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2012 HSC Notes from the Marking Centre – Economics



This document has been produced for the teachers and candidates of the Stage 6 course in Economics. It contains comments on candidate responses to the 2012 Higher School Certificate examination, indicating the quality of the responses and highlighting their relative strengths and weaknesses.

This document should be read along with the relevant syllabus, the 2012 Higher School Certificate examination, the marking guidelines and other support documents developed by the Board of Studies to assist in the teaching and learning of Economics.

General comments

Teachers and candidates should be aware that examiners might ask questions that address the syllabus outcomes in a manner that requires candidates to respond by integrating their knowledge, understanding and skills developed through studying the course.

Candidates need to be aware that the marks allocated to the question and the answer space (where this is provided on the examination paper) are guides to the length of the required response. A longer response will not in itself lead to higher marks. Writing far beyond the space allocated may reduce the time available for answering other questions.

Candidates need to be familiar with the Board’s Glossary of Key Words, which contains some terms commonly used in examination questions. However, candidates should also be aware that not all questions will start with or contain one of the key words from the glossary. Questions such as ‘how?’, ‘why?’ or ‘to what extent?’ may be asked, or verbs that are not included in the glossary may be used, such as ‘design’, ‘translate’ or ‘list’.

Section II

Question 21

  1. In better responses, candidates correctly distinguished between tariffs and quotas. In weaker responses, candidates incorrectly used the definition for a tariff quota.
  1. In better responses, candidates clearly outlined two reasons for the protection of domestic industries. A number of reasons were given for protection, the main ones being to protect employment, prevention of dumping, defence/self-sufficiency, maintaining a broad industry base and the infant industry argument.

    In weaker responses, candidates often identified the reason but did not clearly link the reason to the need for protection.
  1. In better responses, candidates clearly outlined an economic benefit and a cost of a free trade agreement involving Australia. Many candidates answered this question in reference to a generalised FTA involving Australia and provided generic benefits and costs, such as an increase in trade between the countries involved or short-term increase in unemployment.

    In weaker responses, candidates often identified an economic benefit and/or cost but had difficulty clearly outlining them. They also incorrectly identified Australia as belonging to ASEAN which is not a free trade agreement.

Question 22

  1. Most candidates correctly calculated the inflation rate either in the form of a percentage (5%), fraction (6/120), (1/20) or as a decimal (0.05).

    In weaker responses, candidates listed the formula but gave an incorrect answer or expressed the answer in an incorrect manner (eg 0.05%).
  1. In better responses, candidates clearly and concisely distinguished headline inflation from underlying inflation and incorporated accepted terminology, such as the ‘CPI rate includes a wide variety of prices’, ‘a basket of goods and services’, ‘reflects average household spending’, ‘one-off’ or ‘volatile price changes’. Many candidates provided examples to demonstrate the differences, eg price rises of fruit and vegetables due to natural disasters, the effects of the carbon tax and GST.

    In weaker responses, candidates defined one or both of the terms using general or basic terminology without making a clear distinction between the two. Some candidates confused the two terms.
  1. In better responses, candidates demonstrated a clear understanding of how inflationary expectations affect inflation. Economic concepts were clearly explained with an understanding of the link between inflationary expectations of consumers and producers with demand-pull, cost-push inflation, wage-price spiral and the self-fulfilling prophecy of inflationary expectations. In these better responses, candidates used correct and relevant economic theory and terminology to support their explanation, for example, aggregate demand and aggregate supply.

    In weaker responses, candidates merely defined inflationary expectations and did not attempt to explain the impact of inflationary expectations on inflation. Some incorrectly attempted to broadly describe the impacts of monetary policy.
  1. In better responses, candidates constructed a logical response, which included short-term and long-term effects of high domestic inflation relative to inflation in other countries. Responses were well structured and made clear links in a specific rather than a generalised way.

