1.1.10

Question 1

Ways in which government intervention occurs

Answer 1

1. Using budgetary policy to stabilise the business
   cycle and economic activity
2. Improve efficiency in resource allocation by reducing market failure
3. Redistribution of incomes

Question 2

Budgetary policy

Answer 2

The way in which income is collected and spent within the economy to reduce consumption, investment , and government spending

Question 3

Policy during booms maintains living standards

Answer 3

Through increasing taxes this reduces income spent in economy

Question 4

Policy during recessions

Answer 4

Cutting taxes and raising government spending increase the amount of income activity

Question 5

Improve resource allocation to reducing market failure

Answer 5

1. Laws to promote stronger competition (refers to reducing prices and maintaining a high level of business competition)

Question 6

Merit goods

Answer 6

2.Government ensures that all areas of society have access to basic goods and services like education and food by producing the optimally beneficial amount

Question 7

Demerit goods

Answer 7

3. Laws/taxes that discourage the production of demerit goods and services

Question 8

Redistribution incomes

Answer 8

1. Progressive income tax system (reduces income inequality and taxes those in higher income bracket by 45% of income)
2. Welfare payments (access to basic goods and services for those on lower incomes through subsides and and cash payments provided by Centrelink)
3. Provision of some goods and services (Progressive income tax system pays for the government supplying these essential goods and services)