QCAA Economics Economic indicators and past budget stances

While increasing consumer confidence is a sign of expansion, increasing inventories typically indicates unsold goods piling up, which is a sign of an economic slowdown or contraction.

Increasing taxation revenue occurs during an expansion, but the current account balance typically decreases (worsens) because higher domestic incomes lead to increased spending on imports.

Decreasing consumer confidence and increasing inventories of unsold goods are both classic indicators of an economic contraction or recession, not an expansion.

This represents the absolute change in Real GDP (-＄\2 billion) rather than the percentage growth rate.

This is the growth rate from June 2021 to March 2022 ($\frac{40 - 50}{50} \times 100 = -20\%$), not for the full year ended June 2022.

This is the growth rate for the single quarter from June 2021 to September 2021 ($\frac{56 - 50}{50} \times 100 = 12\%$).

This option is incorrect because expansionary policies are typically reserved for periods of recession or deflation. With inflation at a stable $2\%$ (calculated from the CPI rise from 100 to 102), aggressive stimulus could risk pushing inflation above the target range.

This option is incorrect. While dwelling approvals have fallen slightly, the overall macroeconomic indicators (specifically the $2\%$ inflation rate) do not suggest a need for monetary stimulus, which is usually employed to boost low inflation or combat rising unemployment.

This option is incorrect because contractionary fiscal policy is used to cool down an overheating economy with high inflation. Since inflation is stable at $2\%$ and dwelling approvals are already softening, contracting the economy would risk stalling growth unnecessarily.

The government originally planned for a budget surplus, not a deficit, before these natural disasters occurred.

The economic impact of the bushfires and drought worsened the budget balance, turning the planned surplus into a deficit rather than increasing the surplus.

The government had planned for a budget surplus, not a deficit, prior to the economic shocks of the bushfires and drought.

While building approvals are a leading indicator, retail sales are generally considered a coincident indicator because they move in tandem with the current state of the economy.

This option reverses the order. Bankruptcies are a lagging indicator because they occur after an economic downturn has taken its toll, while job advertisements are a leading indicator of future hiring.

New business start-ups are a leading indicator, but motor vehicle sales are typically considered a coincident or leading indicator, not a lagging indicator.

This is the absolute difference in index points ($112.0 - 110.0 = 2.0$), not the percentage change required to find the inflation rate.

This is an incorrect calculation. The inflation rate must be calculated using the percentage change formula between June 2020 and June 2021.

This is an incorrect calculation. The correct inflation rate is found by calculating the percentage change from June 2020 to June 2021.

A balanced budget is a fiscal policy stance rather than a primary macroeconomic objective, and strictly pursuing it can sometimes conflict with stabilizing the economy.

While price stability helps protect the purchasing power of low-income earners, it is not the objective most directly and broadly compatible with price stability at a macroeconomic level.

Although low inflation helps maintain clear price signals for efficient resource allocation, sustainable economic growth is the broader macroeconomic objective most fundamentally compatible with price stability.

While raising pensions injects money, increasing income taxes removes money from the economy (contractionary), which would likely maintain the high surplus and fail to stimulate the slowing GDP growth.

Selling government assets is not a direct fiscal stimulus, and reducing the retirement age shrinks the labor supply; neither action effectively utilizes the budget surplus to boost aggregate demand.

Decreasing health expenditure is a contractionary policy that would reduce aggregate demand and increase the budget surplus further, likely causing GDP growth to slow even more.

Consumer debt is typically a lagging indicator. Consumers usually take on more debt after they feel confident in their financial situation, which happens once a recovery is already underway.

Maximum capacity utilization occurs at the peak of an economic boom, not at the beginning of a recovery, making it a coincident or lagging indicator.

Inflation is generally a lagging indicator that rises after the economy has been expanding and demand outpaces supply, rather than signaling the start of a recovery.

An increase in the number of employed persons does not automatically mean fiscal policy should be avoided; if the economy is overheating, intervention may still be necessary.

The employment rate did change; it increased from approximately $94.8\%$ ($550/580$) in 2021 to $96.2\%$ ($760/790$) in 2022.

Expansionary policy is typically used to boost the economy when employment is low or falling; implementing it when the employment rate is already rising could lead to excessive inflation.

Price stability actually supports the efficient allocation of resources by ensuring that price signals accurately reflect market conditions rather than inflation.

Economic growth and full employment are complementary goals, as expanding production typically requires hiring more workers, thereby reducing unemployment.

Efficient allocation of resources maximizes an economy's productive capacity, which directly supports and enhances economic growth.

Incorrect. Share prices typically fall during an economic contraction as corporate profits decline and investor confidence weakens.

Incorrect. The production of building materials usually decreases during a contraction because demand for new construction projects drops when the economy slows.

Incorrect. New business start-ups generally decline during a contraction due to lower consumer demand, economic uncertainty, and tighter credit conditions.

Reduced company tax receipts would decrease government revenue, which would increase the size of the budget deficit rather than decrease it.

Higher unemployment would lead to increased government spending on welfare and decreased income tax revenue, resulting in a larger budget deficit.

Lower economic growth typically reduces tax revenues and increases welfare payments, which would lead to a larger budget deficit, not a smaller one.

Increasing unemployment benefits typically raises the reservation wage and encourages workers to stay unemployed longer to search for better jobs, which would likely increase the unemployment rate.

An influx of school leavers increases the labor supply; in an economy with decreasing activity, these new entrants are unlikely to find jobs quickly, which would cause the unemployment rate to rise.

If workers delay retirement, the labor force remains larger while demand for labor is falling, which would typically lead to a higher unemployment rate as more people compete for fewer jobs.