Year 10 Term 2 Macro Revison Questions

Year 10 Term 2 Economic Revision Questions
1. In Country X, there are 60 million people of working age. Of these, 70% are available for work while 39 million
are currently employed.
a. Calculate the number of people in country X’s labour force.
b. Calculate country X’s unemployment rate.
2. Describe using examples:

a. Frictional unemployment
b. Cyclical unemployment
3. Why does an increase in the price of some goods have a greater effect on inflation than others?
4. Explain the difference between demand pull inflation and cost push inflation.
5. Discuss the possible consequences in an economy of a high inflation rate.
6. Using a PPF diagram, explain the concept of economic growth.
7. Explain the importance of Consumption in the aggregate demand equation and its impact on economic growth.
8. Describe policies the government can use to increase economic growth.
9. A farmer sells wheat to a baker for $2. The baker uses the wheat to make bread, which is sold for $3. What is the
total contribution of these transactions to GDP?
10. Many years ago, Peggy paid $500 to put together a record collection. Today, she sold her albums in a garage sale
for $100. How does this sale affect current GDP?
11. List the four components of aggregate demand, giving an example of each.
12. Why do economists use real GDP rather than nominal GDP to gauge economic well-being/ standard of living?
13. In the year 2014, the economy produces 100 loaves of bread that sell for $2 each. In the year 2015, the
economy produces 200 loaves of bread that sell for $3 each. Calculate nominal GDP and real GDP for each year
using 2014 as the base year. By what percentage does each of these statistics rise from one year to the next?
14. What components of GDP (if any) would each of the following transactions affect? Explain.
a. A family buys a new Westinghouse refrigerator.
b. Aunt Jane buys a new house.
c. Hyundai sells an i30 from its inventory.
d. You purchase a Domino’s pizza from a smartphone App.
e. Victoria repaves a section of the Pacific Hwy.
f. Your parents buy a bottle of Dom Perpignan Champagne.
g. Foxconn expands its factory in China.
15. Consider an economy that produces only chocolate bars. In year 1, the quantity produced is 3 bars and the price
is $4. In year 2, the quantity produced is 4 bars and the price is $5. In year 3, the quantity produced is 5 bars and
the price is $6. Year 1 is the base year.
a. What is nominal GDP for each of these three years?
b. What is real GDP for each of these years?
c. What is the percentage growth rate of real GDP from year 2 to year 3?
16. Q8. Below are some data from a fictitious economy with two goods only.
Year Price of Milk ($) Quantity of Milk (L) Price of Honey ($) Quantity of Honey (L)
2013 $1 100 $2 50
2014 $1 200 $2 100
2015 $2 200 $4 100
a. Calculate nominal GDP and real GDP for each year, using 2013 as the base year.
b. Calculate the percentage change in nominal GDP and real GDP in 2014 and 2015 from the preceding year.
For each year, identify the variable that does not change. Explain why your answer makes sense.
17. Justify why a government would implement a budget deficit.
18. Explain how changes in the level of government spending (G) and taxation (T) can influence the level of
aggregate demand in an economy (use the circular flow model).
19. Describe how contractionary fiscal policy can help an economy reduce inflation.
20. Evaluate the view that a tax cut is more effective in stimulating aggregate demand than an increase in
government spending.
21. Describe the role of the RBA.
22. Explain the relationship between interest rates and the level of investment in an economy.
23. Describe how expansionary monetary policy can help an economy reduce inflation.
24. Assuming the economy is in recession, identify what government policy initiatives could be used to improve its
position.
25. Discuss the likely impact on an economy of a substantial decrease in the level of interest rates (consider
‘winners’ and ‘losers’).

Year 10 Term 2 Macro Revison Questions

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Year 10 Term 2 Economic Revision Questions

2. Describe using examples:

5. Discuss the possible consequences in an economy of a high inflation rate.

6. Using a PPF diagram, explain the concept of economic growth.

8. Describe policies the government can use to increase economic growth.

17. Justify why a government would implement a budget deficit.

21. Describe the role of the RBA.

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