2014 HIGHER SCHOOL CERTIFIC ATE EXAMINATION

456

Economics

Centre Number

Section II

12345678

40 marks
Attempt Questions 2124
Allow about 1 hour and 15 minutes
for this section

Student Number

Student, Sample

Answer the questions in the spaces

provided. These spaces provide
guidance for the expected length of
response.

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clearly indicate which question you
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Write your Centre Number and
Student Number at the top of this
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1191

15110

456

12345678

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Question 21 (10 marks)

A highway currently passes through a country town. The government is proposing
to build a bypass that diverts highway traffic away from the town.

Discuss the costs and benefits of this proposal.

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(a)

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Question 21 (continued)
(b)

Explain the effect that globalisation has had on environmental sustainability.

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Question 22 (10 marks)

(a)

A hypothetical economy has a simple multiplier of 2.5.

Calculate the change in national income that would result from an increase in
investment of $100 million.

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(b)

Outline how economic growth in a major trading partner might influence

economic growth in Australia.

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How will an increase in Australias marginal propensity to save (MPS) affect
Australias economic growth?

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(c)

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Question 22 (continued)
(d)

Explain the effects of a reduced rate of economic growth on the Australian

Government budget.

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Question 23 (10 marks)

(a)

Distinguish between the current account deficit and foreign debt.

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Explain how the level of national savings can influence the size of the current
account.

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(b)

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Question 23 (continued)
(c)

What are the positive and negative implications of a current account deficit for
the Australian economy?

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Question 24 (10 marks)

(a)

The following diagram shows aggregate demand and aggregate supply curves
for a hypothetical economy.
P

AS

P0

AD
0

Q0

(b)

Outline an effect of product market deregulation on inflation.

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On the diagram, draw the new curve that results if there is a fall in labour
productivity. Label the new equilibrium price P1 and the new equilibrium
quantity Q1.

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Outline a feature of a centralised labour market policy.

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(c)

Question 24 (continued)
(d)

Outline an advantage and a disadvantage of moving from a fixed exchange rate

to a floating exchange rate system.

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