Monetary Policy Essay Hsc
It can sometimes be difficult to find practice HSC Economics Essay Questions.
To make it easy for you, I’ve placed the following 20 questions into their respectful topic and written a small blurb on what you will need to cover in each topic.
I want you to read through each question and practice writing responses to them. Use notes if you need to but the important thing in economics is to answer the question carefully and not mix up the syllabus points.
For example, if it asks for monetary policies, and you provide fiscal policies, it’s a big no no.
A band 6 student will be comfortable writing 3+ quality pages on at least 4 of the questions in each topic.
All of the following questions have been adapted directly from the HSC Economics Syllabus from the NSW Education Standards Authority (NESA) (formally known as BOSTES). Good luck!
HSC Topic One – The Global Economy
This topic focuses on the workings of the global economy from a very macroeconomic viewpoint and looks at the impact of globalisation on individual economies.
Discuss the impact of globalisation and trade liberalisation (removal of trade barriers) on the global economy.
Discuss the advantages and disadvantages of free trade and analyse how technology has increased the quantity of world trade.
Discuss the advantages of free trade and the role of international organisations (WTO, IMF, World Bank, United Nations, OECD ) and free trade agreements in promoting trade in the global economy.
Evaluate the policies used to promote economic growth and economic development of a country other than Australia.
Explain how globalisation has led to variations in the standard of living and differences in the level of development between nations.
Are Your Notes Up To Scratch?
If you need reliable notes or simply want to check your notes are right, take a look at HSC-Notes.com.
Their notes are crafted by the 99+ ATAR Club and provide concise answers to the HSC Syllabus dot points with what you need to know for your exams. Diagrams, mind maps, tables, dot points, paragraphs, sources are included to aid your learning.
With these notes you can spend less time rewriting your textbook and worrying about whether your notes answer the syllabus dot points correctly and spend more time learning and practicing your skills knowing your notes are accurate and concise.
Head on over to HSC-Notes to get your HSC subject notes now
HSC Topic Two – Australia’s Place in the Global Economy
This topic is more specific (and often more difficult) than the previous topic and asks the student to have an understanding of Australia’s place in the global economy, what our largest trading partners are, and what changes to the global economy can effect Australia.
Using diagrams, explain how movements in the Australian dollar can affect the performance of the Australian economy.
Analyse the impact of the changes in the global economy on Australia’s Balance of Payments.
Explain the causes of Australia’s sustained Current Account Deficit (CAD) and explain the impacts of a high CAD on the Australian economy.
Discuss the impact of changes in the domestic and global economy on Australia’s exchange rates and analyse the causes of recent trends in Australia’s exchange rate with the global economy.
Explain the factors that influence Australia’s Balance of Payments.
HSC Topic Three – Economic Issues
This is perhaps my favourite of all the HSC Economics topics as it asks us to examine the nature, causes and consequences of the economic issues that are facing contemporary economies including; unemployment, inflation, distribution of income and wealth as well as sustainable development.
Analyse the causes of unemployment and their effects on the Australian economy.
Explain the causes of inflation and the impacts of high inflation on the Australian economy.
Discuss the consequences of an unequal distribution of income and wealth and the impact of fiscal policy on the distribution of income in Australia.
Analyse the changing sources of economic growth and their effects on the Australian economy and business cycle.
Examine the economic issues associated with the goal of ecologically sustainable development.
HSC Topic Four – Economic Policies and Management
This topic looks at the aims and implementation of economic policies in the Australian economy and asks us to respond to hypothetical situations.
Analyse how macroeconomic policy (i.e. Fiscal and Monetary Policy) can be used to achieve external stability.
Explain the method behind how a Government can finance a budget deficit.
Evaluate the rationale behind the Reserve Bank of Australia’s target inflation rate and explain why monetary policy suffers from a time lag limitation.
Discuss the benefits and disadvantages of having a minimum wage and explain the national system for determining the minimum wage.
Using diagrams, explain how market-based policies can assign a price to a negative externality (e.g. pollution) and improve the quality of life through a paradoxical reduction in consumption.
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Thomas Woolley loves Economics and Business Studies. He completed his HSC in 2013 and has been working at Art of Smart since 2014. He enjoys helping out his students whilst studying B Commerce / B Education at UNSW to become an actual economics/business studies teacher in 2018. Since high school Thomas has also learned to scuba dive, salsa dance, and he can fly a quadcopter like a pro. However, he still cannot skateboard.
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Guide To The HSC Economics Fiscal Policy Essay
In this guide I will be focusing on what needs to be included for an essay on fiscal policy, or more specifically the federal budget.
Post written by Chloe Segal (10th in the state Economics, 11th in the state Business Studies and 4th in the state English Advanced 2015). See all articles first and personally get in touch with our state rankers here
As the core example I will be addressing the following essay question:
‘Assess the effectiveness of fiscal policy in achieving economic objectives in the Australian economy.’
