VCAA Economics Domestic macroeconomic goals

This describes a valid relationship. In market-based economies, returns on capital or skilled labor often outpace general wage growth, meaning economic growth can lead to a wider gap between the rich and the poor.

This describes a valid relationship based on the marginal propensity to consume ($MPC$). Lower-income groups tend to spend a higher percentage of their income, so high inequality can reduce overall consumption and aggregate demand.

This describes a valid relationship regarding incentives. Economic theory suggests that the possibility of earning higher incomes (inequality) motivates innovation, risk-taking, and business investment, which are necessary for growth.

Incorrect. An increase in savings means less money is spent on consumption, which decreases aggregate demand and lowers national income.

Incorrect. Since disposable income is either saved or consumed ($Y_d = C + S$), an increase in savings directly implies a decrease in consumption.

Incorrect. The reduction in aggregate demand caused by increased savings would lead firms to produce less, which typically increases unemployment rather than decreasing it.

When income is below equilibrium, aggregate expenditure exceeds current production, meaning inventories are falling, not rising.

While it is true that inventories are falling, this depletion signals firms to increase production to meet demand, rather than decrease it.

Inventories are falling, not rising. Furthermore, if inventories were actually rising, it would prompt firms to decrease production, not increase it.

A global shift towards renewable energy would reduce, not increase, the demand for carbon-intensive fossil fuels like coal.

Even if the demand for natural gas decreased, this would cause its price to fall, not rise, according to the law of demand.

If the demand for natural gas were to increase as a transition fuel, its price would rise, not fall, assuming supply remains constant.

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 ($\frac{56 - 50}{50} \times 100 = 12\%$).

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.

A fall in the labour force participation rate means fewer people are actively looking for work, which typically decreases the official unemployment rate rather than keeping it high.

Part-time workers are classified as employed. An increase in the number of part-time workers would increase overall employment and decrease the unemployment rate.

Raising the school leaving age would delay young people from entering the labour force, reducing the number of unemployed youth and likely lowering the overall unemployment rate.

This describes cyclical unemployment, which occurs when jobs are lost due to a general economic downturn or recession.

This describes seasonal unemployment, which happens when jobs are only available during certain times of the year.

This is an example of being fired for cause due to personal misconduct, rather than a macroeconomic type of unemployment.

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.

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.

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.

While inflation targeting sets a specific goal (often a range like 2-3%), central banks cannot guarantee the outcome due to external economic shocks and the time lags involved in monetary policy.

The pass-through of interest rate changes depends on banking sector competition and liquidity, rather than the specific policy framework of targeting inflation.

Monetary policy is a demand-side tool, making it difficult to address cost-push inflation (supply shocks) without causing significant harm to economic output.

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.