Victorian Certificate of Education

SUPERVISOR TO ATTACH PROCESSING LABEL HERE

2022

Letter
STUDENT NUMBER

ECONOMICS
Written examination
Friday 4 November 2022
Reading time: 11.45 am to 12.00 noon (15 minutes)
Writing time: 12.00 noon to 2.00 pm (2 hours)

QUESTION AND ANSWER BOOK

Structure of book
Section Number of Number of questions Number of
questions to be answered marks
A 15 15 15
B 4 4 65
Total 80

• Students are permitted to bring into the examination room: pens, pencils, highlighters, erasers,
sharpeners and rulers.
• Students are NOT permitted to bring into the examination room: blank sheets of paper and/or
correction fluid/tape.
• No calculator is allowed in this examination.
Materials supplied
• Question and answer book of 28 pages
• Answer sheet for multiple-choice questions
• Additional space is available at the end of the book if you need extra space to complete an answer.
Instructions
• Write your student number in the space provided above on this page.
• Check that your name and student number as printed on your answer sheet for multiple-choice
questions are correct, and sign your name in the space provided to verify this.
• All written responses must be in English.
At the end of the examination
• Place the answer sheet for multiple-choice questions inside the front cover of this book.

Students are NOT permitted to bring mobile phones and/or any other unauthorised electronic
devices into the examination room.
© VICTORIAN CURRICULUM AND ASSESSMENT AUTHORITY 2022
2022 ECONOMICS EXAM 2

SECTION A – Multiple-choice questions

Instructions for Section A

Answer all questions in pencil on the answer sheet provided for multiple-choice questions.
Choose the response that is correct or that best answers the question.
A correct answer scores 1; an incorrect answer scores 0.
Marks will not be deducted for incorrect answers.
No marks will be given if more than one answer is completed for any question.

Question 1
Which one of the following is likely to be classified as structural unemployment?
A. a person who loses their job as a tour operator due to a recession

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B. a person who loses their job as a fruit picker when there is no fruit left to pick
C. a person who loses their job as an accountant because they stole from their employer
D. a person who loses their job as an Economics teacher due to a decline in the number of students
studying Economics

Question 2
A movement along the supply curve for broccoli is most likely to have been caused by
A. a shortage of skilled farm workers.
B. a decrease in the price of fertiliser.
C. a decrease in personal income tax rates.
D. the removal of the excise tax on petrol used by farmers.

Question 3
Which one of the following reasons is most likely to explain why the unemployment rate in a country
remains high despite strong rates of economic growth?
A. a fall in the labour force participation rate
B. an increase in the number of part-time workers
C. raising the school leaving age to 18 years old
D. an increase in the rate of labour productivity growth

Question 4
Which one of the following factors is likely to have a different effect on Australia’s rate of economic growth
than the others?
A. an increase in the cash rate
B. an increase in the tax-free threshold
C. an increase in the rate of economic growth in China
D. an increase in government spending on infrastructure

SECTION A – continued
 3 2022 ECONOMICS EXAM

Question 5
Consider the following data for a hypothetical economy.

Quarter Real GDP

($ billion)

June 2021 50

September 2021 56

December 2021 57

March 2022 40

June 2022 48
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Using this data, the rate of economic growth for the year ended June 2022 was
A. −2%
B. −4%
C. −20%
D. 12%

Question 6
Which one of the following goods and services is likely to have the highest price elasticity of demand?
A. cigarettes
B. haircuts
C. soft drinks
D. international travel

Question 7
How could the 2022–23 Australian Government budget deficit be financed?
A. by increasing company tax rates
B. by reducing welfare spending
C. by selling government bonds to foreign companies
D. by all of the options listed above

Question 8
A depreciation of the Australian dollar is most likely to be caused by an increase in
A. Australia’s terms of trade.
B. foreign travel expenditure by Australians.
C. the value of primary income credits in the balance of payments.
D. the value of foreign direct investment by multinational corporations into Australia.

