microeconmics
This occurs when the price of a good increases, leading consumers to buy less of it.
law of demand
The total market value of all goods and services produced in a country in a year.
GDP
The RBA’s primary goal of monetary policy is to maintain this.
price stability / inflation targeting
A budget surplus means this.
revenue exceeds expenditure
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.
A
This is the cost of the next best alternative forgone
opportunity cost
This occurs when the general price level in the economy rises over time.
inflation
Monetary policy works with this kind of time delay.
lag effect
An example of a discretionary fiscal policy tool is this.
stimulus spending / tax cuts / infrastructure projects
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.
D
This type of market structure is characterised by many firms selling identical products.
perfect competition
The government aims for this rate of unemployment in Australia, usually around 4–5%.
natural rate of unemployment
if the cash rate rises, explain the likely effect on household mortgage repayments and aggregate demand.
Repayments increase → disposable income falls → AD decreases
If the government increases infrastructure spending, explain how this could create a multiplier effect in the economy.
Spending → income → consumption → further rounds of spending → multiplied GDP growth
The Australian government is aiming to achieve sustainable budgets over time. Which factor makes this challenging
(A) heavy reliance on direct taxation
(B) higher retirement age of employees
(C) change in the demographic structure in the economy
(D) greater infrastructure funding after national flood events
C
A government-imposed maximum price on a good is called this
price ceiling
This curve shows the inverse relationship between unemployment and inflation.
philips curve
Identify and explain one limitation of monetary policy during a deep recession.
liquidity trap / low consumer/business confidence reducing effectiveness
Explain how fiscal policy could be used counter-cyclically during a period of high unemployment.
Expansionary policy: increase spending/reduce taxes to raise AD and employment
Ceteris paribus, a shift in the long run aggregate supply curve should occur when
(A) household saving ratios fall.
(B) average pension age decreases.
(C) median household income increases.
(D) worker productivity remains constant.
B
This point on a production possibility curve shows resources being used most efficiently.
allocative efficiency
This theory suggests government spending can stimulate aggregate demand during downturns.
Keynesian economics
Evaluate whether contractionary monetary policy is effective in reducing inflation caused by rising global oil prices.
Cost-push inflation → higher rates reduce AD but don’t address supply shock → potential rise in unemployment
Evaluate the trade-offs between using expansionary fiscal policy and long-term debt sustainability.
Short-term growth/employment benefits vs. rising public debt, interest repayments, crowding out
Which is an example of an automatic stabiliser?
(A) infrastructure expenditure
(B) electric vehicle subsidies
(C) unemployment benefits
(D) veteran payments
C