2012

TRIAL HIGHER SCHOOL

C E RT I F I CAT E EXAMINA T I O N
Made by Powlmao/Loapowm
(Josh U)

Economics
Total marks 100
Section I

General Instructions
Reading time 5 minutes
Working time 3 hours
Write using black or blue pen
Black pen is preferred
Board-approved calculators may
be used
Write your Centre Number and
Student Number at the top of
pages 9, 11, 13 and 15

Pages 28

20 marks
Attempt Questions 120
Allow about 35 minutes for this section
Section II

Pages 916

40 marks
Attempt Questions 2124
Allow about 1 hour and 15 minutes for this section
Section III

Pages 1718

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

Page 19

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

Section I
20 marks
Attempt Questions 120
Allow about 35 minutes for this section
Use the multiple-choice answer sheet for Questions 120.

Which of the following is an example of a contractionary macroeconomic

policy?
(A) RBA selling second hand Commonwealth Government securities
(B)

RBA buying second hand Commonwealth Government Securities

(C) RBA issuing new Commonwealth Government Securities to finance an increase in

the budget deficit
(D) RBA issuing new Commonwealth Government Securities to retire Government
debt
2

Which of the following economies is Australias largest export

market?
(A) China
(B)

New Zealand

(C)

United States of America

(D) European Union

3

The table shows selected data for a hypothetical economy

Year
1
2
3

Export Price Index

110
110
80

Import Price Index

90
110
120

Which of the following Statements is true?

(A) In Year 3 export prices rose faster than import prices
(B)

In Year 2 the balance on goods and services worsened

(C)

Between Year 1 and Year 3 the terms of trade improved

(D) In Year 3 import prices rose faster than export prices

Paper made by Powlmao/Loapowm (Josh U)

The table shows selected data for an economies Balance of Payments

Balance of Payments

$ billion ($bn)

Exports

100

Imports

150

Net Services

80

Net Income

-90

Net Current Transfers

-15

Capital Transfers

50

Reserve Assets

According to the information above, which of the following statements is correct about
an economy with a floating exchange rate?

(A)

There is a surplus of $30 billion on the balance of Goods and Services

(B)

There is a deficit of $30 billion on the Balance of Goods and Services

(C)

There is a surplus of 75 billion on the financial account

(D)

There is a deficit of $55 billion on the financial account

The graph shows the foreign exchange rate for the Australia Dollar.
AS1

$A/$US

AS0

90c
80c

AD
0

Quantity $A

Which of the following would cause the change in the exchange rate as shown above?
(A) A decrease in portfolio investment inflows
(B)

A decrease in import volumes

(C) A decrease in tourism into Australia

(D) A decrease in global protection levels

Which statement best describes the operation of fiscal policy in comparison to the
operations of monetary policy?
(A) Monetary policy has a longer transmission tie lag and is more effective in
stimulating the economy during a recession
(B)

Fiscal policy influences investment whereas monetary policy influences

consumption
(C) Fiscal policy has a more immediate impact on the economy and can influence
growth between economic sectors
(D) Monetary policy has a shorter transmission time lag and is more effective in
slowing the economy during a boom

The table shows data for a nations terms of trade.

Year

Nominal GDP $bn

CPI

250

100

345

120

What is the value of real GDP in year 2

(A) $208.3bn
(B) $276.0bn
(C) $287.5bn
(D) $300.0bn

Which of the following best describes the characteristics of a developing economy

(A) Low absolute poverty, poor governance and reliance on foreign aid
(B) Low income per capita, low levels of human development, small share of foreign
direct investment.
(C) High absolute poverty, low levels of foreign indebtedness, strong social and political
institutions.
(D) Reliance on service exports, low levels of government debt, high levels of economic
growth

What is the name of the body that is responsible for determining wages in
Australia?
(A) The Australian Industrial Relations Commission
4

(B)

The Australian Fair Pay Commission

(C) Fair Work Australia

(D) The Workplace Ombudsman

10

The graph shows the demand for and supply of Australian dollars.
S1

$A in terms
of $US

S0
0.70
0.60

D
0

Q1

Q0

Quantity of $A

Which of the following is the most likely reason for the shift in the supply curve from
S0 to S1?
(A) An increase in foreign imports into Australia
(B) An increase in foreign financial investment in Australia
(C) A reduction in the net income deficit on the current account
(D) A decline in the international competitiveness of Australian firms

11

How would the Reserve Bank of Australia increase the cash rate in the short term money
market?
(A) Buy Government securities and increase liquidity
(B) Sell Government securities and increase liquidity
(C) Buy Government securities and decrease liquidity
(D) Sell Government securities and decrease liquidity

12

Which of the following is a use of a budget surplus by the Government

(A) Funding tax cuts
(B) Increasing spending on infrastructure projects
5

(C) Financing an issue of government bonds

(D) The repayment of government debt

13 Which of the following best explains under-provision of public goods by the market
system?
(A) Only the government supplies public goods
(B)

Public goods are more expensive, so only high

income earners can afford to pay for them

(C) Firms supplying public goods cannot exclude those

who are unwilling to pay for them
(D) Consumers do not demand public goods, so few are
supplied by the market.