SECTION A – continued
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2022 ECONOMICS EXAM 4

Question 9
Consider the following data for a hypothetical economy.

$ billion

Government spending 20

Imports 55

Taxation receipts 25

Private investment 15

Exports 65

Savings 30

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Using this data, which one of the following statements about the hypothetical economy is correct?
A. It is contracting, because savings are greater than taxation receipts.
B. It is contracting, because leakages are greater than injections.
C. It is expanding, because injections are greater than leakages.
D. It is expanding, because imports are greater than private investment.

Question 10
Which one of the following international transactions would be recorded as a primary income debit in the
current account section of Australia’s balance of payments?
A. the sale of education services by Australian universities to international students
B. the purchase of Australian Government securities by American investment banks
C. the purchase of electronic devices by Australian retailers from Chinese distributors
D. the payment of rent by Australian companies for retail space owned in Melbourne by Japanese
companies

Question 11
Australia’s current account balance is likely to worsen if
A. China’s rate of economic growth decreases.
B. there is an increase in Australia’s national savings.
C. there is an increase in the price of iron ore in world markets.
D. Australian superannuation funds invest more in international shares.

Question 12
If an economy moved into the contraction phase of the business cycle, which combination of outcomes
would result?
A. an increase in interest rates and a decrease in the value of business investment
B. an increase in household savings and a decrease in consumer confidence
C. an increase in cyclical unemployment and an increase in business confidence
D. a decrease in cyclical unemployment and a higher labour force participation rate

SECTION A – continued
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Question 13
Which one of the following Australian Government policy initiatives is the least likely to increase both
aggregate demand and aggregate supply?
A. higher childcare rebates
B. lower company tax rates
C. higher tariffs on imported goods
D. increased spending on road and rail infrastructure

Question 14
The international competitiveness of a country is most likely to fall if
A. labour productivity decreases.
B. real unit labour costs decrease.
C. its currency can buy less of a foreign currency.
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D. its inflation rate is lower than that of its trading partners.

Question 15
Which one of the following would not be classified as a direct tax in the Australian Government’s federal
budget?
A. company tax
B. capital gains tax
C. goods and services tax
D. pay-as-you-go income tax

END OF SECTION A
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2022 ECONOMICS EXAM 6

SECTION B – Written responses

Instructions for Section B

Answer all questions in the spaces provided.

Question 1 (19 marks)

All groups Consumer Price Index (CPI) annual movement (%)

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4

3
percentage
change (%)
2

–1

–2
June June June June June June
2017 2018 2019 2020 2021 2022

Source: Australian Bureau of Statistics, ‘Consumer Price Index, Australia’, reference period June 2022,
<www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release>

a. With reference to the graph above, describe the trend in Australia’s inflation rate since June
2020. 2 marks

SECTION B – Question 1 – continued

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b. Distinguish between demand inflation and cost inflation. 3 marks

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SECTION B – Question 1 – continued

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2022 ECONOMICS EXAM 8

c. Explain how one aggregate demand factor and one aggregate supply factor have influenced
the inflation rate over the past 12 months. 4 marks

Aggregate demand factor

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Aggregate supply factor

d. Examine one economic consequence of a high inflation rate on the efficiency of resource
allocation. 2 marks

SECTION B – Question 1 – continued

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e. Explain how movements in Australia’s inflation rate and the unemployment rate may have
influenced the stance of monetary policy since January 2022. 4 marks
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SECTION B – Question 1 – continued

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2022 ECONOMICS EXAM 10

f. Considering the exchange rate transmission mechanism, explain how the stance of monetary
policy may have affected the achievement of one of the Australian Government’s domestic
macroeconomic goals. 4 marks

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SECTION B – continued
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CONTINUES OVER PAGE

SECTION B – continued
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2022 ECONOMICS EXAM 12

Question 2 (14 marks)

a. Outline how the stance of budgetary policy might be determined. 2 marks

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SECTION B – Question 2 – continued

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b. Explain how automatic stabilisers have affected the Australian Government’s budget outcome
for 2021–22. 4 marks
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SECTION B – Question 2 – continued

