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Economic management practice

QCE Economics · Original practice questions with worked solutions

All economic management practice questions

62 original questions · Page 2 of 3

  1. Q59 · Original practice · 4 marks
    A government refinances a…
    Economic management
  2. Q60 · Original practice · 5 marks
    A proposed port upgrade is funded by cancelling an equally costly overseas government procurement contract. Assume unused local resources. Explain why the change can affect Australian demand even if total government expenditure is unchanged. Explain one possible longer-run effect.
    Economic management
  3. Q61 · Original practice · 5 marks
    A bank lowers its variable mortgage rate from 6.20% to 5.95% after a 50-basis-point cash-rate cut. A household has an interest-only mortgage of…
    Economic management
  4. Q62 · Original practice · 6 marks
    Assume a higher cash rate raises all relevant mortgage rates when contracts first reprice. Use the data to explain the direct mortgage cash-flow effect immediately and after 12 months. Evaluate the claim that unchanged consumption in the first month proves monetary policy has failed.
    Economic management
  5. Q63 · Original practice · 5 marks
    After a rate rise, one group of borrowers pays 600millionmoreannualinterestandreducesconsumptionby70600 million more annual interest and reduces consumption by 70% of that amount. A group of deposit holders earns 400 million more and spends 25% of it. Calculate the combined initial consumption change and explain a distributional issue.
    Economic management
  6. Q64 · Original practice · 5 marks
    A hypothetical Australian-dollar appreciation changes the exchange rate from US0.65toUS0.65 to US0.75 per A1.AnimportedmachinehasafixedUS1. An imported machine has a fixed US15 000 price. Calculate its Australian-dollar price before and after. Explain how this could affect both short-run inflation and longer-run productive capacity.
    Economic management
  7. Q65 · Original practice · 5 marks
    A business is considering borrowing 2millionfornewequipment.Expectedadditionalannualoperatingsurplusbeforefinancingcostsis2 million for new equipment. Expected additional annual operating surplus before financing costs is 130 000. The interest-only loan rate rises from 5% to 7%. Calculate the expected annual surplus after interest at each rate and explain the investment-channel implication. Ignore all other costs.
    Economic management
  8. Q66 · Original practice · 5 marks
    House prices fall after a monetary tightening, but the number of dwellings and households’ current wages are unchanged. Explain two channels through which household consumption could still fall. Distinguish a financial wealth change from a change in physical housing capacity.
    Economic management
  9. Q67 · Original practice · 5 marks
    A temporary energy-price jump is followed by widespread expectations that inflation will remain high. Explain why the central bank may be more concerned about the expectations shift than about the one-off price jump alone.
    Economic management
  10. Q68 · Original practice · 5 marks
    The nominal cash rate falls from 5% to 4.5%, while expected inflation falls from 4% to 2%. Using the exact real-rate ratio, calculate the real cash-rate proxy in both periods. Assess the statement that the nominal cut alone proves monetary conditions became easier.
    Economic management
  11. Q69 · Original practice · 5 marks
    Calculate inflation in Years 2 and 3. Explain why restored freight capacity does not require the CPI to return to 100. Identify one consideration before responding with a further rate increase in Year 3.
    Economic management
  12. Q70 · Original practice · 6 marks
    The forecast assumes the cash rate is held at its current level. Use it to evaluate the argument that inflation above 3% today requires an immediate additional rate rise. Consider one reason the forecast could be wrong.
    Economic management
  13. Q71 · Original practice · 6 marks
    A research grant supports a new battery-storage process. The technology can later be used by other domestic firms without paying the original researcher. Explain a rationale for public support and evaluate one risk in selecting the grant recipient.
    Economic management
  14. Q72 · Original practice · 5 marks
    A retraining program enrols 10 000 displaced workers. Eighty per cent complete it; 60% of completers secure jobs requiring the new qualification within a year. Calculate the number securing those jobs and evaluate what the figures do and do not show about the program’s employment effect.
    Economic management
  15. Q73 · Original practice · 5 marks
    A freight upgrade reduces a producer’s annual delivery costs from 12millionto12 million to 9 million while output is unchanged. Calculate the percentage saving. Explain a possible SRAS effect and one factor affecting whether consumers benefit.
    Economic management
  16. Q74 · Original practice · 5 marks
    A streamlined licensing system cuts a firm’s compliance hours from 500 to 300 per year with output and safety standards unchanged. Calculate the change in compliance hours. Explain why the qualification about safety is important when evaluating deregulation.
    Economic management
  17. Q75 · Original practice · 6 marks
    A factory subsidy is forecast to add 400milliontoannualrealoutput.Asuppliedenvironmentalassessmentestimates400 million to annual real output. A supplied environmental assessment estimates 150 million of annual community costs that are excluded from GDP. Evaluate the subsidy using sustainable development rather than output growth alone. The subsidy costs…
    Economic management
  18. Q76 · Original practice · 5 marks
    Flexible work and childcare initiatives enable 12 000 additional people to join the labour force. Employers have 8000 suitable vacancies, and all are filled by these entrants. Explain the immediate employment and unemployment effects and one longer-run supply benefit.
    Economic management
  19. Q77 · Original practice · 6 marks
    Automation allows a distribution centre to produce 20% more output with the same total labour hours. It also eliminates some routine jobs and creates specialist positions. Evaluate the reform using productivity and employment, distinguishing short- and long-run effects.
    Economic management
  20. Q78 · Original practice · 5 marks
    A new domestic processing facility initially requires 2billionofimportedmachinery.Onceoperational,itisforecasttosubstitutefor2 billion of imported machinery. Once operational, it is forecast to substitute for 300 million of imports annually and generate…
    Economic management
  21. Q79 · Original practice · 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.
    Economic management
  22. Q80 · Original practice · 5 marks
    Two…
    Economic management
  23. Q81 · Original practice · 6 marks
    A government must choose between a one-year 5billiondisasterpaymentandapermanent5 billion disaster payment and a permanent 5 billion annual entitlement. Both are funded by borrowing initially. Compare their implications for structural deficits and future fiscal flexibility, assuming the same immediate recipients and spending response.
    Economic management
  24. Q82 · Original practice · 6 marks
    The two forecasts assume the same supply recovery. Evaluate additional monetary tightening using price stability and full employment. Identify one further piece of evidence needed for a judgement.
    Economic management