What are the three ways government receives revenue?
What budget stance is expected of the government during a period of strong economic growth.
What are the two most important automatic stabiliser systems.
The RBA increases the cash rate from 1.85% to 2.10%.
Calculate how many basis points this is.
Construct a fully labelled AD/SRAS graph that represents demand-pull inflation.
Give three examples of an indirect tax.
Explain the two ways in which government can enact an expansionary stance.
Reduce taxation
Increase spending
Explain the difference between discretionary and non-discretionary fiscal policy, using examples.
Identify three factors that the RBA consider in their monetary policy decision making.
Construct a fully labelled model that represents the effects of automatic stabilisers during a contraction.
Explain the difference between a direct and indirect tax.
Identify three ways in which the government funds a budget deficit.
Explain the process of how the taxation system acts as an automatic stabiliser when economic growth is increasing.
Household income rises
Progressive income tax increases
Increased spending generates higher GST revenue and higher corporate tax
Increased taxation reduces some spending power, reducing demand pressure and slowing AD
Identify two other monetary policy tools available to the RBA.
Construct a fully labelled model that represents the trade off between inflation and unemployment.
Define bracket creep.
In 2020, the government's budget outcome was a deficit of $50 billion. In 2021, it is expected that revenue will remain the same and that the government will achieve a $20 billion deficit.
What is the budget stance - expansionary, contractionary or neutral?
Identify two advantages to fiscal policy.
Identify the four channels of monetary policy transmission.
Draw a flowchart that explains how a decrease in the cash rate influences the savings and investment channel.
Identify a tax that is regressive and explain its impacts on the economy.
In 2020, government revenue was $67 billion and expenditure was $41 billion. In 2020, it is expected that the government will increase spending by $6 billion, whilst revenue will decline by $9 billion.
Determine the budget outcomes for each year and the budget stance in 2021.
2020 - Budget outcome: $26 billion surplus
2021 - Budget outcome: $11 billion surplus
2021 - Budget stance: Expansionary
Identify three limitations of fiscal policy.
The results of a cash rate decision are a reduction in interest payments on debt and an increase in the amount of income available for households and businesses.
Which channel of the transmission mechanism is this cash rate change an example of?
Cash flow channel
The economy is currently operating at equilibrium. Construct a fully labelled graph that illustrates the impacts of favourable rainfall to the agricultural industry.