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Question 1

how a of the following budgetary policies is designed to affect aggregate supply

Answer 1

Spending on infrastructure
⁍ improve supply side conditions
⁍ ↓COP
⁍ ↑productivity capacity and ↑AS in LONG TERM

Recent example:
⁍ 2024/25 budget additional 16.5B for new and existing infrastructure
⁍ out of 16.5B there is 3.3B added for the North east link budget
NEL: take 15,000 off local roads a day and reduce travel times by up to 35 mins
⁍ transport more efficient since ↓fuel costs and ↑faster delivery
⁍ ↑productivity
⁍ ↓COP
⁍ ↑profitability
⁍ ↑ability and willingness to produce g/s
⁍ ↑AS

infrastructure

Question 2

skilled immigration policy

domino + good and bad

Answer 2

In the integrational report 2023:
⁍ number of people aged 65 and over for every 100 people of traditional working age (15 to 64) increases to 38% to 2062
So,
⁍ fewer people of working age
⁍ skilled shortages
Hence (currently):
⁍ Government did: 185,000 permanent migration visa (2024-25 budget) which includes 132,200 towards skilled workers
⁍ ⁍ ⁍ ⁍ ⁍ ⁍ ⁍ strong focus on ↑skilled migrants to areas of need
⁍ ⁍ ⁍ ⁍ ⁍ ⁍ ⁍ Targeted: shortages in skilled professions (nurses, IT ect)
⁍ ⁍ ⁍ ⁍ ⁍ ⁍ ⁍ Geographic: states and cities/towns shortage
Present and emerging skill shortages focus on:
⁍ boosting productivity
Therefore with policy:
⁍ ↑quantity and quality of labour
⁍ ↑productivity
⁍ ↑profitability
⁍ ↑ability and willingness to produce G/S
⁍ ↑AS

Advantages
⁍ fully trained already = ↑quantity and quality of labour
⁍ younger on average = ↑participation

Disadvantages
⁍ Housing crisis
⁍ demand inflationary pressurses

Split into ‘quantity’ and ‘quality’ of labour

includes 132,200 towards skilled workers

Question 3

AS complementing AD

also what is AS and AD policies?

Answer 3

Aggregate supply policies promote efficiency through productivity growth, reductions in costs of production and improvements in the quantity and quality of the factors of production.

Assist AD by increasing productivity capacity (or maximum possible output of an economy) and promoting long term non inflationary growth
* inflationary effects of expansionary AD policies can be countered by the disinflationary effects of AS policies
○ TOGETHER: help promote stronger non inflationary economic growth
give example of AS policy (e.g., infrastructure spending)

diff: intenting to increase real GDP? AD = increase inflation, AS = decrease inflatino

Question 4

Trade lib

domino + good and bad

Answer 4

Trade liberalisation is any government initiative that is designed to promote free trade, or reduce restrictions or barriers to tree trade. These initiatives include progressive reductions in forms of protection with the removals of: tariffs ,quotas, subsidies and a movement towards developing a more free trade agreements.

Short term costs to trade lib:
⁍ some businesses will exit industries (e.g., cars)
⁍ some businesses may need to restructure = mismatch between skills and jobs = structural unemployment
(e.g., employees are replaced by capital or machinery during restructuring to improve efficiency)
AND
⁍ Australian goods and services appear relatively more expensive to it’s import competing industries
⁍ DEC IC

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Long term:
⁍ encourages specialisation
⁍ firms move towards comparative advantage
⁍ using resources in best possible way + can compete on a world scale
⁍ ↓prices and ↑quality
⁍ ↑IC
⁍ ↑NX
⁍ ↑AD
then AD analysis

Question 5

market-based environmental policy

domino + good and bad

Answer 5

Market based environmental policies include policies where the government intervenes to influence the behaviour of economic agents such that they produce less pollution/emissions via the use of market forces

Carbon tax (indirect tax paid proportional to their level of emissions during production of g/s)
⁍ ↑emissions = ↑COP
⁍ incentive for firms to find alternate methods of production

Short term:
⁍ Policies such as carbon offset scheme ↑COP (for business who have carbon intensive production methods e.g., uses a lot of coal) = ↓profibility + ↓willingness to produce = ↓AS = ↑cost inflation….
⁍ firms disincentive to emit carbons (+ preserve natural resources) = helping future society meet n/w = ↑intertemporal efficiency

Long term:
⁍ more jobs created (e.g., solar) = ↑employment opportunity
⁍Possible destruction of bad weather caused by climate change now gone = ↓COP that otherwise would’ve been there
⁍firms disincentive to emit carbons (+ preserve natural resources) = improve balance of resources used between current and future generations = ↑intertemporal efficiency

relative prices in the reallocation to resources