Economic Short Answer Questions

External Stability

Define ‘external stability’

Describe a situation of external instability.

Why is our external stability important?

Briefly describe at what level the current account deficit may be sustainable.

Examine recent trends in the size of the CAD

Explain the difference in the economic effects of a rising levels of foreign debt and foreign equity.

Examine the recent performance of the Australian dollar.

Outline how the Australian dollar may pose an external stability risk.

Outline the policies that the Australian government has used to address the external stability issue.

Critically evaluate the argument that the CAD and foreign liabilities are not a significant problem in
Australia.

Explain the concept that the CAD is the result of a shortage of domestic savings. Discuss the extent to
which you think the CAD reflects a shortage of savings and to what extent a poor trade performance.

Distributi on of income

Distinguish between income and wealth

Explain how the following can be used to measure the degree of inequality in the distribution of
income:

a) the Lorenz curve (explain using diagram)

b) the Gini Coefficient:
c)
Outline how age and gender can influence the distribution of income

Examine which groups tend to be adversely affected by inequality according to occupation, education
and cultural background in Australia.

Discuss the recent trends in the distribution of income in Australia in recent years

Outline the economic costs and benefits associated with income inequality.

Outline the social costs and benefits of inequality.

Discuss government policy options to improve the distribution of income and wealth in Australia

Unemployment

Define ‘labour force’

Define the ‘labour force participation rate’ and explain how it is measured.
Discuss how unemployment is measured and how official unemployment statistics may understate
the true extent of the unemployment problem in Australia.

Outline the recent trends in unemployment in Australia

Outline the main types of unemployment that may occur in the economy.

List the factors that may lead to higher unemployment

Discuss the causes of unemployment in the Australian economy.

Outline the economic and social costs for Australia of a sustained high rate of unemployment.

Explain what is meant by the ‘natural rate of unemployment’:

Discuss how government policies can influence the rate of unemployment in the economy

Infl ati on

Define ‘inflation’

Explain how the inflation rate is calculated.

Outline the main causes of inflation

Discuss the reasons for Australia’s low inflation rates over recent years.

Identify the type of inflation most likely to occur if businesses raise there prices due to higher wage
costs

Explain the role of inflationary expectations in determining the level of inflation.

Explain why it is difficult for government policies to successfully address full employment and price
stability at the same time.

Outline the likely impacts of higher inflation on the Australian economy:

Discuss Policy options to maintain low inflation in Australia:

Environment

Describe the term ‘natural environment’

Discuss why environmental management is often at conflict with other objectives?

Define the term ‘ecologically sustainable development’

Describe what is meant by a ‘public good

Briefly examine the economic problem of ‘free riders’

Identify what methods governments may use to control pollution levels.

Explain what is meant by an externality giving an example

Outline how market failure occurs in relation to managing the environment.

Discuss what is meant by the distinction between ‘renewable’ and ‘non-renewable’ resources.