Part 1: What to include in the introduction
In the introduction you have to find a balance between being as succinct as possible but also communicating all the key points and terminology. Here are a few ideas of what to include:
- Define key terms (e.g. fiscal policy, budget, budget deficit)
- Mention a current statistic (e.g. size of the budget deficit and projected trajectory)
- Distinguish between cyclical and structural components of a budget
- Specifically identify some economic objectives that fiscal policy targets and quantify them (e.g. state the target band for inflation and the NAIRU for unemployment)
As fiscal policy is a broad topic and encompasses a range of initiatives and strategies it is up to your discretion as to what key terms you want to emphasise as you cannot include everything in a short 40 minute response.
Fiscal policy is a countercyclical macroeconomic policy tool that involves the use of taxation and government expenditure to allocate resources, redistribute income and achieve economic objectives and general policy goals (definition of a key term). These goals relate to internal balance and therefore aim to achieve price stability, full employment and a sustainable rate of economic growth (specifying economic objectives related to internal balance). The focus of fiscal policy has shifted towards fiscal consolidation, consistent with the government’s medium-term fiscal strategy to achieve budget surpluses, on average, over the economic cycle. To return to surplus by 2019–20 the government is relying on automatic stabilizers to improve the cyclical component of the budget, together with limits on the growth in discretionary spending to improve the structural component of the budget. Recently, the effectiveness of fiscal policy has been hindered by external influences relating to economic conditions in the global economy (addressing the key focus on effectiveness). The budget deficit for 2016–17 is 2.2% of GDP and is forecast to fall to 0.3% of GDP by 2019–20 as the government is focused on achieving a steady trajectory towards a balanced budget and lower government debt (current statistic).
In this introduction I chose to focus on defining the key terms and specifically identifying economic objectives that will be individually discussed within body paragraphs.
However, an alternative approach could include a discussion of different elements related to fiscal policy. There is no single ‘correct’ introduction. Rather, you need to ensure that everything you include is relevant and will be analyzed and discussed within the body paragraphs. Avoid including additional sentences that have no further relevance and cannot be analyzed.
Part 2: Body paragraphs and economic objectives
When planning what to include in the body paragraphs it is crucial to establish a time frame. The first consideration is to decide which policies and budgets you will be discussing. Most students make the mistake of assuming that the question wants you to discuss the 2016 Budget. Whilst it is crucial that you analyse the effectiveness of measures from the 2016 budget the question isn’t limited to a discussion of the most recent fiscal policy. A more comprehensive and sophisticated response would discuss and contrast the effectiveness of fiscal policy over a range of time periods.
When you are choosing which years to analyse you must analyse fiscal policy measures that were implemented during different stages of the business cycle. This means you should contrast the effectiveness of fiscal policy in an upturn or boom with a recession. For example, you could choose to analyse fiscal policy in response to the GFC (2008–2009), post GFC (2011–2012) and the current budget (2016–2017), taking into account the different objectives during each stage.
Key policies and objectives during the GFC
During this time period you should emphasise the downturn in the business cycle and implementation of discretionary expenditure measures to boost growth and prevent a recession. Key fiscal policy measures included:
- Building Australia Fund
- Education Revolution and Jobs and Training Compact
- $1.5 billion investment to help first home buyers purchase a home (First Home Owner’s Boost)
- Skilling Australia for the Future
- Guarantee of deposits of authorised deposit taking institutions to support confidence in Australia’s financial markets
- Purchasing $8 billion in residential mortgage backed securities
- $3.9 billion in support payments for low and middle income families ($1000 for each child in families eligible for Family Tax Benefits)
Key policies and objectives during the interim period
- Alternative Pathways Program to improve occupational and geographic labour mobility
- $1 billion for the National Disability Insurance Scheme
- $2.1 billion on a Schoolkids Bonus
- Increase in the tax free threshold from $6000 to $18 200
- $350 million for the Roads to Recovery program
- Raising the superannuation guarantee from 9% to 12%
- $1 billion investment in boosting Australian innovation, productivity and competitiveness under A Plan for Australian Jobs
- Renewable Energy Future Fund
Key policies and objectives from the 2014–2016 budgets
When discussing this time period, you should emphasise the context in terms of a slowdown in growth and a contraction in the business cycle. Fiscal policy measures during this time period focused on the following objectives:
- Fiscal consolidation and reducing public debt
- Implementing GST on online services to increase taxation revenue
- Temporary 2% debt levy on income levels over $180 000
2. Tightening welfare eligibility
- Tightening of eligibility requirements on pension entitlements
- Income will be redistributed away from holidaying backpackers who will have no tax free threshold
- $7 GP co-payment
3. Boosting infrastructure spending
- $5 billion infrastructure fund to develop Northern Australia
