QCE EconomicsPractice Examination 16

This paper covers

• Automatic stabilisers — means-tested income support payments (JobSeeker, Youth Allowance) as automatic fiscal stabilisers during economic contraction
• Discretionary fiscal stimulus — lump-sum transfers, infrastructure spending, tax cuts; multiplier effects and lags
• AD/AS model — demand-side shocks, shifts in aggregate demand, equilibrium output and price level
• Macroeconomic objectives — full employment, price stability, economic growth, external stability, equitable income distribution
• Fiscal policy stances — expansionary, contractionary, neutral; budget balance, deficit and surplus
• Business cycle — recession, contraction, output gap, unemployment cyclical vs structural
• Multiplier effect — operation, size determinants (MPC, marginal tax rate, import propensity)
• Monetary policy — RBA cash rate, four transmission channels, lags and limitations vs fiscal policy
• Balance of payments — current account, capital and financial account; twin deficits hypothesis
• International trade and exchange rates — floating exchange rate, J-curve, terms of trade
• Crowding out — public borrowing, interest rates, private investment displacement
• Income distribution — Gini coefficient, means-testing rationale, welfare effects of stabilisers
• Aggregate supply / microeconomic reform — supply-side complementarity with demand management
• Trade-offs between macroeconomic objectives — inflation-unemployment trade-off, Phillips curve
• Effectiveness evaluation — timeliness, targeting, leakage, political constraints, debt sustainability

Students are permitted to bring into the examination the materials normally allowed for this subject. Answer all questions in the spaces provided.

This is an ATARMAxxing practice paper. It is not an official examination and is not affiliated with, endorsed by, or produced by the VCAA, NESA or the QCAA.