QUESTION 12 (9 marks)
Hypothetical data and economic information is provided.
RESERVE BANK OF AUSTRALIA: ’ Current cash rate Is 3.5%
Analyse the data and economic information to explain the impact on the household sector of a 75 basis point cash rate decrease from the current cash rate (ceteris paribus). Provide two reasons to justify your answer.
QCAA guide · typeset solution
QCAA sample response and mark allocation
Q | Sample response |  | M |  | M | The response: | M |
12 | The data shows businesses are more confident of the future than consumers, as business confidence has risen, and consumer confidence has fallen over the past year. This implies that while businesses expect their profits to rise, consumers do not have the same confidence about their income, which would be negatively influencing their spending decisions. Australian new vehicle sales have decreased by approximately 26% within one year. This trend is consistent with a sudden and significant decrease in consumer confidence. A 75 basis point decrease in the cash rate to 2.75% is a significant intervention that should impact new vehicle sales. Households could be expected to increase their demand for new vehicles. The reasons are firstly that households would experience an increase in their disposable income, as lower interest rates are passed though the economy. Second, their confidence should improve by the RBA acting to stimulate the economy. | • identifies decreasing (↓) consumer confidence yet increasing (↑) business confidence over the year • makes a valid inference about consumer confidence | 3 | • calculates new vehicle sales have decreased by 26% • makes a valid inference about the new vehicle sales | 2 | • identifies the decrease (↓) in the cash rate to 2.75% is significant • explains the impact on household (HH) sector using 2 reasons | 4 |
• identifies ↓ consumer confidence yet ↑ business confidence over the year OR • makes a valid inference about ↓ consumer confidence | 2 | • makes a valid statement about new vehicle sales | 1 | • quantifies the ↓ in the cash rate • explains the impact on HH sector using 1 reason | 3 | ||
• makes a valid statement about consumer confidence | 1 | • does not satisfy any of the descriptors above. | 0 | • quantifies the ↓ in the cash rate • identifies a valid impact on the HH sector | 2 | ||
• does not satisfy any of the descriptors above. | 0 | • identifies an impact of the cash rate on the HH sector | 1 | ||||
• does not satisfy any of the descriptors above. | 0 | ||||||
QCAA sample response and marking criteria reproduced from the official guide.
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