2016 Economics Exam Discussion

[100.00]

Think it ended "to what extent does this market operate freely? not "what type of market does australia operate?"

I don't think it asked about the market you talked about, I think it was "to what extent do markets operate freely in Australia" no? If it was I missed it.

[corza000]

Likewise, (not exact replication)

Explain how a change in progressive income taxation, and how a change in company taxation, can affect AD and economic growth. (6 marks) - essentially this was fairly easy, however its vague nature is what stumped many people.

It was effect on AS, which makes the progressive tax part a little trickier

[abcdqdxD]

Choose one factor that affects a particular market in the Australian economy (such as agricultural, commodity e.t.c), and the effect it has on the  operations of the market. To what extent does this market operate freely (6 marks)

Interesting question, not something you usually get. No right or wrong answers here. Higher scoring answers would discuss more aspects of the chosen market.

Some potential ideas:
- Choose market (e.g. commodity)
- Choose factor (e.g. China transition to consumption led growth)
- Explain factor: China transition -> less demand for commodities -> shift demand curve to the left & movement along supply curve to the left -> lower price, lower quantity. Supply side: lower prices -> less profitability -> reduce labour/capital & reallocate to other more profitable markets. Can rant on more in depth here for extra marks. Probably 2 marks here.
- Free market: Discuss level of FTAs/tarrifs/etc and impact on market. Can discuss globalisation & comparative advantages briefly (not the focus of the Q though). Probably 2 marks here.
- May want to discuss market failures if any (e.g. mining coal is a negative externality) -> minerals resource rent tax was implemented combat overproduction. Another 2 marks here.

Explain how a policy in the budget can increase participation rate in an economy, and how another policy can decrease long-term unemployment
(6 marks)

- Choose policy (e.g. reducing family tax benefits, or work-ready training programs)
- Explain how policy increases participation rate (e.g. reduce welfare -> less income -> incentive to find work -> increase participation rate) 3 marks
- Choose policy to decrease long term unemployment & explain (supply: skilled workers, demand: policy that increases AD in long run e.g. FTAs) 3 marks
- May want to highlight inverse relationship between unemployment and participation rate

Explain how a change in progressive income taxation, and how a change in company taxation, can affect AS and economic growth. (6 marks)
- Define progressive tax
- Define progressive income tax system (1 mark)
- Explain impact: more progressive tax system -> reduce incentive to work -> lower participation rate -> lower pool of labour resources & less skilled -> decrease AS -> decrease GDP (and higher inflation), (2 marks)
- Define company tax and briefly explain (1 mark)
- Explain impact: lower company tax -> higher profitability -> increase (I) -> expand operating capacity and increase demand for labour -> shift AS curve to right -> lower prices, higher quantity (good for SSE) (2 marks)

[100.00]

Choose one factor that affects a particular market in the Australian economy (such as agricultural, commodity e.t.c), and the effect it has on the  operations of the market. To what extent does this market operate freely (6 marks)

Interesting question, not something you usually get. No right or wrong answers here. Higher scoring answers would discuss more aspects of the chosen market.

Some potential ideas:
- Choose market (e.g. commodity)
- Choose factor (e.g. China transition to consumption led growth)
- Explain factor: China transition -> less demand for commodities -> shift demand curve to the left & movement along supply curve to the left -> lower price, lower quantity. Supply side: lower prices -> less profitability -> reduce labour/capital & reallocate to other more profitable markets. Can rant on more in depth here for extra marks. Probably 2 marks here.
- Free market: Discuss level of FTAs/tarrifs/etc and impact on market. Can discuss globalisation & comparative advantages briefly (not the focus of the Q though). Probably 2 marks here.
- May want to discuss market failures if any (e.g. mining coal is a negative externality) -> minerals resource rent tax was implemented combat overproduction. Another 2 marks here.

Explain how a policy in the budget can increase participation rate in an economy, and how another policy can decrease long-term unemployment
(6 marks)

- Choose policy (e.g. reducing family tax benefits, or work-ready training programs)
- Explain how policy increases participation rate (e.g. reduce welfare -> less income -> incentive to find work -> increase participation rate) 3 marks
- Choose policy to decrease long term unemployment & explain (supply: skilled workers, demand: policy that increases AD in long run e.g. FTAs) 3 marks
- May want to highlight inverse relationship between unemployment and participation rate

Explain how a change in progressive income taxation, and how a change in company taxation, can affect AS and economic growth. (6 marks)
- Define progressive tax
- Define progressive income tax system (1 mark)
- Explain impact: more progressive tax system -> reduce incentive to work -> lower participation rate -> lower pool of labour resources & less skilled -> decrease AS -> decrease GDP (and higher inflation), (2 marks)
- Define company tax and briefly explain (1 mark)
- Explain impact: lower company tax -> higher profitability -> increase (I) -> expand operating capacity and increase demand for labour -> shift AS curve to right -> lower prices, higher quantity (good for SSE) (2 marks)

Interesting, judging by your explanation for the individual market one, my answer of relative prices seems to be correct.

