QUESTION 79 (6 marks)
The government proposes the same construction stimulus in both regions. Explain why real-output and price effects may differ. Recommend one design change that would improve the policy’s effectiveness.
Practice marking scheme
Answer
Coast can expand output more readily; Inland risks bottlenecks and higher costs. Target timing and workforce capacity.
Working
Coast has available skilled workers, so demand can draw on idle resources. Inland competes for a constrained workforce and may divert existing activity or raise wages/material costs. Staging Inland projects, investing in relevant training or shifting immediate spending to areas with slack can improve real-output additionality. Regional benefits and transport links should also guide allocation.
Marking criteria
- Explains the difference using both supplied conditions. [2 marks]
- Links capacity constraints to real-output versus price effects. [2 marks]
- Justifies a targeted design change and its trade-off. [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.