfers) 50
Balance on the capital and financial account 200

From the data, what is the value of exports?

(A) $900bn
(B) $700bn
(C) $500bn
(D) $300bn

12 Which of the following government policy decisions would be most suitable for
achieving environmental sustainability?

(A) Impose a tax on firms that cause either a positive or negative externality
(B) Pay a subsidy to firms that cause either a positive or negative externality
(C) Impose a tax on firms that cause a positive externality and pay a subsidy to firms
that cause a negative externality
(D) Pay a subsidy to firms that cause a positive externality and impose a tax on firms
that cause a negative externality

2012 –5–
13 Which of the following statements best applies to public goods?

(A) These goods are subject to over-pricing.

(B) There are fixed supplies of these goods.
(C) Consumers must pay to use these goods.
(D) Consumers can access these goods without paying directly for them.

14 The following diagram shows aggregate demand (AD) and aggregate supply (AS) curves
for the Australian economy.

AS1
Price level

AS2

0 Quantity

All other things being equal, which of the following is most likely to cause the shift in
the aggregate supply curve from AS1 to AS2?

(A) An increase in the budget surplus

(B) An increase in labour productivity
(C) An increase in the minimum wage for casual workers
(D) An increase in interest rates by the Reserve Bank of Australia

2012 –6–
15 The table shows population and employment data for an economy.

Year Working age population Employed Unemployed

(million) (million) (million)
1 30 21 3
2 40 27 3

Which of the following statements is correct for Year 2 compared to Year 1?

(A) Year 2 has a lower participation rate and lower unemployment rate.
(B) Year 2 has a lower participation rate and higher unemployment rate.
(C) Year 2 has a higher participation rate and lower unemployment rate.
(D) Year 2 has a higher participation rate and higher unemployment rate.

16 All other things being equal, which of the following is most likely to cause an increase
in Australia’s current account deficit?

(A) A decrease in national savings

(B) A decrease in Australian overseas aid
(C) An increase in the Federal Government’s budget surplus
(D) An increase in the number of overseas students studying in Australia

17 The table shows the exchange rate of the Australian dollar ($A) expressed as units of
foreign currency per $A.

Year Euro per $A1 $US per $A1 Yen per $A1
1 0.7 1.10 80
2 0.8 1.00 90

How has the exchange rate of the Australian dollar changed in Year 2 compared to
Year 1?

(A) It has appreciated against the Euro and depreciated against the Yen.
(B) It has depreciated against the Euro and appreciated against the Yen.
(C) It has appreciated against the Euro and depreciated against the $US.
(D) It has depreciated against the Euro and appreciated against the $US.

2012 –7–
18 The diagram shows the impact of a subsidy paid to domestic producers on the price and
quantity of beach towels. Assume that the equilibrium price of beach towels with the
subsidy is $10 per towel.

Price
($) S1
S2

D
12 20 Quantity

From the diagram, what is the subsidy (per towel) paid to domestic producers?

(A) $2
(B) $4
(C) $8
(D) $12

19 An increase in investment of $5000 increases the equilibrium level of national income by

$20 000. What is the marginal propensity to consume (MPC)?

(A) 0.2
(B) 0.25
(C) 0.75
(D) 0.8

20 Which of the following is most likely to reduce Australia’s import volumes?

Economic activity in Australia Australian dollar

(A) Recession Appreciation
(B) Expansion Depreciation
(C) Expansion Appreciation
(D) Recession Depreciation

2012 –8–
© Board of Studies NSW 2012
2012 HIGHER SCHOOL CERTIFIC ATE EXAMINATION

Economics
Centre Number
Section II

40 marks
Attempt Questions 21–24 Student Number
Allow about 1 hour and 15 minutes
for this section
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Answer the questions in the spaces

provided. These spaces provide
guidance for the expected length of
response.

Extra writing space is provided on

pages 18 and 19. If you use this space,
clearly indicate what question you are
answering.
Do NOT write in this area.

Please turn over

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Question 21 (10 marks)

(a) Distinguish between import tariff and import quota. 2

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(b) Outline TWO reasons for the protection of domestic industries. 4

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Question 22 (10 marks)

(a) The consumer price index (CPI) is 120 in Year 1 and 126 in Year 2. 1

Calculate the inflation rate between Year 1 and Year 2.

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(b) What is the difference between the headline rate and the underlying rate of CPI 2
inflation?

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(c) How might inflationary expectations affect inflation? 3

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Question 22 (continued)

(d) Explain the possible effects on the domestic economy if domestic inflation is 4
high relative to inflation in other countries.

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Question 23 (10 marks)

(a) The diagram shows the Lorenz Curve for an economy. 1

100

Cumulative proportion of
national income (%)

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0
0 100

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Cumulative proportion of
households ranked by income (%)

On the diagram, draw another Lorenz Curve that represents a MORE equal
distribution of income for this economy.

(b) Outline an economic benefit of income inequality. 2

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Question 23 (continued)

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(d) Explain the ways in which fiscal policy can reduce income inequality. 4
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Question 24 (10 marks)

(a) What is the difference between underemployment and hidden unemployment? 2

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(b) Why might changes in underemployment NOT affect the unemployment rate? 2

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(d) How would an increase in the minimum wage affect the labour market? Assume 3
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that the minimum wage is above the equilibrium wage.

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

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