Im bagging my head for the PIT one (I thought it was incentives but I took a different path down the demand side) Is it still correct? I said a lower PIT system (e.g the current shift in PIT marginal tax rate in the 2nd highest tack bracket to 80,000 from 87,000 is effectively meant to exclude middle income earners). Then I went down the path of the more disposable income = more demand in certain industries around the economy and increased AS through increased perceptions of profitability and expansion of supply. (this is sort of that "cause and effect" error i feel.

Moreover, for the long-term unemployment one, I essentially talked about the 1.1. billion science/innovation agenda designed to reduce cost pressures overtime e.t.c. and how the increased innovation spurring from this policy will expand our productive capacity, and increase the willingness of future producers to supply in periods of higher demand due to industries (e.g. mining) will have lower machinery costs via an expanded productive capacity helping achieve lower inflation. Is this correct?

Thank you!

[abcdqdxD]

Yep focus of PIT is supply side not demand side.

I'm not sure about the science one, because theoretically a higher productive capacity doesn't necessarily mean lower employment (though I guess you could argue it). So that one is a bit iffy.

[100.00]

Yep focus of PIT is supply side not demand side.

I'm not sure about the science one, because theoretically a higher productive capacity doesn't necessarily mean lower employment (though I guess you could argue it). So that one is a bit iffy.

Rip PIT (you sure there's no way to sneak a mark there if you first talked about the demand side? because theoretically it is a demand side tax)
for the science one i said that decreased costs of production leads to willingness to expand and take up labour (sorry I didn't write that in my answer)

[laksjdlakj]

hey I was wondering there was a question that was smth along the lines of why is the govt discussing changes to the taxation system/introducing taxation reform for 2 marks. A lot of people seemed to write about increasing progressive taxes to ensure more equitable distribution of income but I wrote abt increasing taxes to help return the budget to surplus is that wrong? :/

[abcdqdxD]

hey I was wondering there was a question that was smth along the lines of why is the govt discussing changes to the taxation system/introducing taxation reform for 2 marks. A lot of people seemed to write about increasing progressive taxes to ensure more equitable distribution of income but I wrote abt increasing taxes to help return the budget to surplus is that wrong? :/

Yep both answers are fine, nothing to worry about

[corza000]

Which of the following components of aggregate demand is the most unstable?
A. private investment expenditure
B. private consumption expenditure
C. government investment expenditure
D. government consumption expenditure

[100.00]

Which of the following components of aggregate demand is the most unstable?
A. private investment expenditure
B. private consumption expenditure
C. government investment expenditure
D. government consumption expenditure

A

[bravado]

I know y'all hate posts like this, but I'm rank 1-3 in a medium-strong cohort with around a 95% average for sacs (teacher is a VCAA assessor, so I think the SACs are pretty difficult)

I'm pretty sure I got 2 multiple choice questions wrong on that exam, and I'm also pretty sure I messed up that free market 6 marker. So I'm looking at around 80-83/90 for this exam. Last year's A+ cut off was 81.

Given the perceived difficulty of this exam, do I still have a chance at a 45? I know this is probably the stupidest question but I just need to have something to tide me over until ATAR day.

[abcdqdxD]

I know y'all hate posts like this, but I'm rank 1-3 in a medium-strong cohort with around a 95% average for sacs (teacher is a VCAA assessor, so I think the SACs are pretty difficult)

I'm pretty sure I got 2 multiple choice questions wrong on that exam, and I'm also pretty sure I messed up that free market 6 marker. So I'm looking at around 80-83/90 for this exam. Last year's A+ cut off was 81.

Given the perceived difficulty of this exam, do I still have a chance at a 45? I know this is probably the stupidest question but I just need to have something to tide me over until ATAR day.

Assuming this year's cutoff is around 80/90:
80/90 would get you around 40
83/90 would get you around 43-44

As a guide, my year was around 78/90 cutoff and 84/90 got 47

[Private Joke]

Does anyone have a copy of the exam?

[Mathmos]

For the discussing change to the tax system, I talked about multinational firms evading taxes, culminating in the crackdown in the 2016-17 Budget.

Also for the market question, I talked about the supermarket market, with the one factor being climate conditions affecting the ability of farmers to produce stuff, which the supermarkets would then have to buy, and then went into a bit more detail from there. And with how freely it operates, I just talked about how it operates freely a lot of the time given the threat of government intervention, but that other times the duopoly of Coles and Woolworths would exercise market power and thus cause the market to not operate freely.

How screwed am I?

[abcdqdxD]

For the discussing change to the tax system, I talked about multinational firms evading taxes, culminating in the crackdown in the 2016-17 Budget.

Also for the market question, I talked about the supermarket market, with the one factor being climate conditions affecting the ability of farmers to produce stuff, which the supermarkets would then have to buy, and then went into a bit more detail from there. And with how freely it operates, I just talked about how it operates freely a lot of the time given the threat of government intervention, but that other times the duopoly of Coles and Woolworths would exercise market power and thus cause the market to not operate freely.

How screwed am I?

Not screwed at all