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2019

 
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VCE Business Studies

Economics Unit 4: Managing the Economy

Prerequisites

Economics Unit 3. 

Course Description

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 ability of the Australian Government to achieve its domestic macro-economic goals has a significant effect on living standards in Australia. The Australian Government can utilise a wide range of policy instruments to influence these goals and to positively affect living standards. Students develop an understanding of how the Australian Government can alter the composition and level of government outlays and receipts to directly and indirectly influence the level of aggregate demand and the achievement of domestic macro-economic goals.

Area of Study 1 focuses on the role of aggregate demand policies in stabilising the business cycle to achieve the Australian Government’s domestic macro-economic goals. Students examine the role of the Reserve Bank of Australia (RBA) with a focus on its responsibility to alter the cost and availability of credit in the economy. Students consider each of the transmission mechanisms through which changes to interest rates can affect the level of aggregate demand in the economy and how these changes might affect the achievement of the Australian Government’s domestic macro-economic goals. Students examine and analyse the effects of the last two Australian Government budgets, and how particular initiatives have helped to stabilise the level of aggregate demand and influenced the achievement of domestic macro-economic goals.

In Area of Study 2 students consider how the Australian Government utilises aggregate supply policies to manage the Australian economy. If the productive capacity of the economy is expanding, growth in aggregate demand can be met and economic growth can be maintained both now and into the future. Students investigate the role of both market-based and interventionist approaches to managing the supply side of the economy. They evaluate these policy responses in terms of their effect on incentives and consider how they increase competition and efficiency in the economy. Students assess the role of micro-economic reform in terms of its effect on economic prosperity and the achievement of the Australian Government’s domestic macro-economic goals.

Areas of Study

Aggregate demand policies and domestic economic stability

In this area of study students examine how the Australian Government and its statutory authority, the RBA, can utilise budgetary and monetary policy respectively to influence the level of aggregate demand in the economy. They evaluate the relative effectiveness of each policy by focussing on their strengths and weaknesses and explain how each policy has been utilised by the Australian Government in the past two years.

Aggregate Supply Policies

In this area of study students examine the important role of aggregate supply policies in creating a stronger macro-economic environment so that domestic macro-economic goals can be more easily achieved. They investigate the different approaches that government may take to promoting competition and efficiency. Should the Australian Government intervene in the market? Is it better to rely more on the market to promote productivity growth and improvements in the quality and quantity of the factors of production? Students evaluate each of these approaches, highlighting their strengths and weaknesses and drawing conclusions about the short-term and long-term consequences in terms of the domestic macro-economic goals and living standards.

Assessment

Outcomes Assessment Tasks Marks Allocated
(school-assessed coursework)
On completion of this unit the student should be able to discuss the nature and operation of aggregate demand policies and analyse how the policies may influence the Australian Government’s domestic macro-economic goals and living standards. Folio of exercises or essay or test or report. 60
On completion of this unit the student should be able to discuss the nature and operation of aggregate supply policies and analyse how the policies may influence the Australian Government’s domestic macro-economic goals and living standards. Folio of exercises or essay or test or report. 40
Total Marks 100

Overall Final Assessment

Graded Assessment Title Assessment Exam Duration Contribution to Study Score (%)
1 Unit 3 Coursework School-assessed   25
2 Unit 4 Coursework School-assessed   25
3 Written Examination November 2 hours 50

 

Reproduced by permission of the Victorian Curriculum and Assessment Authority, Victoria, Australia: www.vcaa.vic.edu.au