U4 AOS 2 Flashcards
aggregate supply policies seek to
- increase the quantity and quality of resources
- increase productivity
- lower production costs of firms
- reduce market failures
budgetary policies used to affect AS
- help AS by inc efficiency, cutting production costs, strengthening profits & improving international competitiveness so producers become more willing & able to expand productive capacity
expand on:
- budget outlays to improve national infrastructure
or
- tax reforms
policies of skilled immigration to affect AS
policy of trade liberalisation to affect AS
market based environmental policy to affect AS
increasing efficiency
allocative - along the ppc
productive - least cost methods of production
dynamic - how quickly resources can be reallocated
intertemporal - right balance overtime
Budget as an AS tool
- national infrastructure
- training and education
- govt subsidies
- R&D
- tax reforms
focus is improving international competitiveness, achievement of {macroeconomic goals}
- know 2 infrastructure projects
budget outlays and govt goals
- increased capital resources
- reduces bottlenecks
- new projects have improved tech
- can increase allocative efficiency by - reducing market failures
- reduces production costs
- can reduce structural unemployment
- can improve MLS [material living standards] & NMLS
negative externalities
where total cost of production are not entirely born only by the production company or consumer
Aus’ gov debt compared to other countries is pretty low
weaknesses of infrastructure spending 4 marks
- financial constraints, particularly govt debt
- poor decision making, often influence by politics
- long time lags
infrastructure project overview:
snowy hydro 2.0
SH2.0 is a renewable energy project which aims to store and generate excess renewable energy which can be released during peak demand periods and involves constructing a new underground power station and linking two existing dams with a 27 kilometre tunnel. Providing 2,200 megawatts of dispatchable, on-demand generating capacity and 350,000 megawatt hours of large-scale energy storage. project was originally budgeted at $2 billion but is now expected to cost $12 billion
outline how snowy hydro 2.0 can improve the efficiency of the Australian economy 4 marks
By increasing renewable energy capacity, Snowy Hydro 2.0 helps stabilise energy supply, reducing reliance on fossil fuels. This ensures a more reliable electricity grid, which is essential for businesses and industries to operate efficiently.
The project could lead to lower energy costs in the long term by providing a cheaper source of electricity. This reduction in costs can increase the competitiveness of Australian businesses, allowing them to allocate resources more efficiently.
The construction and operation of Snowy Hydro 2.0 create jobs and stimulate investment in regional areas, enhancing productivity and economic growth. The increased employment and income can lead to higher consumption and economic activity.
By supporting the transition to a low-carbon economy, Snowy Hydro 2.0 helps avoid the costs associated with climate change and environmental degradation. This long-term sustainability ensures that economic resources are not diverted to deal with environmental damages, promoting allocative efficiency.
Explain how SH 2.0 can help achieve macroeconomic stability 3 marks
Low and Stable Inflation
Energy Price Stability: SH 2.0 increases the supply of renewable energy, which can lead to more stable and potentially lower energy prices. By reducing the volatility in energy prices, SH 2.0 helps to maintain low and stable inflation. When energy costs are stable, the cost of production for businesses remains predictable, preventing sudden spikes in consumer prices that could lead to inflation.
2. Strong and Sustainable Economic Growth
Investment and Innovation: SH 2.0 represents a significant infrastructure investment, which stimulates economic activity during its construction phase through job creation and increased demand for materials and services. The ongoing operation of SH 2.0 also supports economic growth by providing a reliable energy source, which is essential for businesses to operate efficiently and expand. By contributing to a transition to a low-carbon economy, SH 2.0 fosters sustainable growth, avoiding the long-term economic costs associated with environmental degradation.
3. Full Employment
Job Creation: The construction and operation of SH 2.0 create direct and indirect employment opportunities. During the construction phase, a significant number of jobs are generated in the construction, engineering, and related sectors. In the longer term, the operation of the facility and the associated industries that benefit from stable and lower energy costs can contribute to full employment by creating a more favorable environment for business expansion and job creation.
SH 2.0 has serious implications for both MLS & NMTLS. Discuss. 4 marks
MLS - By increasing the supply of renewable energy, SH 2.0 has the potential to lower electricity prices over time. Lower energy costs can increase disposable income for households and reduce operating costs for businesses, improving overall material living standards.
NMLS - SH 2.0 contributes to reducing greenhouse gas emissions by increasing the share of renewable energy in Australia’s energy mix. Improved environmental quality can lead to better health outcomes and a higher quality of life, positively impacting non-material living standards.
