Economic management — Question 11

11

As transfer payments that redistribute income, JobSeeker payments are automatic stabilisers; that is, government expenditure increases inevitably when the economy’s growth rate is falling and the number of unemployed people rises. These payments allow unemployed people to spend more than they would otherwise. Without these increases in spending, the economy would be heading for a larger downturn (point A) than otherwise. With the stimulatory effect of spending that automatically increases because of the higher unemployment, the trough will be at a higher point (point B). This direct relationship between unemployment payments and unemployment also works at peaks of the economic cycle to automatically reduce government expenditure.

• accurately represents the economic cycle

• includes a title and axis labels

• includes 2 points showing change in a trough position

2

• explains how automatic stabilisers work to smooth out peaks and troughs in the economic cycle

• describes how an increase (↑) in JobSeeker would smooth out troughs in the diagram drawn

• links to diagram

4

• draws the economic cycle

1

• describes how automatic stabilisers work to smooth out peaks or troughs in the economic cycle

• describes how an ↑ in JobSeeker would smooth out the diagram drawn

• refers to diagram

3

• does not satisfy any of the descriptors above.

0

• describes how automatic stabilisers work to smooth out peaks or troughs in the economic cycle

OR

• describes how an ↑ in JobSeeker would smooth out an economic cycle

2

• identifies how transfer payments or JobSeeker automatically stabilise an economic cycle

1

• does not satisfy any of the descriptors above.

0