VCE-ECON-U34 E4.1 Practice Exam 4: Question Paper

A) The number of hours worked
B) GDP (or output) per hour worked — a measure of how much output is produced per unit of labour input
C) Total employment
D) The ratio of capital to labour

A) Increases in total output
B) The increase in output not accounted for by increases in labour and capital inputs — a residual measure of efficiency and technological improvement
C) Growth in all factors of production
D) Productivity of the total workforce

A) Two growth rates for GDP
B) The divergence between resource-rich states (WA, QLD) booming from high commodity prices and other states and industries struggling with the high exchange rate
C) Two different inflation rates
D) Fast and slow-growing age groups in the population

A) Tariff increases and industry protection
B) Privatisation, deregulation, corporate tax reform, labour market reform, trade liberalisation — aimed at improving productive efficiency and the economy’s supply capacity
C) Increasing government spending
D) Minimum wage increases

A) Re-introducing industry protection
B) Floating the dollar, deregulating financial markets, reducing tariffs, privatising government enterprises, enterprise bargaining, and compulsory superannuation
C) Nationalising the major banks
D) Increasing trade barriers

A) Whether Australia attends the UN
B) The openness of its trade and capital flows relative to GDP — exports + imports as % of GDP; cross-border investment flows
C) Australia’s voting power in international institutions
D) Australia’s foreign aid spending

A) Government payments to elderly people
B) The economic growth potential arising when a large working-age cohort (relative to dependents) increases labour force participation and savings rates
C) Higher birth rates increasing future growth
D) Dividends paid on government bonds

A) Higher youth unemployment
B) Rising dependency ratio — fewer workers per retiree → pressure on superannuation, the Age Pension, healthcare, and aged care systems; potential labour shortages
C) Falling inflation
D) Reducing house prices

A) Productivity growth from capital investment only
B) The long-run increase in productive efficiency and GDP growth resulting from microeconomic reforms — better resource allocation, increased competition, technological adoption
C) Short-run employment gains
D) Budget savings from cutting public services

A) Creating manufacturing employment
B) A strong AUD from resource exports reducing the competitiveness of non-resource tradeable sectors — particularly manufacturing, tourism and education exports
C) Reducing resource sector employment
D) Lowering Australia’s terms of trade

A) Fixed exchange rate and high trade barriers
B) Flexible exchange rate acting as a shock absorber; floating rate currency; diverse export base; strong fiscal position; sound financial system; RBA independence
C) Government ownership of all banks
D) Low dependence on trade

A) Fiscal policy and monetary policy contributions only
B) Contributions from labour (workforce growth), capital accumulation, and total factor productivity (TFP) — the Solow decomposition
C) Domestic and foreign demand contributions only
D) Private and public sector contributions only

A) Reducing household saving
B) Accumulating a large pool of domestic long-term investment capital (currently $3.5 trillion+) — reducing reliance on foreign capital; supporting capital markets; providing retirement income
C) Increasing income inequality
D) Reducing government spending on healthcare

A) It is too small to fund adequate services
B) Its costs are growing faster than initially projected — creating significant fiscal pressure; estimated future costs are a major budget sustainability challenge
C) It reduces labour force participation
D) It only benefits high-income Australians

A) Only demand factors (population growth, migration)
B) Structural undersupply of housing (planning restrictions, infrastructure costs, construction industry productivity) combined with demand factors (population growth, tax incentives for investment, low interest rates)
C) Negative gearing only
D) Only external economic factors

A) Eliminating the mining sector
B) Potential ‘green iron’, hydrogen, and critical minerals exports; domestic energy cost reductions; new manufacturing capacity; and avoiding the economic costs of unmitigated climate change
C) Making electricity cheaper immediately
D) Only creating service sector jobs

A) A fall in labour force participation
B) A sharp slowing in total factor productivity (TFP) growth — particularly after the end of the 1990s reform era; associated with reduced competitive pressure, weak investment in R and D, and service sector growth
C) Rising unemployment
D) Falling real wages

A) Sets the cash rate
B) Independently researches and reports on microeconomic reform and productivity issues — providing recommendations on competition policy, regulation, industry policy, labour markets and social policy
C) Manages government infrastructure investment
D) Sets minimum wages

A) Australia has no public debt
B) Gross government debt as a proportion of GDP (~50%) is lower than most comparable advanced economies; Australia maintained fiscal surpluses for much of the 2000s and recovered quickly from COVID deficit
C) Australia has the highest credit rating globally
D) Australia collects more tax than any other country

A) Only the challenge of managing continued strong growth
B) Managing the transition away from fossil fuel dependence; addressing housing affordability; raising productivity growth; caring for an ageing population; and reducing inequality — while maintaining macroeconomic stability
C) Reducing the size of government only
D) Developing a manufacturing sector only

Describe the major economic reforms implemented in Australia during the 1980s and 1990s and explain how they aimed to improve economic efficiency.

Explain Australia’s ‘productivity paradox’ — strong economic growth alongside weak productivity growth — in recent decades.

Explain the economic challenges posed by Australia’s ageing population.

What are the main causes of Australia’s housing affordability crisis and what economic policies could address it?

Explain the economic significance of the ‘energy transition’ for Australia.

Describe the role of education and human capital investment in long-run economic growth.

What are the main features of Australia’s National Disability Insurance Scheme (NDIS) and what are the economic issues it raises?

Describe the main features of Australia’s current economic performance and the key challenges facing policymakers over the next decade.

Extended Response 1: Productivity and Growth

Extended Response 1: Productivity and Growth (a)
Assess the factors that have contributed to Australia’s long-run economic performance. What policies would best support productivity growth over the next decade?

Extended Response 1: Productivity and Growth

Extended Response 1: Productivity and Growth (b)
To what extent has the Australian economy successfully diversified away from commodity dependence?

Extended Response 2: Economic Reform

Extended Response 2: Economic Reform (a)
Evaluate the economic arguments for and against negative gearing in Australia’s tax system. What would be the consequences of reforming it?

Extended Response 2: Economic Reform

Extended Response 2: Economic Reform (b)
Should Australia increase its level of immigration? Evaluate the economic arguments.