Economics Unit 3: Australia's Economic Prosperity
Students are advised to complete Units 1 and 2 before undertaking Unit 3.
Students contemplating a tertiary course in commerce or business should note that courses may require students to undertake some study in economics. Prior experience of economics at secondary school can be an advantage.
The Australian economy is constantly evolving. The main instrument for allocating resources is the market but the Australian Government also plays a significant role in this regard. In this unit students investigate the role of the market in allocating resources and examine the factors that are likely to affect the price and quantity traded for a range of goods and services. They develop an understanding of the key measures of efficiency and how market systems can result in efficient outcomes. Students consider contemporary issues to explain the need for government intervention in markets and why markets might fail to maximise society’s living standards. As part of a balanced examination, students also consider unintended consequences of government intervention in the market.
In this unit students develop an understanding of the macro-economy. They investigate the factors that influence the level of aggregate demand and aggregate supply in the economy and use models and theories to explain how changes in these variables might influence the achievement of the Australian Government’s domestic macroeconomic goals and affect living standards.
Australia’s economic prosperity depends, in part, on strong economic relationships with its major trading partners. Students investigate the importance of international economic relationships in terms of their influence on Australia’s living standards. They analyse how international transactions are recorded, predict how economic events might affect the value of the exchange rate and evaluate the effect of trade liberalisation.
Areas of Study
An introduction to micro-economics: the market system, resource allocation and government intervention
In this area of study students investigate the role of the market in answering the key economic questions of what and how much to produce, how to produce and for whom to produce. They consider the effect of decisions made by consumers and businesses on what goods and services are produced, the quantities in which they are produced, to whom they are distributed and the way they are produced. Students investigate some of the key factors that influence the level of demand and supply in the economy and how these might lead to changing prices and the movement of land, labour and capital to those areas of production that generate the most value for society. Students use models to make predictions and to consider the role of markets in achieving economic efficiency. Using a case study from the past two years they discuss instances where the market fails to allocate resources efficiently and whether government intervention leads to a more efficient allocation of resources in terms of maximising society’s wellbeing.
Domestic macro-economic goals
In this area of study students investigate the Australian Government’s domestic macro-economic goals of low inflation, strong and sustainable economic growth and full employment and why these goals are pursued. They consider the role of key economic agents using a simple circular flow model of the macro-economy. Students examine how each of the goals is measured and the potential consequences associated with the non-achievement of each goal. They identify and analyse contemporary aggregate demand and aggregate supply factors that may influence the achievement of domestic macro-economic goals in the past two years, and consider how achievement of the goals may affect material and non-material living standards.
Australia and the world economy
Australia is an open economy. There has been a gradual reduction in trade barriers with trade making an increasingly greater contribution to Australia’s living standards. Students examine the reasons why countries engage in international transactions such as the exchange of goods and services and the movement of savings and investment capital, and evaluate how these transactions might affect living standards. They investigate how international transactions are recorded and the relationships between different sections of the balance of payments. Students apply their knowledge of demand and supply models to explain movements in the exchange rate, and discuss the effects of changing currency values on the achievement of the Australian Government’s domestic macro-economic goals.
|On completion of this unit the student should be able to explain how markets operate to allocate resources, and discuss the effect of government intervention on market outcomes
||Folio of exercises or essay or test or report.
|On completion of this unit the student should be able to analyse key contemporary factors that may have influenced the Australian Government’s domestic macro-economic goals over the past two years and discuss how achievement of these goals may affect living standards.
||Folio of exercises or essay or test or report.
|On completion of this unit the student should be able to explain the factors that may influence Australia’s international transactions and evaluate how international transactions and trade liberalisation may influence the current account balance, the Australian Government’s domestic macro-economic goals and living standards in Australia.
|Folio of exercises or essay or test or report.
Overall Final Assessment
||Contribution to Study Score (%)
||Unit 3 Coursework
||Unit 4 Coursework
Reproduced by permission of the Victorian Curriculum and Assessment Authority, Victoria, Australia: www.vcaa.vic.edu.au