14

Which of the following transactions would be recorded as a debit on the Current account
of the Balance of Payments?
(A) The purchase of shares in a US company by an
Australian Resident
(B)

Borrowing from a Japanese Bank

(C) Interest paid to Australian lenders

(D) Dividends paid to foreign investors

15

Which of the following is an example of a bilateral trade agreement to which Australia is

a part of?
(A) Closer Economic Relations Trade Agreement
(B)

Australia China Free Trade Agreement

(C) ASEAN Australia New Zealand Free Trade Agreement

(E)

16

ASEAN Economic Outlook

Which is the most appropriate macroeconomic policy mix if the Australian economy is
experiencing inflationary pressures?
(A) A decrease in taxation and the sale of government securities by the Reserve Bank
6

(B)

A decrease in government spending and the sale of government securities by the

Reserve Bank

(C) An increase in taxation and the purchase of government securities by the

Reserve Bank
(D) An increase in government spending and the purchase of government securities by
the Reserve Bank

17

Which of the following would least likely result from a centralize system of wage
determination
(A) A more equal distribution of income
(B) Lower levels of inflation
(C) Rising levels of productivity
(D) Lower wage growth

18 Which of the following types of inflation is least effectively addressed using monetary
policy
(A) Demand pull inflation
(B)

Cost push inflation

(C) Inflationary expectations

(D) Imported inflation
19

Which of the following is a characteristic of an automatic stabilizer?

(A) They counteract fluctuations in economic activity
(B)

They do not operate when an economy falls into recession

(C) They are also known as the structural component of the budget
(D) They reinforce fluctuations in economic activity

20

An industry that generates pollution incurs both private and social costs.
What will happen to the quantity and equilibrium price when BOTH private and social
costs are taken into account?
(A) Both output and price will fall.
(B)

Both output and price will rise.

(C) Output will fall and the price will rise.

(D) Output will rise and the price will fall.

Economics
Section II
40 marks
Attempt Questions 2124
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.

Question 21 (10 marks)

(a)

Outline two ways income inequality is measured

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(b)

Distinguish between income and wealth

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Question 21 continues on page 10

(c)

Explain one factor contributing to income inequality in Australia

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(c)

Discuss Government policies that can be ued to reduce wealth inequality in Australia
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Economics
Section II (continued)

Question 22 (10 marks)

(a)

The table shows current account data for an economy.

(i)

Year 1

Unemployment

1063000

1128000

1186000

Define the Natural rate of unemployment (NAIRU)

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(ii)

Show the rate of change in unemployment from year 2 to year 3

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Question 22 (continued)
(b)

Explain ONE possible cause and ONE effect of unemployment

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Examine the effectiveness of ONE economic policy used to reduce the rate of
unemployment
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(C)

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End of Question 22

Economics
Section II (continued)

Question 23 (10 marks)

(a)

The table shows an exchange rate for an economy.

$1.10
$1.00

Calculate the movement shown above

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(b)

Outline two factors that could have caused the movement in the diagram above
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Question 23 (continued)
(b)

Describe the impact of an improvement in Australias export competitiveness

on Australias exchange rate
2

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(d)

Explain the relationship between financial flows and the exchange rate
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End of Question 23

Economics
Section II (continued)

Question 24 (10 marks)

(a)

Define Monetary Policy.

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(b)

Describe one recent trend in monetary policy and its effect in the economy
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Question 24 continues on page 16

Question 24 (continued)

(c)

Briefly explain how monetary policy can influence imported inflation

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(d) Explain how the Reserve Bank of Australia can use domestic market operations
to lower inflation in a economy
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Economics
Section III
20 marks
Attempt either Question 25 or Question 26
Allow about 35 minutes for this section
Answer the question in a 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 the use of macroeconomic and microeconomic policies used by the Australian
Government to achieve the objectives of full employment and external stability. In your
response use the information below

OR

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 impacts of changes in the global economy on Australias financial and trade flows.
In your response refer to the below information.

17

Section IV
20 marks
Attempt either Question 27 or Question 28
Allow about 35 minutes for this section
Answer the question in a SEPARATE 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)

Examine the limitations of strategies to promote economic growth and development in an
economy other than Australia.
OR
Question 28 (20 marks)
Discus the economic implications of Australias continuing current account deficit.

End of paper

18

BLANK PAGE

20
Board of Studies NSW 2011