How many VCAA Economics questions cover Aggregate demand policies and domestic economic stability?

Q: How many VCAA Economics questions cover Aggregate demand policies and domestic economic stability?

AusGrader has 92 VCAA Economics questions on Aggregate demand policies and domestic economic stability, all with instant AI grading and detailed marking feedback.

VCAA (VCE) Economics — Aggregate demand policies and domestic economic stability Questions & Answers | AusGrader

Q1

2024

QCAA

1 mark

Q1

1 mark

In the Australian federal budget, the spending component that has increased most significantly over the past five years is

A

the National Disability Insurance Scheme.

B

public order and safety.

C

childcare subsidies.

D

medical benefits.

Q2

2024

QCAA

1 mark

Q2

1 mark

The principal medium-term objective of monetary policy is to

A

influence the value of the Australian dollar.

B

increase gross domestic product.

C

reduce structural employment.

D

control inflation.

Q13

2020

QCAA

9 marks

Q13

9 marks

An economic scenario is provided.

The 2021/22 federal budget is expected to deliver a deficit of ＄4.2b at the end of June 2022. A ＄7.1b surplus is anticipated the following year.
(Forecast released May 2022)

Export data shows coal exports are expected to fall from 2021 to 2022 by approximately ＄70 billion.
(Data released 10 July 2022)

CPI data shows that movements in the consumer price index (CPI) and the wage price index (WPI) were below 2% for the three years to June 2022.
(Data updated 31 July 2022)

Use the scenario to explain two relationships and their economic effects. Evaluate the merit of achieving a budget surplus in your answer.

The CPI data shows there are no inflation pressures from consumer prices or wages, indicating the economy has not experienced demand pressures for three years.
The export data demonstrates that Australia has some external stability pressures, because the export value of coal has fallen by ＄70 billion.
These two datasets, in the absence of further information, indicate that economic activity is weakening. They also provide evidence of negative forces acting within Australia’s economy that require stimulatory policies.
Proposals to achieve a federal budget surplus as expected cannot be justified at this time, because it would mean contracting the economy, which could result in inflation and wages falling further. The fall in wages would be expected to cause households to defer spending and save, causing a flow-on effect on business investment. This would result in several negative forces acting on aggregate demand and reducing economic growth. Consequently, the productive capacity of the economy should be increased.

Marking Criteria

Data Relationships

Marking Bands

Descriptor	Marks
Explains a relationship to – domestic aggregate demand pressures (inflation) – external stability pressures (exports)	2
Identifies a relationship linked to either the inflation data or the export data	1
Does not satisfy any of the descriptors below.	0

Economic Activity Deduction

Marking Bands

Descriptor	Marks
Deduces that economic activity is weak based on the 2 datasets, identifies ceteris paribus	3
Deduces that economic activity is weak based on the 2 datasets OR deduces that economic activity is weak based on 1 dataset, identifies ceteris paribus	2
Identifies that economic activity is weak	1
Does not satisfy any of the descriptors below.	0

Policy Conclusion

Marking Bands

Descriptor	Marks
Draws a conclusion that stimulus is required so there is no merit in a budget surplus, provides detailed reasoning using an economic criterion	4
Draws a conclusion that stimulus is required so there is no merit in a budget surplus, provides reasoning using an economic criterion OR draws a conclusion that stimulus is required, provides detailed reasoning referring to the sources	3
Draws a conclusion that stimulus is required, identifies a reason using an economic criterion	2
Identifies that contracting the economy is not warranted	1
Does not satisfy any of the descriptors below.	0

Q31

2020

SCSA

20 marks

Q31a

12 marks

Explain why and how both monetary policy and fiscal policy have been used to influence the Australian economy in 2020. Use an aggregate expenditure (AE) model to support your answer.

Answer(s) could include:
Australian economy:

reference to severe contraction (recession) and nature of demand and supply shock from exogenous factors particularly the coronavirus
main economic indicators and how they have changed over the year: GDP growth, unemployment, inflation, investment, exchange rate, consumer spending etc.
reference to industries hardest hit by contraction
global financial crises and uncertainty
effect of slowdown of global economic growth on local economy.

Monetary policy:

reduction in cash rate by RBA and market interest rates - expansionary
intended effect on consumption, investment and exchange rate via transmission mechanism
aim to support aggregate spending and create employment
role of multiplier effect.

Fiscal policy:

range of significant stimulus payments to households and government policy support for businesses during time of collapsing consumer spending
reduction in government revenue and increase in expenditure
movement to a significant budget deficit from planned budget surplus
role of multiplier effect..

AE model:

45 degree line, AE on vertical axis, Real GDP on horizontal axis
parallel AE lines demonstrating impact of recession and policy effect
increase in equilibrium real GDP to reduce deflationary gap.

