U4 AOS 2

Question 1

aggregate supply policies seek to

Answer 1

• increase the quantity and quality of resources
• increase productivity
• lower production costs of firms
• reduce market failures

Question 2

budgetary policies used to affect AS

Answer 2

• help AS by inc efficiency, cutting production costs, strengthening profits & improving international competitiveness so producers become more willing & able to expand productive capacity

expand on:
- budget outlays to improve national infrastructure
or
- tax reforms

Question 3

policies of skilled immigration to affect AS

Question 4

policy of trade liberalisation to affect AS

Question 5

market based environmental policy to affect AS

Question 6

increasing efficiency

Answer 6

allocative - along the ppc
productive - least cost methods of production
dynamic - how quickly resources can be reallocated
intertemporal - right balance overtime

Question 7

Budget as an AS tool

Answer 7

• national infrastructure
• training and education
• govt subsidies
• R&D
• tax reforms

focus is improving international competitiveness, achievement of {macroeconomic goals}
- know 2 infrastructure projects

Question 8

budget outlays and govt goals

Answer 8

• increased capital resources
• reduces bottlenecks
• new projects have improved tech
• can increase allocative efficiency by - reducing market failures
• reduces production costs
• can reduce structural unemployment
• can improve MLS [material living standards] & NMLS

Question 9

negative externalities

Answer 9

where total cost of production are not entirely born only by the production company or consumer

Answer 10

Aus’ gov debt compared to other countries is pretty low

Question 11

weaknesses of infrastructure spending 4 marks

Answer 11

• financial constraints, particularly govt debt
• poor decision making, often influence by politics
• long time lags

Question 12

infrastructure project overview:
snowy hydro 2.0

Answer 12

SH2.0 is a renewable energy project which aims to store and generate excess renewable energy which can be released during peak demand periods and involves constructing a new underground power station and linking two existing dams with a 27 kilometre tunnel. Providing 2,200 megawatts of dispatchable, on-demand generating capacity and 350,000 megawatt hours of large-scale energy storage. project was originally budgeted at $2 billion but is now expected to cost $12 billion

Question 13

outline how snowy hydro 2.0 can improve the efficiency of the Australian economy 4 marks

Answer 13

By increasing renewable energy capacity, Snowy Hydro 2.0 helps stabilise energy supply, reducing reliance on fossil fuels. This ensures a more reliable electricity grid, which is essential for businesses and industries to operate efficiently.

The project could lead to lower energy costs in the long term by providing a cheaper source of electricity. This reduction in costs can increase the competitiveness of Australian businesses, allowing them to allocate resources more efficiently.

The construction and operation of Snowy Hydro 2.0 create jobs and stimulate investment in regional areas, enhancing productivity and economic growth. The increased employment and income can lead to higher consumption and economic activity.

By supporting the transition to a low-carbon economy, Snowy Hydro 2.0 helps avoid the costs associated with climate change and environmental degradation. This long-term sustainability ensures that economic resources are not diverted to deal with environmental damages, promoting allocative efficiency.

Question 14

Explain how SH 2.0 can help achieve macroeconomic stability 3 marks

Answer 14

Low and Stable Inflation
Energy Price Stability: SH 2.0 increases the supply of renewable energy, which can lead to more stable and potentially lower energy prices. By reducing the volatility in energy prices, SH 2.0 helps to maintain low and stable inflation. When energy costs are stable, the cost of production for businesses remains predictable, preventing sudden spikes in consumer prices that could lead to inflation.
2. Strong and Sustainable Economic Growth
Investment and Innovation: SH 2.0 represents a significant infrastructure investment, which stimulates economic activity during its construction phase through job creation and increased demand for materials and services. The ongoing operation of SH 2.0 also supports economic growth by providing a reliable energy source, which is essential for businesses to operate efficiently and expand. By contributing to a transition to a low-carbon economy, SH 2.0 fosters sustainable growth, avoiding the long-term economic costs associated with environmental degradation.
3. Full Employment
Job Creation: The construction and operation of SH 2.0 create direct and indirect employment opportunities. During the construction phase, a significant number of jobs are generated in the construction, engineering, and related sectors. In the longer term, the operation of the facility and the associated industries that benefit from stable and lower energy costs can contribute to full employment by creating a more favorable environment for business expansion and job creation.

Question 15

SH 2.0 has serious implications for both MLS & NMTLS. Discuss. 4 marks

Answer 15

MLS - By increasing the supply of renewable energy, SH 2.0 has the potential to lower electricity prices over time. Lower energy costs can increase disposable income for households and reduce operating costs for businesses, improving overall material living standards.

NMLS - SH 2.0 contributes to reducing greenhouse gas emissions by increasing the share of renewable energy in Australia’s energy mix. Improved environmental quality can lead to better health outcomes and a higher quality of life, positively impacting non-material living standards.

Question 16

In light of cost overruns explain how SH 2.0 could make aus’s international competitiveness worse.

Answer 16

If the costs of SH 2.0 significantly exceed initial estimates, the additional expenses might be passed on to consumers and businesses through higher taxes. This could increase production costs for Australian businesses, making their goods and services more expensive on the global market. As a result, Australian exports could become less competitive compared to those from countries with lower energy costs.

Reduced Investment in Other Sectors: Funds that are used to cover cost overruns in SH 2.0 might have been used for other projects or sectors that could potentially offer higher returns or more immediate benefits to Australia’s economy. This misallocation of resources could slow down innovation and productivity growth in other industries, further weakening Australia’s international competitiveness.