    In weaker responses, candidates provided general information on the effect of inflation on an economy. These candidates did not accurately explain the effects of high relative domestic inflation compared to inflation in other countries. Some responses appeared to be a prepared response on inflation and/or exchange rates, which resulted in the candidates not adequately addressing the question.

Question 23

  1. Candidates generally drew a new Lorenz curve to the left of the original curve between the line of equality.

    In weaker responses, candidates drew a curve to the right of the original curve or drew from the top left corner to the bottom right. Some candidates did not follow the instruction to draw a new curve.
  1. In better responses, candidates clearly outlined a link between income inequality and economic benefit, such as increase in productivity, economic growth, savings increase and capital formation. The relationship of the incentives for higher incomes leading to improved economic outcomes was shown in these responses.

    In weaker responses, candidates stated an economic benefit or outlined a benefit for the individual, such as higher wages or more money.

    In better responses, candidates provided one or more reasons for the differences in incomes between males and females. Responses were well written and incorporated clear examples, statistics and economic terminology.

    In weaker responses, candidates listed reasons without explaining the effects or gave generalised reasons for the income gap, such as gender stereotypes. These reasons were often identified without saying why or how these factors make for wage differences between males and females.
  1. In better responses, candidates demonstrated an understanding of the different elements of fiscal policy (progressive taxation and government expenditure in the form of transfer payments) and clearly linked the two sides through the redistributive function. They were also able to include specific measures and statistics from the 2012–2013 Commonwealth Budget, such as the raising of the tax-free threshold or other targeted programs to assist disadvantaged groups.

    In weaker responses, candidates tended to make generalised or simplistic statements about taxation and spending that did not imply redistributive aspect. They also made confused statements about discretionary and non-discretionary measures, expansionary fiscal policy and budget deficits. Some candidates confused interest rates and other non-fiscal policies, such as the Fair Work Act.

Question 24

  1. In better responses, candidates defined the terms ‘underemployment’ and ‘hidden unemployment’ in a more precise and accurate manner.

    The most common form of hidden unemployment referred to by candidates was the discouraged worker: a person who wants to work but who has given up searching for work because he or she believes there will be no job offers for them. In better responses, candidates understood that ‘discouraged workers’ are not the only source of hidden unemployment. Some even observed that there was an increasing incidence of experienced and highly qualified workers who are between jobs and struggling to find their way back into employment.

    In weaker responses, candidates often demonstrated little understanding of hidden unemployment. They sometimes referred to retirees and school students as examples or suggested that people doing lower-skilled jobs were examples of the underemployed. There was only a slightly better understanding of the concept of underemployment.
  1. In better responses, candidates linked changes in underemployment to discretionary employment preferences of employers, such as choosing to reduce rostered hours of casual workers.

    In weaker responses, candidates displayed little understanding of how the level of underemployment was actually measured and calculated. Subsequently, they often did not make the link between hours worked and being officially classified as employed or unemployed.
  1. In better responses, candidates argued that in the longer term there would be an increase in the participation rate as more of the working age population develop skills appropriate for employment. They described changes to labour demand and labour supply without making direct reference to any change in unemployment, but rather inferred an excess supply of labour arising and subsequently higher unemployment.

    In weaker responses, candidates often confused the short- and long-term effects of increasing the school leaving age and whether the labour force participation rate would eventually rise or fall.
  1. There was some good analysis presented by many candidates including responses that included the traditional competitive labour market diagram.

    In better responses, candidates focused on the labour market effects of an increase in the minimum wage not just ‘general’ economic effects such as higher inflation, slower economic growth or an increased CAD.

    In weaker responses, candidates incorrectly labelled labour market diagrams and took the view that the increase in the minimum wage was an incentive for workers to increase their productivity. They did not link the higher unemployment labour (wage) cost with reduced demand for labour on the part of the employer.

    A substantial number of candidates only looked at the effect of the increase in the minimum wage on either labour demand or labour supply, not both.

