QUESTION 39 (6 marks)
A successful Australian film-production hub attracts additional overseas orders. Assume unused productive capacity and no immediate change in production costs. Explain the initial effect using an AD/AS diagram that you draw and label.
Practice marking scheme
Answer
Higher exports shift AD right, raising equilibrium real GDP and the price level in the short run.
Working
Film services sold abroad are exports and an injection. Higher X increases AD = C + I + G + X − M. With SRAS unchanged and spare capacity, the equilibrium moves right/up. Draw AD1 and AD2, label the shared price-level/real-GDP axes, and project the two equilibria. Some additional output is feasible; the price effect depends on the slope of SRAS.
Marking criteria
- Links overseas orders to exports and higher AD. [2 marks]
- Draws and labels a rightward AD shift with unchanged SRAS. [2 marks]
- Identifies and explains higher short-run real GDP and price level. [2 marks]
Practice question aligned to the current QCAA syllabus; review the worked solution and marking criteria.
View the QCAA syllabusCompare your working with the guide above.