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Stage 2 Economics Assessment Type 1: Skills and Application Task Circular Flow and Economic Management (45 marks) Purpose This task is designed to give you the opportunity to demonstrate skills and conceptual understanding in relation to the circular flow model and economic management. Description of assessment Refer to the source material and answer the questions that follow. Use diagrams to support your answers. Assessment conditions Supervised. Open book. – class time. You will have one week to complete this assessment task. Learning Requirements Assessment Design Criteria 1. know, understand, communicate, and apply economic concepts, principles, models, and skills Knowledge and Understanding The specific features are as follows: KU1 Knowledge, understanding, and application of economic concepts, principles, models, and skills. KU2 Understanding of the role of economic systems in dealing with the economic problem of scarcity. Analysis and Evaluation The specific features are as follows: AE1 Analysis and evaluation of economic issues and events (past and current) using economic models and the skills of economic inquiry. AE2 Evaluation of the effects of interdependence on individuals, business, and government, locally, nationally, and globally. AE3 Analysis and evaluation of the impact of economic change locally, nationally, and globally. AE4 Evaluation of the way in which economic decisions involve costs and benefits. Communication The specific features are as follows: C1 Communication of economic principles, models, and concepts. C2 Use of economic terminology. 2. explain the role of economic systems in dealing with the economic problem of scarcity 3. evaluate the effects of interdependence on individuals, business, and governments locally, nationally, and globally 4. evaluate and explain the way in which economic decisions involve costs and benefits 5. critically analyse and evaluate economic issues and events (past and current) using economic models and the skills of economic inquiry 6. critically analyse and evaluate the impact of economic change locally, nationally, and globally. Page 1 of 3 Use of diagrams provides students with the opportunity to demonstrate their ability to communicate in different formats. Stage 2 Economics Task Ref: A303711 (January 2014) © SACE Board of South Australia 2014 Performance Standards for Stage 2 Economics A Knowledge and Understanding Analysis and Evaluation Communication Comprehensive knowledge, indepth understanding, and focused application of complex economic concepts, principles, models, and skills. Astute and logical analysis and evaluation of economic issues and events (past and current) using economic models and the skills of economic inquiry. Sophisticated communication of economic principles and models, and complex concepts. Perceptive evaluation of the effects of interdependence on individuals, business, and government locally, nationally, and globally. Consistent, clear, and appropriate use of correct economic terminology. Comprehensive and wellinformed understanding of the role of economic systems in dealing with the economic problem of scarcity. B Some depth of knowledge and understanding, and focused application, of a variety of economic concepts, principles, models, and skills. Well-informed understanding of the role of economic systems in dealing with the economic problem of scarcity. Incisive analysis and evaluation of the impact of economic change locally, nationally, and globally. Insightful and well-informed evaluation of the way in which economic decisions involve costs and benefits. Well-considered analysis and evaluation of economic issues and events (past and current) using economic models and the skills of economic inquiry. Well-considered evaluation of the effects of interdependence on individuals, business, and government locally, nationally, and globally. Clear and accurate communication of economic principles and models, and a variety of concepts. Clear and appropriate use of economic terminology. Well-informed analysis and evaluation of the impact of economic change locally, nationally, and globally. Well-informed evaluation of the way in which economic decisions involve costs and benefits. C Considered knowledge and understanding, and competent application, of economic concepts, principles, models, and skills. Informed understanding of the role of economic systems in dealing with the economic problem of scarcity. Considered analysis and evaluation of economic issues and events (past and current) using economic models and the skills of economic inquiry. Competent communication of some economic principles, models, and concepts. Considered evaluation of the effects of interdependence on individuals, business, and government locally, nationally, and globally. Appropriate use of economic terminology. Informed analysis and evaluation of the impact of economic change locally, nationally, and globally. Informed evaluation of the way in which economic decisions involve costs and benefits. D Superficial understanding and partial application of some basic economic concepts, principles, models, and skills. Some recognition of the role of economic systems in dealing with the economic problem of scarcity. Basic consideration and description of one or more economic issues and/or events (past and current) using some skills of economic inquiry. Communication of some basic economic principles, models, and concepts. Basic consideration and description of one or more of the effects of interdependence on individuals, business, and government locally, nationally, and globally. Some appropriate use of some economic terminology, with inconsistencies. Recognition of aspects of the impact of economic change locally, nationally, and globally. Some awareness of the way in which economic decisions involve costs and benefits. E Identification and attempted application of one or more basic economic concepts, principles, models, or skills. Limited recognition of the role of economic systems in dealing with the economic problem of scarcity. Emerging awareness of one or more economic issues or events (past and current), with limited use of skills of economic inquiry. Limited recognition of one or more of the effects of interdependence on individuals, business, and government locally, nationally, and globally. Attempted communication of one or more simple economic principles, models, or concepts. Limited use of economic terminology. Emerging recognition of an aspect of the impact of economic change locally, nationally, and globally. Limited awareness of the way in which economic decisions involve costs and benefits. Page 2 of 3 Stage 2 Economics Task Ref: A303711 (January 2014) © SACE Board of South Australia 2014 Stage 2 Economics Assessment Type 1: Skills and Application Circular Flow and Economic Management Refer to the following information You are the Treasurer of a medium sized country whose economy has been suffering a slowdown in economic growth with GDP growth falling from 4.5% twelve months ago to just 0.2% at the current time. Unemployment has begun to increase and business investment has declined. Productivity growth has also slowed and there has been a gradual increase in imports over the past two years. Using your knowledge of the circular flow model and the different policy options available to the government complete the following tasks. 1. The following policies have been suggested to help this economy recover. 1. Increase interest rates 2. Special tax cuts to support new businesses 3. Increased welfare payments to pensioners 4. Decreased interest rates 5. Decreased personal tax rates for high income earners only 6. Lower taxes on imports (tariffs) 7. Increased government spending on infrastructure 8. Special payments to new home buyers 9. Cuts in spending on education 10. Government to employ more teachers, nurses and police 11. Increased taxes on imports (tariffs) 12. Grants and tax deductions for export industries 13. Payroll tax rebates for industries that employ more workers 14. Increased personal income tax 15. Increased tax on luxury items a) Divide the policies under two headings. Appropriate/ Not Appropriate given current economic conditions. Briefly explain why you selected each policy as appropriate or not appropriate. Name the type of policy involved and use the terms contractionary or expansionary in your explanation. (30) b) Using your knowledge of the circular flow of income model explain which two of the policies that you listed as appropriate, would have the greatest expansionary effect on the economy in question. Clearly identify which money flows are affected and which sectors are most affected. Discuss possible problems that might be associated with the policy and any differences between the short term and long term effects. Use a diagram and refer to the expenditure multiplier in your answer. (10) c) Explain why the use of a range of economic policies might be the best approach to economic management for this economy. (5) Additional Comments This task is structured such that students have the opportunity to demonstrate achievement at all levels against the performance standards. Part (a) requires a straightforward classification of policies. Students are directed to use specific terms in brief explanations. Part (b) requires students to demonstrate skills of analysis and evaluation but provides detailed instructions which support students in focusing on key points in their response. Part (c) is open-ended with no scaffolding provided. This allows students to demonstrate achievement in the specific features at the highest level. Page 3 of 3 Stage 2 Economics Task Ref: A303711 (January 2014) © SACE Board of South Australia 2014