Answer four (4) questions. Maximum of 400 words for each question. These are questions which require short answer responses to a series of issues relating to economic principles and concepts. Attempt to answer each question in full and directly.
A) Would GDP per capita comparisons across countries accurately indicate their relative levels of standard of living and economic welfare? Critically evaluate and answer this question.
B) Which of the following are included in calculations of this year’s GDP? Briefly explain your answer in each case.
i) Dividends on a BLK share.
ii) Social security payments received by a retired factory worker from the government.
iii) The money received by Scott when he sells a 2004 Holden to John.
iv) The monthly allowance that a student receives from home.
v) Rent on a two bedroom apartment.
vi) Sales of illicit drugs in Sydney.
vii) The purchase of a painting by a Sydney art gallery.
viii) Cleaning your own house.
ix) Cleaning someone else’s house as a favour.
x) Cleaning someone else’s house as a paid cleaner.
C) Classify each of the following items as a final good or service or an intermediate good or service and identify which is a component of consumption expenditure, investment or government expenditure on goods and services [3 marks]:
i) Banking services bought by Coles.
ii) Security system bought by the ANZ Bank.
iii) Coffee beans bought by McDonald’s.
iv) New coffee grinders bought by Starbucks.
v) Starbuck’s grande mocha frappuccino bought by a student at a campus coffee bar.
vi) New helicopters bought by Australia’s army.
The Turnbull government recently signed a contract with a French company to build new submarines and plans to spend $60b for the Australian Navy submarines. These ships will be built in South Australia. Assuming fixed prices and that all monies will be spent in Australia, explain how the Australian economy will be affected by the $60b in new government purchases using AD-AS framework. (Remember: If you do not talk about the AD and AS curves, you are not using the AD-AS model.)
The Australian government implements a carbon permit scheme to reduce the Australian contribution to global warming. This tax raises the cost of generating electricity through coal (the major form of electricity generation in Australia) by 10%.
i) What impact would we expect this cost increase to have on the Australian economy? Show on an AD-AS diagram.
ii) What impact would we expect this cost increase to have on Australian companies that export primary commodities such as iron and copper? These companies are large users of coal-generated electricity.
iii) What impact would we expect this cost increase to have on the Australian utilities that generate electricity for Australian households and industries? Explain your reasoning carefully.
Visit the Australian Bureau of Statistics site (www.abs.gov.au) and find the unemployment rate figures for the March 2015/16 (cat. no. 6202).
(i) Discuss the trend of the unemployment rate over the reported period in your own words.
(ii) Do those unemployment figures reported by the Australian Bureau of Statistics tend to underestimate or overestimate the real sign of the unemployment problem. Explain