Section III

Question 25

Most candidates provided a clear definition of the Balance of Payments, demonstrated a sound understanding of the components of the Balance of Payments and also defined the process of globalisation.

In better responses, candidates integrated their knowledge of Australia’s Balance of Payments with recent changes in the global economy. These candidates substantiated their analysis with economic data. They demonstrated comprehensive understanding of the impact on the Balance of Payments of changes in the international business cycle, terms of trade, appreciation of the Australian dollar as well as the developments in the role of emerging economies.

The specific effects of changes in the global economy were accurately explained in better responses. The relationship between Current Account effects and Capital and Financial Account effects were clearly explained. The significance and relevance of these effects for the Australian economy were comprehensively analysed. Information provided in the stimulus was used to enhance better responses.

In weaker responses, candidates, tended to simply rewrite information from the stimulus. These candidates described the structure of the Balance of Payments with little attempt to relate changes in the global economy to Balance of Payments outcomes.

In many weaker responses, candidates lacked understanding of the concepts ‘terms of trade’ and ‘international competitiveness’. They frequently confused the Current Account Deficit with the Budget Deficit. These candidates often failed to grasp that the question required more than details of the Balance of Payments.

Question 26

In better responses, candidates wrote comprehensively on the relationship between the changes in the global economy and its impact on the structure of industry in the Australian economy.

In better responses, candidates also integrated economic theory with both the stimulus material and their own data, and considered the four main sectors of the Australian economy, agriculture, mining, manufacturing and services in some detail. In addition, better responses were well structured and sustained; they often included key definitions and correctly explained diagrams. These candidates made clear links in a specific manner rather than in a generalised way.

In weaker responses, candidates tended to be more descriptive and general in nature. They focused on describing the impact of some changes in the global economy, but with minimal linkage to their effects on the structure of industry in the Australian economy. These responses typically included some poorly drawn diagrams (tariffs; subsidies, exchange rates, etc) that were not linked correctly to the question.

In weaker responses, candidates commonly made limited use of statistics, either from the stimulus or their own knowledge. They also provided limited examples that directly linked the impact of changes in the global economy on the structure of the Australian economy. In many instances, candidates simply chose to rewrite or copy out parts of the stimulus without demonstrating any clear understanding of the relationships involved.

Section IV

Question 27

In better responses, candidates clearly defined the concept of globalisation, economic growth and quality of life. These candidates wrote specifically on the effects of globalisation and showed clear, consistent and logical links between these effects and the changes in economic growth and quality of life in their chosen case study.

In these better responses, candidates also considered both the positive and negative effects that these changes have had and are having in their chosen country. Good support through use of statistics and examples were also used to enhance the quality of such responses.

In weaker responses, candidates tended to answer the question in a much more descriptive and generalised manner. While some wrote at considerable length, there was little attempt to answer the actual question set. Many candidates reproduced their case study and discussed economic growth and quality of life without reference to the effects of globalisation. Other candidates simply wrote ‘because of globalisation’ when attempting to identify the causes of changes to their country’s economic growth and quality of life. In addition, many candidates focused on either economic growth or quality of life and did not support their points through use of statistics and/or examples.

Question 28

In better responses, candidates provided a clear and comprehensive description of the government’s economic objectives. They demonstrated a strong understanding of a range of policies the government uses to achieve these objectives, such as fiscal and monetary policies and microeconomic policies.

These candidates extensively discussed the effectiveness of the government’s use of these policies in achieving their objectives, often supporting their arguments by drawing on contemporary examples and through the aid of correctly labelled and explained diagrams and data. In these responses, the candidates made substantial reference to the suitability and limitations of each type of policy.

In weaker responses, candidates tended to be more descriptive and general in nature. They described some economic objectives and government policies. These candidates made little or no use of data or reference to current government policies or policy objectives, and provided either superficial or no discussion of the effectiveness of these policies.

These candidates sometimes made use of diagrams, but their explanations of these diagrams were generally inaccurate, inadequate or non-existent.

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