YEARLY EXAMINATION

2019

Economics
General Instructions
• Reading time – 5 minutes
• Working time – 2 hours
• Write using black pen
• NESA approved calculators may be used

Total marks: 70

Section I – 20 marks (pages 2–7)

• Attempt Questions 1–20

• Allow about 35 minutes for this section

Section II – 30 marks (pages 9–14)

• Attempt Questions 21–25

• Allow about 50 minutes for this section

Section III – 20 marks (page 16)

• Attempt Question 26
• Answer in the writing booklets provided
• Allow about 35 minutes for this section
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 consumer credit?

(A) Bond
(B) Mortgage
(C) Credit card
(D) Commonwealth Government Securities

2 Which level of government is primarily responsible for the supply of education and health
care services?

(A) State
(B) Local
(C) Federal
(D) International

3 Which institution is the controlling authority responsible for regulating individual deposit-
taking institutions to promote the stability of the Australian financial system?

(A) Reserve Bank of Australia

(B) Australian Securities and Investments Commission
(C) Australian Prudential Regulation Authority
(D) Australian Treasury

4 A person earns an income that is high enough to afford necessities but not enough to afford
the average standard of living in the economy.

Which of the following describes this person’s situation?

(A) Relative poverty

(B) Absolute poverty
(C) Moderate poverty
(D) Localised poverty

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5 The table shows data for a hypothetical economy

INCOME CONSUMPTION
0 50
75 100
150 150
225 200
300 250

From the information given in the table above, which of the following statements is
true?

(A) MPC is rising and the APC is falling.

(B) MPC is falling and the APC is rising.
(C) MPC is constant and the APC is falling.
(D) MPC and APC are rising.

6 Which of the following correctly describes wage outcomes for migrants to Australia?

English Speaking Background Non-English Speaking Background

(A) Above average Above average
(B) Above average Below average
(C) Below average Above average
(D) Below average Below average

7 The table shows data for a hypothetical economy in equilibrium.

G I M S T X
400 420 37 340 500 ?

What is the value of the economy’s exports?

(A) 17
(B) 57
(C) 63
(D) 143

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8 Which of the following best defines the price mechanism?

(A) The interaction of supply and demand to determine market price.

(B) The setting of prices by a regulatory or government body.
(C) The method of calculating the consumer price index.
(D) The measure of the general movement of prices in the economy.

Use the following information to answer Questions 9 & 10.

The table shows data for a hypothetical economy.

Population Population aged 15+ Employed Unemployed

750,000 600,000 300,000 60,000

9 13What is the economy’s unemployment rate?

(A) 8%
(B) 10%
(C) 17%
(D) 20%

10 What is the economy’s labour force participation rate?

(A) 40%
(B) 48%
(C) 50%
(D) 60%

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Use the following information to answer Questions 11 and 12.

The table shows data for a person in a hypothetical economy.

Income before tax Income after tax Consumption Saving

10,000 9,000 5,000 4,000
11,000 9,350 5,070 4,280
12,000 9,600 5,120 4,480

11 What type of tax system does this economy have?

(A) Regressive
(B) Progressive
(C) Proportional
(D) Accelerating

12. What type of unemployment may result from changes in consumer tastes and
preferences?

(A) Cyclical unemployment

(B) Frictional unemployment

(C) Structural unemployment

(D) Seasonal unemployment

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Use the following information to answer Questions 13–15.

The diagram shows the demand and supply for oil.

13 Which of the following could have caused this change?

(A) Difficulty storing oil for a long time

(B) A decrease in the price of electric cars
(C) A natural disaster in a major oil producing country
(D) A rise in the price of oil due to an increase in car usage

14 What is the change in total revenue for oil producers as a result of this shift?

(A) An increase of $80

(B) A decrease of $80
(C) An increase of $190
(D) A decrease of $190

15 According to the diagram, how elastic is demand to the change in price of oil?

(A) Unit elastic

(B) Relatively elastic
(C) Perfectly inelastic
(D) Relatively inelastic

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16 Which of the following would be most likely to cause an increase in the labour force
participation rate?

