VCE-ECON-U34 E8.1 Practice Exam 8: Question Paper

A) A fall in the capital-to-labour ratio
B) An increase in the amount of capital equipment available per worker, which tends to raise labour productivity
C) A decline in business investment
D) The depreciation of existing capital equipment

A) Capital investment always raises output by the same amount regardless of the existing capital stock
B) As more capital is added to a fixed amount of labour, each additional unit of capital eventually adds progressively less to output
C) Capital investment reduces output
D) Labour productivity cannot be increased through capital investment

A) A firm’s average cost of production rises as output increases
B) A firm’s average cost of production falls as output increases, allowing larger-scale producers to produce more efficiently per unit
C) A firm reduces its scale of operation
D) Government imposes production quotas

A) Increasing the size of the population only
B) Raising the skills, knowledge and capability of the workforce, enabling higher output per worker and supporting innovation
C) Reducing the need for physical capital entirely
D) Lowering wages across the economy

A) Simply employing more workers
B) Research and development spending, innovation, and the adoption of new technology and better ways of organising production
C) Increasing the retirement age
D) Raising interest rates

A) Increasing tariffs on imported goods
B) Requiring government-owned enterprises and previously protected sectors to compete on equal terms, opening utilities and infrastructure to greater competition
C) Nationalising private industries
D) Fixing all prices by government regulation

A) Increase the amount of red tape facing businesses
B) Remove unnecessary government rules and restrictions that raise business costs or limit competition, improving efficiency and productive capacity
C) Increase government ownership of industry
D) Fix wages across all industries

A) Reducing the economy’s productive capacity
B) Lowering the costs of moving goods, people, energy and information, allowing firms across the economy to operate more efficiently
C) Increasing unemployment permanently
D) Reducing international trade

A) Only by a single centralised industrial tribunal for the whole economy
B) At the level of the individual business or enterprise, allowing greater flexibility to link pay to productivity and firm-specific circumstances
C) Only by the federal government
D) Only for public sector workers

A) Increase the economy’s potential growth rate
B) Reduce the economy’s potential growth rate, since fewer people are available to produce goods and services relative to the population
C) Have no effect on potential GDP
D) Automatically raise productivity

A) Reducing the size of the labour force
B) Directly increasing the labour force and filling skill shortages in specific occupations, while also bringing entrepreneurial and innovative capacity
C) Eliminating the need for education spending
D) Fixing the exchange rate

A) The rate of economic growth
B) The degree of income (or wealth) inequality within a population, ranging from 0 (perfect equality) to 1 (perfect inequality)
C) The unemployment rate
D) The level of foreign debt

A) Maximising GDP growth regardless of other consequences
B) Environmental protection and social wellbeing, recognising that growth achieved by depleting resources or degrading the environment may not be sustainable long-term
C) Reducing all forms of production
D) Eliminating international trade

A) Government spending, investment and exports
B) Savings, taxation and imports — income that is not passed on as further spending within the domestic economy
C) Only household consumption
D) Only wages paid to workers

A) The size of the overall economy shrinks permanently
B) The relative importance of different industries within the economy shifts over time — for example, the declining share of manufacturing and growing share of services
C) Government spending is restructured annually
D) Exchange rates are adjusted

A) Reducing the total amount of capital in the economy
B) Allowing more output to be produced with the same or fewer labour hours in affected tasks, though also potentially displacing some jobs
C) Eliminating the need for any human labour immediately
D) Reducing the need for infrastructure

A) Differences in exchange rates between states
B) Differences in economic performance, productivity and living standards between different geographic regions
C) Differences in the national inflation rate
D) Differences in the RBA cash rate by state

A) Reducing the total labour force
B) Increasing the available labour input to the economy and utilising a wider pool of skills and talent
C) Reducing household income
D) Increasing the unemployment rate automatically

A) Reducing government revenue with no other effect
B) Making a country a more attractive destination for business investment, potentially increasing capital investment and jobs
C) Automatically eliminating unemployment
D) Fixing the exchange rate

A) Have no effect on the economy
B) Contribute to skills shortages that raise wages in affected trades and can constrain productive capacity in sectors reliant on those skills, such as housing construction
C) Automatically reduce housing costs
D) Increase the participation rate automatically

Using the Solow growth decomposition (labour, capital and total factor productivity), explain the sources of economic growth and discuss which is considered most important for raising Australia’s long-run living standards.

Explain how competition policy, such as Australia’s National Competition Policy, can improve productivity, using an example.

Explain the economic effects of an ageing population on labour supply and the participation rate, and discuss two policy responses available to government.

Explain how investment in economic infrastructure can raise an economy’s productive capacity, and discuss two current infrastructure challenges facing Australia.

Explain the relationship between income inequality and economic growth, discussing arguments on both sides of whether redistribution helps or hinders growth.

Explain the concept of structural change in the Australian economy and evaluate the costs and benefits for the regions and workers affected.

Explain how automation and artificial intelligence could affect Australian productivity and employment over the next decade.

Explain the role of migration in supporting Australia’s economic growth, and discuss the associated economic costs that need to be managed.

Extended Response 1: Productivity and Reform

Extended Response 1: Productivity and Reform (a)
Assess the effectiveness of Australia’s National Competition Policy and other microeconomic reforms since the 1990s in raising productivity, and identify further reforms that could support future productivity growth.

Extended Response 1: Productivity and Reform

Extended Response 1: Productivity and Reform (b)
Explain the difference between labour productivity and total factor productivity, and explain why TFP growth is considered a more sustainable driver of rising living standards.

Extended Response 2: Demographic and Structural Change

Extended Response 2: Demographic and Structural Change (a)
Evaluate the range of policy options available to address the economic challenges of Australia’s ageing population, including migration, workforce participation incentives and productivity growth.

Extended Response 2: Demographic and Structural Change

Extended Response 2: Demographic and Structural Change (b)
Explain how structural change, such as the decline of manufacturing and growth of the services sector, creates both winners and losers in the Australian economy, and identify one policy that can support affected workers and regions.