QUESTION 13 (9 marks)
An economic scenario is provided.
The 2021/22 federal budget is expected to deliver a deficit of $4.2b at the end of June
port data shows coal exports are
2022. A $7.1b surplus is anticipated the
expected to fall from 2021 to 2022 by approximately $70 billion.
following year.
2022
(Forecast released May ) (Data released 10 July 2022)
CPI data shows that movements in the consumer price index (CPI) and the wage price index (WPI) were below 2% for the three years to June 2022.
(Data updated 31 July 2022)
Use the scenario to explain two relationships and their economic effects. Evaluate the merit of achieving a budget surplus in your answer.
QCAA guide · typeset solution
QCAA sample response and mark allocation
Q | Sample response | The response: | M | The response: | M | The response: | M |
13 | The CPI data shows there are no inflation pressures from consumer prices or wages, indicating the economy has not experienced demand pressures for three years. The export data demonstrates that Australia has some external stability pressures, because the export value of coal has fallen by $70 billion. These two datasets, in the absence of further information, indicate that economic activity is weakening. They also provide evidence of negative forces acting within Australia’s economy that require stimulatory policies. Proposals to achieve a federal budget surplus as expected cannot be justified at this time, because it would mean contracting the economy, which could result in inflation and wages falling further. The fall in wages would be expected to cause households to defer spending and save, causing a flow-on effect on business investment. This would result in several negative forces acting on aggregate demand and reducing economic growth. Consequently, the productive capacity of the economy should be increased. | • explains a relationship to - domestic aggregate demand pressures (inflation) - external stability pressures (exports) | 2 | • deduces that economic activity is weak based on the 2 datasets • identifies ceteris paribus | 3 | • draws a conclusion that stimulus is required so there is no merit in a budget surplus • provides detailed reasoning using an economic criterion | 4 |
• identifies a relationship linked to either the inflation data or the export data | 1 | • deduces that economic activity is weak based on the 2 datasets OR • deduces that economic activity is weak based on 1 dataset • identifies ceteris paribus | 2 | • draws a conclusion that stimulus is required so there is no merit in a budget surplus • provides reasoning using an economic criterion OR • draws a conclusion that stimulus is required • provides detailed reasoning referring to the sources | 3 | ||
• does not satisfy any of the descriptors above. | 0 | • identifies that economic activity is weak | 1 | • draws a conclusion that stimulus is required • identifies a reason using an economic criterion | 2 | ||
• does not satisfy any of the descriptors above. | 0 | • identifies that contracting the economy is not warranted | 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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