- $2.2 billion revenue by indexing the petrol fuel excise, which will be channelled into roads funding
4. Reallocating resources towards the private sector
- Privatisation of Medibank
- Proposed deregulation of tertiary education
- ABC and SBS will lose 1% of their annual funding over the next four years
- Government will finish the Gonski school funding plan in 2017–18, saving around $30 billion from the Federal Budget
5.Stimulating small business
- Reallocation of resources towards small business through a tax deduction for assets costing up to $20 000
- Cutting company tax by 1.5% for unincorporated small businesses with turnover less than $2 million (e.g. sole traders, partnerships)
- Investment in renewables has been slashed
- Review of the Renewable Energy Target
- Commitment of $2.55 billion to funding the Emissions Reduction Fund (direct action policy)
- $525 million in funding for the Green Army initiative
- Abolition of the Carbon tax
- $25 million drought assistance package
- $100 million Great Barrier Reef Conservation
7. Boosting workforce participation
- $330 million Youth Employment Strategy to fund training programs for individuals during the four week waiting period before they are eligible to receive access to particular youth welfare payments
- $10 000 wage subsidy for employers to hire older workers
- $3.5 billion childcare package to encourage greater workforce participation among women
Part 3: Incorporation of quotes
It is often useful to critique fiscal policy by including a few quotations from prominent economists. In terms of sourcing these quotations useful websites are the RBA, the Australia and the Financial Review.
Here is an example of a body paragraph that critiques fiscal policy using quotes as supporting evidence:
Australian politician, Arthur Sinodinos suggests targeted structural reforms will be required to boost economic growth. He argues, ‘structural reform and targeted infrastructure spending will release the handbrake on growth by improving the allocation of resources and relieving capacity constraints.’ Achieving economic objectives related to inflation targeting and sustainable unemployment will also require a focus on ‘inclusive growth.’ This concept is discussed by Paul Smyth whose central concern is boosting growth through human capital investment and a switch from a welfare to a social investment model. This proposal would have major ramifications for fiscal policy as a macroeconomic policy instrument as the federal budget would include major reforms to transfer payments and social security.
Part 4: Incorporation of economic theories
The two main theories to discuss when analysing fiscal policy are crowding out and the twin deficits hypothesis.
Crowding out occurs when government spending is financed through borrowing from the private sector, which puts upward pressure on interest rates and ‘crowds out’ private sector investors that cannot borrow at the higher interest rates. Higher interest rates also attract foreign financial inflows, resulting in an appreciation, reducing export competitiveness, thereby crowding out private sector export activity.
The twin deficits hypothesis suggests that budget deficits, used to stimulate the economy, cause current account deficits and therefore should be minimized.
Part 5: Addressing effectiveness
To evaluate the effectiveness of a policy, complete the following steps:
- Identify the original objective
- Determine whether the government actually implemented the policy (many fiscal policy measures never pass through parliament)
- Review economic outcomes and how closely they relate to policy objectives
- Determine whether other factors significantly affect the economic outcome, such as changes in global economic conditions, overseas interest rate movements, exchange rate fluctuations, changes in commodity prices etc.
- Consider whether a policy has any unintended consequences or side effects (this requires you to consider the trade off between conflicting objectives such as cyclical unemployment and inflation)
You should raise the following key points when critically analysing the effectiveness of fiscal policy:
- Fiscal policy is the most effective policy to stimulate the economy and job creation but is less effective in slowing it down (more effective during a recession)
- Australia was successful in using fiscal policy to avoid a recession during the GFC
- Fiscal policy can target particular types of unemployment (e.g. structural unemployment)
- Slower to implement but quicker to impact
- The effectiveness of fiscal policy is reduced as it is working in the opposite direct to monetary policy (fiscal policy is contractionary whilst monetary policy is expansionary)
- Fiscal policy is constrained by the election cycle, passing bills through the Senate and lobby groups
Here is a sample body paragraph that could be used to as analysis of effectiveness:
Continued economic uncertainty has hindered Australia’s growth performance and necessitated the continued support of automatic stabilizers. As unemployment hovers around 5.7% transfer payments attract significant spending. Simultaneously, slow wage growth has reduced personal income tax revenue. This has reduced the effectiveness of fiscal policy in achieving objectives related to the reduction of public debt and movement towards a budget surplus. Nevertheless, fiscal drag has meant income tax revenue continues to rise. The government has relied on this process as a driver of increases in non-discretionary revenue.
I hope this guide to writing a fiscal policy essay helps you in preparation for HSC. Try to write to some practice essays using these tips and the structure discussed above.
Post written by Chloe Segal (10th in the state Economics, 11th in the state Business Studies and 4th in the state English Advanced 2015)