Question 17

issues

Answer 17

• fertility rate below replacement
• ageing population
• fewer taxpayers [as a %] compared to population in the future
• strain on govt finances
• labour shortages

Question 18

josh

Question 19

trade liberalisation definition

Answer 19

the removal of barriers to trade like tariffs, quotas and subsidies to local industries between countries in order to

Question 20

trade lib in short term

Answer 20

• broadly negative impact in short term
• local industries are exposed to overseas competitions [via removal of tariffs] = struggle to survive
• loss of subsidies & businesses are forced to downsize or even shut down
• bad for aussie jobs & the economy
• hurts our international competitiveness as we lose protection; cost of production goes up and subsidies are lost [e.g. overseas cost of production are relatively lower]
• decrease productive efficiency due to wasted labour resources; as ppl retrain and try to find new job or industry; less competitive

Question 21

trade lib impact on macroeconomic goals [short term]

Answer 21

• job losses hurt full employment
• cheaper g+s from o/s coupled with decreasing local prices [to compete] and decrease in AD = downward pressure on prices = better able to achieve low and stable inflation goal
• SSEG; GDP will slow down due to increased spending on o/s g+s and decreased spending on local ones
• AS growth decreases

Question 22

trade lib in long term

Answer 22

• broadly positive
• ## inc competition in market = innovation & increased productivity

Question 23

trade lib on living standards

Question 24

AS

Answer 24

businesses and their ability and willingness to produce

Question 25

Aim of AS policies

Answer 25

- increase productive capacity {increase AS} of economy [shifting PPF outwards] - improve the potential output or growth of an economy - increase [shift to the right] the AS curve: increase the ability and willingness of firms to produce at any given price

Question 26

AD & AS policies complementary

Answer 26

- AD policies works i the short term to influence level of spending in an economy - AS policies work in the long term to influence businesses willingness/ability to produce It's the interaction of AD & AS which influence the achievement of the 3 goals

Answer 27

in short term AD policy stimulates growth and creates jobs but can also increase inflationary pressures - in order to grow sustainably AS policies must work to increase the capacity of the economy over the longer term - all AS policies help to achieve all 3 macro goals

Question 28

outline how inland rail can improve the efficiency of the Australian economy 4 marks

Answer 28

Faster and More Reliable Freight Transport: Inland Rail offers a quicker, more reliable transportation route between key agricultural and industrial regions and major cities. This reduces delivery times, which enhances supply chain efficiency and lowers business operating costs. Reduced Congestion on Roads: By diverting freight from road transport to rail, Inland Rail reduces road congestion, especially for heavy trucks. This improves travel times for both passenger and commercial road users, reducing transport costs and increasing productivity. Lower Transportation Costs: Rail transport is generally more cost-effective than road for long-distance bulk freight. Inland Rail can reduce transportation costs for businesses, making Australian goods more competitive both domestically and internationally. Boost to Regional Economies: Inland Rail connects regional areas to major ports and markets, fostering economic growth in these regions. By improving access to markets, it encourages investment and job creation, increasing overall economic efficiency and productivity across the country.

Question 29

explain how inland rail can help achieve macroeconomic stability 3 marks

Answer 29

Strong and Sustainable Economic Growth: The Inland Rail Project is expected to significantly enhance freight efficiency, thereby stimulating economic activity and contributing to a stronger GDP. Low and Stable Inflation: By reducing freight costs and improving supply chain efficiencies, the Inland Rail Project can help keep inflation in check. More efficient transportation can lead to lower prices for goods, as the cost savings from improved logistics are passed on to consumers Full Employment: The construction and operational phases of the Inland Rail are projected to create thousands of jobs, contributing to full employment in the regions it serves. The project has already employed over 5,400 people, with ongoing job creation of around 18,300 full-time equivalent (FTE) jobs by 2032 as construction progresses and operations commence

Question 30

Inland rail project has serious implications for both MLS & NMTLS. Discuss. 4 marks

Answer 30

MLS - a households ability to access Goods & services: Faster and more reliable freight services will ensure that consumers have better access to goods, potentially lowering prices and improving living standards. NMLS - aspects of a persons quality of life that cannot be measured by monetary factors The shift to rail freight is expected to reduce carbon emissions, contributing to a cleaner environment and better quality of life for communities along the rail route.

Question 31

Explain how the inland rail project could impact aus's international competitiveness

Answer 31

Enhanced Supply Chains: The Inland Rail will better connect Australian businesses to international markets, improving export capabilities, particularly for agricultural and bulk goods. Attracting Investment: Improved transport infrastructure is likely to attract further domestic and foreign investment in Australian industries, enhancing overall competitiveness

Question 32

productive capacity

Answer 32

a nations maximum potential output of g+s given given efficient & complete use of all resources available

Question 33

Explain relationship b/w productive capacity and productivity

Answer 33

productivity is a measure of outputs per input whereas productive capacity is a nations maximum potential output of G+S given efficient and complete use of all resources available. Productivity growth can help achieve productive capacity as more outputs will be produced with the same inputs meaning even if productive capacity is not fully utilised productivity can still increase within its confines. Operating at full productive capacity leads to higher productivity as all resources are used efficiently. Long term productivity growth is necessary to expand an economy's overall productive capacity.

Question 34

in land rail

Answer 35

Labour Productivity focuses on the efficiency of human workers, while Capital Productivity focuses on the efficiency of physical capital (machinery, tools, etc.). Improvements in Labour Productivity often come from better skills or technology, whereas improvements in Capital Productivity come from more efficient use of machinery, better technology, or higher capacity utilization. Labour productivity measures the amount of output (goods or services) produced per unit of labour input. It reflects how efficiently human workers are using their time and skills to produce output. Capital productivity measures the amount of output produced per unit of capital input (e.g., machinery, tools, or equipment). It reflects how efficiently capital goods are being utilized in the production process.

Question 36

macro-econ goals