Economics Study Notes

In this area of study students investigate the role of the market in addressing the key economic questions of what and how much to produce, how to produce and for whom to produce. Students consider the effects of decisions made by consumers and businesses on what goods and services are produced, the quantities in which they are produced, the way they are produced and to whom they are distributed. Students investigate the key factors that affect the level of demand and supply in markets and how these might lead to changing prices, as well as the movement of land, labour and capital resources to those areas of production that generate the most value for society. Students use models to make predictions and consider the role of markets in achieving economic efficiency. They discuss instances where the market fails to allocate resources efficiently and evaluate whether government intervention leads to a more efficient allocation of resources in terms of maximising society’s living standards.

In this area of study students investigate Australia’s domestic macroeconomic goals supporting living standards, including strong and sustainable economic growth, full employment and low and stable inflation (price stability). Using the five-sector circular flow model of the macroeconomy, students consider the role of key economic agents and examine the factors that affect the business cycle. Students examine how each of the goals is measured and the potential consequences associated with the level of achievement of each goal. Students identify and analyse contemporary aggregate demand and aggregate supply factors that may have influenced the level of achievement of domestic macroeconomic goals over the past two years and consider how the level of achievement of the goals may affect living standards.

Australia is an open economy. Students examine the reasons for international trade, such as the exchange of goods and services and the movement of savings and investment capital, and how these transactions might affect living standards. Students describe how international transactions are recorded. Students analyse the effects of movements in the exchange rate, the terms of trade and changes in international competitiveness on the achievement of the domestic macroeconomic goals and living standards.

In this area of study students examine how the RBA and the Australian Government can utilise monetary and budgetary policy respectively to affect the level of aggregate demand in the economy. Students discuss the operation of aggregate demand policies, and analyse how current aggregate demand policy settings are intended to effect the achievement of the domestic macroeconomic goals and influence living standards. Students analyse the relative strengths and weaknesses of the policies in influencing the domestic macroeconomic goals and living standards.

In this area of study students examine the role of aggregate supply policies in creating a stronger macroeconomic environment so that the domestic macroeconomic goals can be more easily achieved. They investigate the different approaches that policymakers may take to promote efficiency through productivity growth, reductions in the costs of production, and improvements in the quality and quantity of the factors of production. Students analyse how these policies may affect aggregate supply and Australia’s international competitiveness and draw conclusions about the effects of these policies on the domestic macroeconomic goals and living standards.