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2022 ECONOMICS EXAM 14

c. Explain how a change to one structural component of the 2022–23 Budget may influence
aggregate demand and the achievement of the domestic macroeconomic goal of strong and
sustainable economic growth. You may refer to any structural change announced in the March
Budget presented by the Coalition Government or any budget updates made by the Australian
Labor Party Government elected in May 2022. 4 marks

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SECTION B – Question 2 – continued

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d. Evaluate the use of budgetary policy in achieving the Australian Government’s goal of full
employment. 4 marks
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SECTION B – continued
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2022 ECONOMICS EXAM 16

Question 3 (18 marks)

a. Explain how productivity growth may affect the achievement of the Australian Government’s
domestic macroeconomic goal of strong and sustainable economic growth and living
standards. 6 marks

Economic growth

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Living standards

SECTION B – Question 3 – continued

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b. With reference to an example, select one of the following aspects of the Australian
Government’s budgetary policy and explain how this aspect might influence aggregate supply
and the inflation rate in Australia:
• research and development grants
• investment in infrastructure
• tax reform 4 marks

Selected aspect

Aggregate supply
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Inflation rate

SECTION B – Question 3 – continued

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2022 ECONOMICS EXAM 18

c. Consider the following information.

In the year ending 30 June 2021, overseas migration contributed a net loss of 89 000 to
Australia’s population …
The last time Australia saw an annual net loss due to overseas migration was 75 years
ago at the end of World War 2.
Source: Australian Bureau of Statistics, ‘Overseas migration’, reference period 2020–21 financial year,
<www.abs.gov.au/statistics/people/population/overseas-migration/2020-21>

Examine how changes in Australia’s overseas migration, such as the change outlined above,
might have affected the labour market and aggregate supply. 4 marks

Labour market

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Aggregate supply

SECTION B – Question 3 – continued

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d. Explain how trade liberalisation is likely to affect Australia’s inflation rate and living
standards. 4 marks

Inflation rate
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Living standards

SECTION B – continued
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2022 ECONOMICS EXAM 20

Question 4 (14 marks)

• The World Health Organization (WHO) [recommends] that ‘free sugars1’ should account for
less than 10% of total energy intake (approx. 50 grams/12 teaspoons) for the prevention of
unhealthy weight gain and dental caries2 …
• Over half of consumers in Australia (52%) and New Zealand adults (58%) are exceeding the
WHO recommended intakes, with adolescents and young adults recording the highest sugar
consumption.
Source: Food Regulation, ‘Forum – Policy Context – Sugars in Australia and New Zealand’,
<https://foodregulation.gov.au/internet/fr/publishing.nsf/Content/sugar-labelling>

1freesugars – sugars added to drinks, as well as sugars in honey, fruit juice and fruit juice
concentrates
2dental caries – tooth decay

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a. Outline the potential opportunity cost of consuming sugar for an individual. 2 marks

SECTION B – Question 4 – continued

 21 2022 ECONOMICS EXAM

b. With reference to the information provided on page 20, explain one reason why the excess
consumption of sugar may cause market failure. 3 marks
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SECTION B – Question 4 – continued

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2022 ECONOMICS EXAM 22

c. Using a fully labelled demand and supply diagram, illustrate and analyse how one form
of government intervention might lead to a change in relative prices and the allocation of
resources. You may refer to any market in your response. 6 marks

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SECTION B – Question 4 – continued

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d. Explain how government intervention might unintentionally lead to a decrease in the

efficiency of resource allocation. You may refer to any market in your response. 3 marks
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END OF QUESTION AND ANSWER BOOK

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2022 ECONOMICS EXAM 24

Extra space for responses

Clearly number all responses in this space.

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 2022 ECONOMICS EXAM
26

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2022 ECONOMICS EXAM 28

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An answer book is available from the supervisor if you need extra space to complete an answer. Please
ensure you write your student number in the space provided on the front cover of the answer book.
At the end of the examination, place the answer book inside the front cover of this question and
answer book.