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Academic year: 2023



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The marking of Section II involves setting specific criteria for each part of the question. Students are encouraged to answer the questions in Section III and Section IV of the paper in essay form.

Essays based on Stimulus Material

They pointed out the trade-off nature of the relationship as described by the Phillips curve and the inherent difficulties in reducing unemployment and inflation simultaneously. The stimulus material led students to a discussion of the strategies that could be used to lift national savings, with an emphasis on the fiscal consolidation measures aimed at increasing public savings. A graph of the current account balance encouraged students to analyze any problems that might be reflected there.

Overall, there was unfortunately little evidence of judicious use of the stimulus material by the candidates. These answers focused on each part of the question and clearly demonstrated the logical connections between the discussion points. Some have explored potential conflicts, including the lag problem, arising from the current fiscal/monetary policy mix.

Above-average responses covered all parts of the question well, although in-depth analysis of the relationship between the current policy stance and its impact on the external sector was not always detailed.


Excellent answers displayed clear, accurate and detailed understanding of the meaning of fiscal policy in its current economic context. They explained the current account deficit, savings-investment gap and twin deficit theory and gave critical evaluation of government measures to increase national saving. In these answers, candidates could examine fiscal policy as part of a policy mix aimed at the external problem.

These answers recognized the problem of reducing unemployment in the face of lower economic growth. These answers were based on knowledge and made good use of accurate statistics to support their analyses. Most average responses focused on the first discussion point, often demonstrating a good understanding of fiscal theory.

However, in most cases, candidates had difficulty applying this theory to the government's actual fiscal stance.

Labour Economics

The latter part of the question elicited only a minimal explanation of the effects of government policy on labor supply. The first and second parts of this question were taken from the study area Institutional aspects of the domestic labor market (page 43). Excellent answers were mainly characterized by the candidates' ability to connect all three parts of the question.

These responses outlined current government labor market policies and provided a clear description of the Workplace Relations Act of 1996, including a discussion of its intended purpose. In these responses, the candidates effectively linked government labor market policies to the declining role of trade unions, the changing role of the IRC and employers' organizations. These responses invariably linked microeconomic labor market reforms to macroeconomic issues such as aggregate demand, the current account deficit and external debt.

They identified labor market programs and their consequences for the quality of labor supply.

Industry Economics

These answers generally answered the last part of the question well and covered all the points raised by the excellent answers. The second part of the question was poorly handled, with very basic discussion of the issues or descriptive examples of Australian markets. They pointed to the technical and allocative inefficiencies in each model as a clue to the last part of the question about government intervention.

These responses referred to the Hilmer Report, the role of the Australian Competition and Consumer Commission (ACCC), the National Competition Council (NCC) and the privatization or corporatisation of Government Business Enterprises (GBEs), all under the umbrella of microeconomic reform. . The above-average answers covered all aspects of the question, but did not achieve the same balance of treatment as was seen in the excellent answers. Average responses addressed all parts of the question, but were more descriptive than analytical in nature.

Discussion of the range of policy initiatives was limited and tended to be superficial, while the reasons for government intervention were often ignored.

Development Economics

Costs and benefits were both addressed in the final part of the question, with students demonstrating a knowledge of both economics and related social issues. Above-average answers showed a thorough knowledge of the problems less developed countries face in achieving higher living standards, but did not always relate this to the distinction between growth and development. They tended to list only a few problems or to state the characteristics of less developed countries as an answer to the first part of the question.

In these answers, candidates discussed the last part of the question very briefly, strangely often ignoring the benefits while focusing on the costs. Responses discussed, among other things, the reduction of trade barriers and the role of organizations such as the GATT (General Agreement on Tariffs and Trade) and the WTO (World Trade Organization). These answers tended to quickly move on to the second part of the question, a discussion of developing countries' specific problems.

The last part of the question was treated evenly, citing foreign aid/loans and free trade.

Economics of Primary Industries

Excellent answers were characterized by the use of recent, accurate statistics, sound economic reasoning and in-depth coverage of all parts of the question. Above average answers generally covered the first and second parts of the question quite well. Problems and government policy responses were clearly described but lacked the depth of the excellent responses.

Average answers usually focused only on the first and second part of the question. Excellent answers were characterized by candidates' ability to thoroughly discuss all parts of the question and support their analysis with relevant and up-to-date statistics. While they adequately covered the different parts of the question, they lacked the depth and breadth of the excellent answers.

Such answers were largely discriminated against better answers due to the lack of quality in the latter part of the question.

Distribution of Income and Wealth

Overall, they had a solid grasp of the main issues, using theoretical and graphical analyzes such as supply and demand graphs and the cobweb theorem to support their arguments. Average answers covered all parts of the question, but they lacked the breadth and depth of the excellent and above-average answers, and they tended to be descriptive, suggesting the possibility of prepared answers. When answering questions about the distribution of income and wealth, students must discipline themselves not to get carried away by a philosophical approach that tends to color their treatment of the questions.

Such responses were comprehensive in addressing the impact of market factors on income distribution. These responses included a coherent and well-reasoned exposition of the arguments for and against government intervention to affect the distribution of income. Above-average answers offered arguments for and against government intervention in income distribution, but their arguments lacked the depth of excellent answers.

They demonstrated a thorough understanding of the concept of the poverty line and the limitations of its application.


Environmental Economics

These responses demonstrated a thorough understanding of the concept of market failure and issues related to government policies. Excellent answers were based on a good understanding of the relationship between economic growth and the environment. Discussion tended to focus on the role of the environment as a provider of resources, while diagrams showing the trade-off between the environment and economic growth were frequently used.

These responses also explored the role of the environment as a source of amenities and a receptacle for waste. Above-average responses reflected a clear understanding of the relationship between economic growth and the environment. These responses focused on the role of the environment as a provider of resources and examined the trade-off between growth and the environment.

The discussion of the concepts of renewable and non-renewable resources was generally good, with relevant examples.

Income and Expenditure Analysis

In these answers, candidates showed that they have a reasonable understanding of the question, but that they do not have the necessary depth of knowledge to cover all aspects comprehensively. Above average responses adequately answered all parts of the question, but tended to be more descriptive than analytical. Average responses generally answered the first part of the question well, but only briefly dealt with the causes of economic fluctuations.

Discussion of the limitations of these policies was either brief (only time delays) or non-existent. In the second part of the question, these answers noted and discussed the fact that traditional, cultural, political and economic factors were the causes of the different economic systems. Above average responses did well in the third part of the question, although here candidates showed some confusion at the use of the term over time in the question.

They rarely gave reasons for the diversity of such systems, choosing instead to explain and define each of the different types of economic systems.

Evolution of Economic Ideas

Above average answers generally answered both parts of the question, but in less detail than the excellent answers, and they tended to be more descriptive and less analytical. These responses discussed Keynes' criticism of Say's Law in the classical analysis of the labor market. In the second part of the question, these answers discussed the influence of Keynes's work on government policy, though not at length.

The second part of the question was very poorly answered, with many answers linking Keynesian policy with the budget deficit. Here, candidates gave details of the founders of marginal utility theory, namely Jevons, Walrus and Menger, which led to Marshall's development of microeconomic theory. The revival of monetarist ideas (Freidman) and laissez faire competition policy were also mentioned.

Average answers generally did not answer all parts of the question, were often overly descriptive and lacked clear understanding.


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