Study Design Economics

AOS1: The Market System and Resource AllocationKey knowledge This knowledge includes • key economic concepts including relative scarcity, opportunity cost and the efficient allocation of resources; • economic factors influencing decision making of households, businesses, government and other relevant groups; • the law of demand and the demand curve; • microeconomic demand side factors that influence prices and quantity of goods and servicesin individual markets, including disposable income, the price of substitutes and complements, preferences and tastes, interest rates, population growth and demographic change, and consumer sentiment; • the law of supply and the supply curve; • microeconomic supply side factors that influence prices and quantity of goods and services in individual markets, including the prices of the factors of production, technological change, productivity growth and climatic conditions; • effects of changes in supply and demand on equilibrium prices and quantity traded; • the role of relative prices in the allocation of resources; • the meaning and significance of price elasticity of supply and demand; • factors affecting price elasticity of demand, including the degree of necessity, availability of substitutes and proportion of income; • factors affecting price elasticity of supply, including spare capacity, production period and durability of goods; • market structure including perfect competition, monopolistic competition, oligopoly and monopoly, and its impact on prices, the efficiency of resource allocation and living standards; • sources of market failure including market power, public goods, externalities and asymmetric information; • the reasons for government intervention in the market, including addressing market failure, redistribution of income and stabilisation of the level of economic activity. Key skills These skills include the ability to • use a range of sources to acquire economic information; • define key economic concepts and use them appropriately; • construct graphs and tables to represent economic data; • interpret and analyse statistical and graphical data; • use economic theory and evidence to explain how resources are allocated in a market system; • evaluate the competitiveness of markets in the Australian economy; • discuss the extent to which markets operate freely in Australia.

AOS2: Output, Employment and IncomeKey knowledge This knowledge includes The nature and purpose of macroeconomic activity • the business cycle; • aggregate demand and its components; • aggregate supply; • material and non-material living standards, and the nature and purpose of economic activity as it relates to living standards and long-term economic prosperity; • factors influencing living standards including income per capita, environmental quality and the distribution of income; Low inflation • the meaning of the Reserve Bank of Australia’s goal of stability of the Australian currency (low inflation); • measuring rates of inflation using the Consumer Price Index; • the impact on living standards of failing to meet the goal of low inflation; • aggregate demand and aggregate supply factors that may have influenced the rate of inflation over the past four years; Strong and sustainable economic growth • the meaning of the goal of strong and sustainable economic growth; • economically sustainable development including consideration of access to, and use of, natural resources; • ways of measuring economic growth using Real Gross Domestic Product (GDP); • limitations of GDP and alternative measures of living standards, including Genuine Progress Indicator (GPI) and Measuring Australia’s Progress (MAP); • the reasons for pursuing economic growth, including the impact upon material and non-material living standards; • the impact on living standards of failing to meet the goal of strong and sustainable economic growth; • aggregate demand and aggregate supply factors that may have influenced the rate of economic growth over the past four years; • factors that may influence Australia’s future rates of economic growth;Full employment • the meaning of the term full employment; • measures of the labour force including the participation rate, the unemployment rate and the labour force underutilisation rate; • the costs and benefits of achieving full employment including the impact on living standards; • aggregate demand and aggregate supply factors that may have influenced the achievement of full employment over the past four years; External stability • the nature, significance and measurement of international transactions including the balance of payments, exchange rates, terms of trade and net foreign debt; • the impact on living standards of changes in international transactions; • the nature of free trade and protection including advantages and disadvantages, methods of protection, and the effects of free trade on domestic and global trade and living standards; • aggregate demand and aggregate supply factors that may have influenced international transactions over the past four years; Equity of income distribution • sources of income and the meaning of equity in the distribution of income; • ways of measuring income distribution, inequity and poverty including the Lorenz Curve, the Gini Coefficient and the Henderson Poverty Line; • economic and social costs and benefits of income inequality, and how this might influence living standards; • the trade-off between equity and efficiency; • factors that may have influenced the distribution of income over the past four years. Key skills These skills include the ability to • use a range of sources to acquire economic information; • define key economic concepts and use them appropriately; • apply economic concepts and theories to explain the nature and importance of key economic goals; • interpret and analyse statistical and graphical data to investigate the factors that have influenced the achievement of key economic goals over the past four years; • analyse the impact of key economic goals on living standards.

AOS1: Macroeconomic Demand PoliciesKey knowledge This knowledge includes • the nature and operation of budgetary policy including the level and composition of government receipts and expenditure, the operation of automatic (built-in) and discretionary stabilisers, and methods of financing a budget deficit or using a budget surplus; • the ways budgetary policy may be utilised to influence the level of aggregate demand in order to manage the goals of stability of the currency (low inflation), strong and sustainable economic growth, and full employment, and the impact on living standards; • the ways budgetary policy may be utilised to influence external stability and equity in income distribution; • specific budgetary policy initiatives from the past four years that were designed to influence the level of aggregate demand; • the nature and operation of monetary policy including the ways monetary policy may be utilised to influence the level of aggregate demand in order to manage the stability of the currency (low inflation), strong and sustainable economic growth and full employment, and its impact on living standards; • the way the implementation of monetary policy in the past four years may have influenced the level of aggregate demand; • the relationship between monetary policy and budgetary policy in the management of aggregate demand. Key skills These skills include the ability to • define key economic concepts and use them appropriately; • gather relevant data and information about the nature and operation of aggregate demand management policies in Australia; • apply economic theories and concepts to government demand management policies; • apply skills of economic analysis, including problem-solving, to analyse how aggregate demand management policies have been used to influence key economic goals; • analyse the impact of aggregate demand policies on living standards in Australia.

AOS2: Aggregate Supply PoliciesKey knowledge This knowledge includes • the nature, operation and aims of aggregate supply policies; • how one of the following microeconomic reform policies is intended to influence the achievement of the government’s key economic goals and living standards: National Competition Policy, Labour market reform, Deregulation of key markets, Trade liberalisation; • how budgetary policy, including the role of taxation and infrastructure spending, may affect the level of aggregate supply in order to influence the government’s key economic goals and living standards; • the impact of immigration policies on the labour market and aggregate supply and the way in which this influences the achievement of the government’s key economic goals and living standards; • how one environmental policy is designed to influence aggregate supply, long-term economic prosperity and living standards; • the relationship between aggregate supply and macroeconomic demand policies in the current government policy mix. Key skills These skills include the ability to • define key economic concepts and use them appropriately; • gather and interpret relevant data and information about the nature and operation of aggregate supply management policies in Australia; • apply economic theories and concepts to aggregate supply policies implemented by the Australian Government; • analyse the impact of aggregate supply policies on living standards in Australia; • analyse the role of aggregate demand and aggregate supply policies in the current government policy mix.

AOS1: The Market System and Resource Allocation

AOS2: Output, Employment and Income

AOS1: Macroeconomic Demand Policies

AOS2: Aggregate Supply Policies