Macroeconomics - L19 Immigration Policy

Question 1

Is Immigration Policy an Aggregate Demand or Aggregate Supply policy?

Answer 1

Aggregate Supply

Question 2

What are AS policies designed to do?

Answer 2

Increase the nation’s productive capacity so that an increased volume of goods and services can be produced over time.

Question 3

Australia has an ageing population.
Provide two effects of an ageing population on the economy.

Answer 3

1. More welfare will be needed (aged pensions)
2. More spending on aged care facilities and hospitals will be required
3. Decreased workforce participation rate.
4. Less tax revenue from income tax for the Federal Budget

Question 4

What is immigration policy?

Answer 4

A strategic supply-side approach to managing the number (level) of migrants coming to Australia from overseas.

Question 5

What is the Skilled Migration Program designed to do?

Answer 5

Attract migrants who make a significant contribution to the Australian economy, and fill positions where no Australian workers are available. Skilled migrants have very high participation rates in the workforce, helping to stimulate economic growth, which results in more jobs.

Question 6

Identify three ways that Immigration Policy can improve AS.

Answer 6

1. Increase the supply of labour (quantity of factor of production), placing downward pressure on wage rates (reducing costs of production).
2. Alleviate capacity constraints (skills shortages) and in doing so, improve the quality of a factor of production (labour).
3. Maintain or improve productivity levels (productivity growth).
4. Replace ageing workforce with young, skilled professionals (quantity and quality of a factor of production - labour).