Marking Criteria

Australian economy in 2020

Marking Bands

Descriptor	Marks
Explanation of the state of the Australian economy in 2020	3
Description of the Australian economy in 2020	2
Some awareness of the Australian economy in 2020	1
None of the above	0

Monetary Policy

Marking Bands

Descriptor	Marks
Explanation of the use of monetary policy and its relevance to the economic circumstances	3
Description of monetary policy setting/changes connected to the economic circumstances	2
Some awareness of how monetary policy has been used this year	1
None of the above	0

Fiscal Policy

Marking Bands

Descriptor	Marks
Explanation of the use of fiscal policy and its relevance to the economic circumstances	3
Description of fiscal policy setting/changes connected to the economic circumstances	2
Some awareness of how fiscal policy has been used this year	1
None of the above	0

Economic model

Marking Bands

Descriptor	Marks
Fully labelled and correct AE model demonstrating a deflationary gap and impact of expansionary policy settings	3
Mostly correct model demonstrating impact of expansionary policy settings	2
Some aspects on an AE model	1
None of the above	0

Q31b

8 marks

Discuss the factors likely to influence the effectiveness of each of these policies.

Answer(s) could include:

Monetary policy:

overall effectiveness is likely to be poor; no guaranteed increase in aggregate spending such as, cost of borrowing and asset prices channels
interest rates were already very low, further reductions likely to have limited impact due to low consumer and business confidence
household debt is high making it more likely households will seek to retire debt rather than borrow
depreciation of Australian dollar will have increased net exports despite a significant fall in world growth
significant effect time lag.

Fiscal policy:

more effective because government spending can increase aggregate spending directly
government expenditure multiplier likely to be low because of low MPC
government reluctant to go into too much debt given experience post-GFC
other criticisms relevant to success of policies implemented in 2020.

A number of factors effect both policies, i.e. multiplier effect, expectation, and crowding out effects.

Marking Criteria

Descriptor	Marks
Discussion in detail several factors and reasons for their influence on effectiveness of policies	8
The student response meets all criteria of the 6-mark band, and additionally meets the majority of criteria in the 8-mark band.	7
Explanation of several factors and their influence on effectiveness of policies	6
The student response meets all criteria of the 4-mark band, and additionally meets the majority of criteria in the 6-mark band.	5
Description of a few factors and their link to effectiveness of policies	4
The student response meets all criteria of the 2-mark band, and additionally meets the majority of criteria in the 4-mark band.	3
Identification of a factor and its influence	2
The student response meets all criteria of the 0-mark band, and additionally meets the majority of criteria in the 2-mark band.	1
None of the above	0

Q27

2022

SCSA

12 marks

Q27

The economic indicators in the table below refer to a hypothetical economy.

Economic indicator	2020	2021	2022
Change in real GDP	1.2%	1.4%	1.8%
Consumer price index	3%	4%	1.9%
Unemployment rate	7.5%	5.5%	5.1%
Balance on goods and services	＄60bn	＄80bn	＄120bn
Net income balance	＄20bn	–＄25bn	–＄30bn
Cash rate	0.5%	0.25%	0.25%

Q27a (i)

1 mark

Identify the phase of the business cycle the economy experienced between 2020 and 2022.

Descriptor	Marks
expansionary/expansion phase/upswing/recovery	1

Q27a (ii)

1 mark

Calculate the current account balance for 2022.

Descriptor	Marks
＄90bn	1

Q27b

4 marks

Describe two possible causes of the phase of the business cycle identified in part (a)(i) above.

Answers could include:

increased net exports
lower unemployment leading to higher household income and higher consumer spending
increased AD: government, consumer, investment spending, increased exports.
expansionary monetary and fiscal policies.

Marking Criteria

Cause 1

Marking Bands

Descriptor	Marks
Describes a possible cause of the expansion between 2020 and 2022.	2
Identifies a possible cause of the expansion between 2020 and 2022.	1
None of the above	0

Cause 2

Marking Bands

Descriptor	Marks
Describes a possible cause of the expansion between 2020 and 2022.	2
Identifies a possible cause of the expansion between 2020 and 2022.	1
None of the above	0

Q27c

6 marks

Assume that the economic indicators for 2022 shown in the table on page 14 applied to the Australian economy.

Using the aggregate expenditure (AE) model, demonstrate the likely stance the Reserve Bank of Australia would adopt in order to influence economic activity, and explain the impact of this stance.

Answers could include:

RBA would use expansionary monetary policy and lower the cash stance to stimulate economic activity
The lower cash rate will stimulate economic activity via the transmission mechanism.
This will increase GDP, lower unemployment, increase consumption and investment spending and lower AUD, causing increase in exports
There is consideration of the multiplier and a clear reference to the model.

Marking Criteria

Explanation

Marking Bands

Descriptor	Marks
Explains, with reference to the model, how the RBA would use monetary policy to influence economic activity.	4
Describes how the RBA would use monetary policy with some reference to the transmission mechanism and the model.	3
Outlines how monetary policy influences economic activity through the transmission mechanism.	2
States that the RBA would adopt expansionary monetary stance and lowers the cash rate.	1
None of the above	0

Model

Marking Bands

Descriptor	Marks
Correctly labelled AE model clearly demonstrating upward shift in AE curve.	2
Mostly correct model showing an upward shift in AE curve.	1
None of the above	0

VCAA Economics Aggregate demand policies and domestic economic stability

Data Relationships

Economic Activity Deduction

Policy Conclusion

Australian economy in 2020

Monetary Policy

Fiscal Policy

Economic model

Cause 1

Cause 2

Explanation

Model

Frequently Asked Questions

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