Download 2008 HSC - nagleeco-2009

2008 HSC
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16/17 Great work Ingrid. On track for 20/20 in exam.
35/40
55/60 = 92%
Ingrid, although your answers were all correct, they could still be ‘tightened’ a little. Hopefully the
suggestons I have made below make sense. If unsure, please let me know.
Well done again!
Short Answer
Question 21
c) Outline one effect of economic growth on an economy (2 marks)
Economic growth will increase consumer confidence, increasing aggregate demand which leads to
higher production levels, which will require firms to increase workers and therefore decrease
unemployment. 
d) Explain how one domestic influence and one global influence affect Australia’s economic
growth (5 marks)
An influence such as the global financial crisis may result in decreased economic growth for
Australia.  Due to the GFC of 08 many economies experienced recession, which resulted in
decreased aggregate demand and production levels all over the world.  This influenced Australia to
also decrease production as there was a decrease in consumer confidence and aggregate demand.
The low production led to a slowing of economic growth demonstrated by the -0.8% growth
experienced in the December quarter 2008. 
A domestic influence that may affect Australia’s economic growth is the participation and
unemployment rates. If a low percentage of the economy is participating in the labour force, then
there is a huge wastage of human resources, and if those who are participating are actually
unemployed then this is also wastage. This can affect the extent to which the economy can grow as
not all those who have the potential to work are actually contributing to our output. 
Ingrid, I would just state participation rate as the cause of declining economic growth as you have
only been asked for ONE. Be careful to only provide what the question asks. Also, I would prefer to
see participation rate as unemployment rate is more the result of low economic growth – even
though with your argument you have explained yourself well.
For a 5 mark question, you might also like to specify the distinction between global and domestic,
just to ensure you have comprehensively covered the question.
Question 22
a) Define gross world product (2 marks)
Gross world product is the sum of the total output of goods and services by all economies in
the world over a period of time. 
b) Outline one positive and one negative impact of globalisation on the environment (2
marks)
A negative impact of globalisation is the increased negative externality of damage to the
environment, as firms try to maximise use of resources to better compete, without being
mindful of the non-renewable resources they are fast consuming. 
A positive impact of globalisation is that if a new technology is created with great ecological
sustainability, economies all over the world would want it in order to preserve the
environment. Also to remain internationally competitive and for product differentiation as
stating ‘ecologically safe’ can be a great marketing tool.
c) Describe one impact transnational corporations on a country other than Australia (2
marks)
TNC’s have had a negative impact on China. There has been an exploitation of labour where
Chinese employees working for these corporations have been subjected to harsh conditions
and minimum wages. 
d) Evaluate the effectiveness of one strategy that has been used to promote economic
development in a country other than Australia (4 marks)
The tax reformation of 1994 allowed for economic development in China.  It eliminated
previous tax evasions and allowed for the central government to control tax collection, 
improving the system and creating true revenue.  An income tax system was implemented
allowing for a significant increase in the central governments share of tax revenue.  This
strategy made it possible for the government to spend on building projects, schools and
hospitals, improving infrastructure to increase the welfare of people and achieve economic
development.  Beautiful Ingrid!
Question 23
a) What is meant by the term structural change (2 marks)
Structural change refers to the process by which the pattern of production in an economy is
altered overtime and certain products, processes of production and even industries,
disappear, while others emerge. 
b) Why might a government implement microeconomic reform? (2 marks)
Microeconomic reforms are targeted at specific industries,  making it easier for
government to target the areas which require improvement such as productivity and
efficiency of producers. 
c) Describe one limitation of microeconomic reform (2 marks)
Microeconomic reform may require economic restructuring that may result in
unemployment in the short-term.
d) Examine the economic effect of financial market deregulation or labour market
deregulation in Australia (4 marks)
Financial market deregulation occurred in Australia in December 1983 when the Australian
dollar was floated. This has allowed for increased productivity of the Australian workforce
as the demand for Australian exports will be is influenced by the degree of international
competitiveness of domestic exporters.? If domestic firms are competitive and aim for the
lowest possible price for their goods then it will be attractive to foreign buyers to purchase
our exports.
e) Care here, if you are talking about financial deregulation, mention that the price is
determined by the price mechanism and floating the $A made it more attractive for
investors to invest in Australia. This allowed for structural changes that paved the way for
productivity improvements that enabled us to become internationally competitive.
f) Labour market reform is the decentralisation of the Award system, moving toward more
individualise contracts or workplace arrangements. This systems reduces the safety net
attributed to minimum rates of pay as specific in the award and creates opportunities for
individuals with better levels of productivity to be rewarded financially. This creates an
incentive for productivity and hence a more productive labour force.
Question 24
a) Define foreign direct investment (2 marks)
Foreign direct investment is the movement of funds between economies for the purpose of
establishing a new company or buying a substantial portion of shares in an existing company
( 10% or more). This investment is long-term and the investor may intend to play a role in
the management of a business. 
b) Using the data, briefly explain how net income affects the current account balance (3
marks)
Net income refers to earnings on investments where interest payments, dividends and rent
paid by Australians on foreign liabilities (debits) is subtracted from these payments made by
foreigners to Australians (credits).  The data shows that income debits are greater than
credits resulting in a negative net income. This negative figure contributes greatly to the
balance on the current account as it increases the current account deficit. 
c) Analyse two possible economic consequences of foreign debt for an economy (5 marks)
Foreign debt may be needed in order to fund for investments that cannot be obtained in an
economy because of a lack of domestic savings.  Borrowing money allows for economic
growth to occur by injecting funds into the economy where there otherwise wouldn’t have
been. Therefore debt is beneficial in economies were saving are low.  Try to state it as
“Productivity gains through capital investment…”
Foreign debt, however, may lead to external instability. If an economy experiences high
levels of debt it may become less appealing for other economies to lend them money and as
an incentive may demand an increase in interest payments which would lead to higher levels
of debt and may become unsustainable for the economy.
d) Link high foreign debt to instability. They do not necessarily always occur together. The
problem with foreign debt is that it creates a need for debt servicing which is an automatic
debit on the current account, adding to the CAD. The need to make interest repayments
without any return on investment in the period has the potential of instigating the debt
trap as we struggle to remain internatioally competitive with such a large percentage of
our income being lost to debt servicing.