Aggregate Supply Policies

Question 1

Allocative Efficiency

Answer 1

Ensures that goods/services are produced which best suits societies needs/wants.

Question 2

Productive/Technical Efficiency

Answer 2

Businesses use lowest cost production techniques to maximise production.

Question 3

Dynamic Efficency

Answer 3

Production is maximised using the latest technology.

Question 4

Intertemporal Efficiency

Answer 4

Ensures resource use is balanced between current and future use.

Question 5

Immigration Target

Answer 5

1. Skilled Migrant Stream (128,000)
   Made up of:
   -General skills migration (Migrants meet broad skill requirements)
   -Employer sponsored migration (business nominates specific migrants to fill skill gaps)
   -Distinguished Talent (migrants that have internationally recognized “skills” e.g sports, sciences)
   -Business Innovation and Investment (business owners who are successful overseas)
2. Family Migrants Stream (57,000) (family unification)
3. Humanitarian Migrant Stream (6,000) (refugees)

Question 6

Inland Rail Link Figures

Answer 6

• Delivers freight from Melbourne to Brisbane via regional Vic, Nsw and Qld.
• 1700km
• Expected to create up to 16,000 jobs to help build and maintain the rail link
• Expected to cost 10 billion

Question 7

Direct Action Plan Goal

Answer 7

Reduce greenhouse gas emissions to 5 percent below 2000 levels by 2020

Question 8

What is a Micro Economic Reform Policy?

Answer 8

MRP is any government policy that is designed to reallocate the nations resources in an effort to improve the efficiency or operation of Australian markets or industries. The ultimate aim of MRP’s is to achieve a more efficient allocation of resources, greater international competitiveness and better living standards.

Question 9

Australia’s “Aging Population”

Answer 9

Australia has an “Aging Population” therefore a targeted immigration policy aims to increase the size of the labor force and improve the over “skills” of the labor force.

Question 10

Company Tax Cut

Answer 10

Incrementally reduce from 30% to 25% by 2026

Question 11

Emission Reduction Fund Steps

Answer 11

1. Firms put in “tenders” (bids) to show how they could reduce co2 emissions.
2. The govt authority will determine which tenders or projects are the most cost effective (cheapest)
3. The govt pays (subsides) those businesses to introduce the initiative

Question 12

China-Australia Free Trade Agreement (ChAFTA) Facts

Answer 12

China is Australia’s largest trading partner
China bought $90 billion of Australian exports, more than a quarter of Australia’s total exports to the world
On full implementation of the agreement (1st Jan 2029), 99.9 percent of Australia’s resources, energy and manufacturing exports will enjoy duty free entry into China

Question 13

Short Term effect of Trade Liberalisation

Answer 13

Business failures, greater unemployment, higher levels of government spending on welfare ultimately lowering living standards

Question 14

Long Term effect of Trade Liberalisation

Answer 14

Increase in allocative efficiency (directing resources into areas of comparative cost advantage), decrease in import costs, increase in exports, decrease in inflation, increase in eco growth, decrease in CAD (exports are more price attractive) and an increase in purchasing power.

Question 15

Short Term effect of Immigration Policy

Answer 15

• Slight rise in unemployment (increase in labor force, skill mismatch, leads to higher welfare outlays )
• Increase population creates more congestion, lowering non material living standards

Question 16

Long Term effect of Immigration Policy

Answer 16

Increases productive capacity due to an increase to the availability of the resource labor and downward pressure on wages.

• Helps slow the ageing population
• Immigrants are consumers, increasing AD, increasing demand for labor, decreasing cyclical unemployment.
• Cultural benefits (non material living standards)

Question 17

Short Term effect of Environmental Policy

Answer 17

Relies on government subsides (inefficency), increasing costs, decreasing aggregate supply

Question 18

Long Term effect of Environmental Policy

Answer 18

Preserves arable land resources, maintaining AS

Question 19

Infrastructure spending effects on goals

Answer 19

• Equity/Full employment: Decreases unemployment
• Inflation: Decreases cost inflation
• External Stability: Increases price attractiveness, increasing exports
• Eco Growth: Increase in G2,X, increases AD, an increase in E and a decrease in C increases AS

Question 20

Immigration Policy effects on goals

Answer 20

• Equity/Full employment: Short term increase in unemployment, long term decrease in unemployment
• Inflation: Increase in AS should reduce cost inflation, however may cause demand inflation
• External Stability: Increases price attractiveness, increasing exports
• Eco Growth: Increase in the labor force will boost our productive capacity and support economic growth and long term prosperity

Question 21

Aggregate Supply Definition

Answer 21

Aggregate supply is simply defined as the total annual quantity of all finished goods and services produced by every business in the Australian economy.

Question 22

Aggregate Supply polices shift the AS curve to the right, increasing GDP without causing…

Answer 22

Inflation

Question 23

Productive capacity

Answer 23

Product capacity is the economy’s physical limit or potential to produce goods and services when all resources are used to maximum efficiency.

Question 24

How do MRP such as Trade Liberalisation improve efficiency in resource allocation?

Answer 24

-Raises productivity as firms now have an incentive to minimise costs and operate efficiently (4 ways)