4. Economic policies - Microeconomic policies

Question 1

What are microeconomic policies for?

Answer 1

They are designed to raise the economy’s level of efficiency, productivity and international competitiveness (supply)

Question 2

How do microeconomic policies affect the S&D graph

Answer 2

They are supply side policies to increase the economy’s long run aggregate supply curve (AS) or productive capacity.

Question 3

What do microeconomic policies address?

Answer 3

Microeconomic reform policies are used to address specific structural problems in markets (e.g. labour market reform) which cannot be influenced by monetary and fiscal policies.

Question 4

Examples of what could lead to an increase shift in AS

Answer 4

• Higher productivity (eg. labour productivity)
• Technology use
• Increase in resource use to increase output
• Increased competition (higher efficiency and increased output)

Question 5

microeconomic policies are used in tandem with…

Answer 5

Used in tandem with macroeconomic policies

Question 6

What kind of effect does these policies have on the economy?

Answer 6

Have long term, rather than short term effect

Question 7

What are these policies designed for

Answer 7

Designed to achieve structural change in economy to make it more efficient, productive and competitive

Question 8

Microeconomic policies can also lead to…

Answer 8

improved international competitiveness

Question 9

Types of efficiency achieved from microeconomic reforms

Answer 9

Technical Efficiency

Allocative Efficiency

Dynamic Efficiency

Question 10

What is technical efficiency?

Answer 10

firms producing output by using the least cost combination of resources. Achieving Technical Optimum (LRAC curve)

Question 11

What is Allocative Efficiency?

Answer 11

When resources are allocated in such a way as to reflect consumer preferences for goods and services.

Question 12

What is dynamic efficiency?

Answer 12

refers to firms using the latest cost reducing technology to meet changing consumer preferences.

Question 13

Benefits of efficiency

Answer 13

• Rise in National income
• Higher Living Standards
• Enhances Australia’s ability to absorb overseas “shock” (e.g. GFC)
• Due to its links to productivity, it enhances labour productivity

Question 14

Microeconomic reform policies real evidence omg

Answer 14

Microeconomic reform policies were used widely by the Hawke and Keating governments in the 1980s and 1990s as a means of raising the efficiency of production, competition in markets, and the productivity of labour and capital.

Question 15

Microeconomic reform of factor and product markets include:

Answer 15

Decreased border protection ; Deregulation of financial markets ; Floating of the dollar ; Reform of the tax system ; Labour market decentralisation ; Privatisations ; Competition policy

Question 16

Decreased border protection means…

Answer 16

exposure to international trade and competition

Question 17

Deregulation of financial markets means… (year)

Answer 17

increased competition and financial services (1983)

Question 18

Floating of the dollar…

Answer 18

reflect market forces and cushion the economy from external shocks

Question 19

Reform of the tax system means

Answer 19

Broadening of tax base and changing tax mix

Question 20

Labour market decentralisation means

Answer 20

decentralisation of wage negotiations

Question 21

Privatisations means

Answer 21

reform of public monopolies

Question 22

Competition policy

Answer 22

competition policy act (1995) to reduce anti-competitive behaviour.