(A) A fall in real wage levels

(B) An decrease in the retirement age
(C) An increase in hidden unemployment
(D) A reduction of the high school leaving age

17 Which of the following is a feature of a planned economy?

(A) Prices are determined by the price mechanism

(B) The role of government in the economy is limited

(C) The role of enterprise in the economy is limited

(D) Resources are allocated according to demand and supply

18 Broad money refers to:

(A) money that has been printed by the RBA.

(B) money that has been printed by the RBA and money that has been deposited with
the RBA.
(C) money that has been printed by the RBA and money that has been deposited with
commercial banks.
(D) money that has been printed by the RBA and money that has been deposited with
any deposit-taking institution.

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19. The diagram shows the long-run average cost curve for a hypothetical firm.

Which of the following could cause the firm to move from point A to point B on the
diagram?

(A) Specialisation of employee tasks

(B) An increase in the cost of inputs
(C) Increased investment in capital equipment
(D) Increased congestion of transport infrastructure by rival firms

20 Which of the following is an example of a merit good?

(A) An electricity supply station

(B) A supermarket
(C) A community library
(D) A bank

End of Section I

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2 0 1 9 PRELIMINARY YEARLY EXAM

Economics
Section II
30 marks
Attempt Questions 21–25

Allow about 50 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 15 and 16. If you use this space, clearly indicate which
question you are answering.

Please turn over

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Question 21 (6 marks)

The diagram shows a production possibility frontier for cars and tonnes of wheat in a
hypothetical economy.

(a) Draw on the diagram what would occur if there was an increase in technological 1
innovation in wheat production.

(b) Define opportunity cost

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(c) Calculate the opportunity cost of producing 1 tonne of wheat. 1

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Question 21 continues on page 11

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Question 21 (continued)

(d) Explain the future economic implications of firms choosing to make a large 3
number of cars compared to wheat.

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Question 22 (6 marks)

(a) Distinguish between substitute goods and complement goods. 2

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(b) Analyse the possible impacts of technological change on how well firms achieve 4
their goals.

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Question 23 (6 marks)
The diagram below shows the supply and demand for BTS concert tickets
at Sydney’s Qudos Bank Arena on the 10 June 2020 at 7.30pm.

$ D
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Q
(a) Explain how ONE factor could effect the elasticity of demand for the concert
tickets.

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(b) Explain why the supply curve is vertical for the concert.
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Question 24 (6 marks)

(a) Distinguish between an award and an enterprise agreement. 2

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(b) Discuss the economic impacts of an inequitable distribution of income from work. 4

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Question 25 (6 marks)

(a) Distinguish between privatisation and corporatisation. 2

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(b) Explain how fiscal policy can stabilise the business cycle during a recession. 4

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End of Question 25

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Section II Extra writing space

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

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2 0 1 9 PRELIMINARY YEARLY EXAM

Economics
Section III
20 marks
Attempt Question 26
Allow about 35 minutes for this section

Answer the question in the Section III 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

Question 26 (20 marks)

Explain how the cash rate is set and its influence on the Australian economy.

Inflation is low and is likely to remain so for some time, reflecting low growth in labour costs
and strong competition in retailing. A gradual pick-up in inflation is, however, expected as the
economy strengthens. The central forecast is for inflation to be a bit above 2 per cent in 2018.

Reserve Bank of Australia, July 2018

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2019 Preliminary Economics
Multiple Choice Answer Sheet Student Number: _______________

Circle the correct response

1 A B C D

2 A B C D

3 A B C D

4 A B C D

5 A B C D

6 A B C D

7 A B C D

8 A B C D

9 A B C D

10 A B C D

11 A B C D

12 A B C D

13 A B C D

14 A B C D

15 A B C D

16 A B C D

17 A B C D

18 A B C D

19 A B C D

20 A B C D

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