Syllabus
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Unit 1: Markets and models
Topic 1: The basic economic problem
Unit 1: Markets and models > Topic 1: The basic economic problem
- Describe key concepts using economic terminology, including the ceteris paribus assumption, choice, economic growth, economic resources, efficiency, factors of production, opportunity cost, production possibility curve (frontier), productivity and scarcity
- Describe the basic economic problem of relative scarcity and the need for decision-making by individuals, businesses and governments at local, state, national and international levels
- Explain the concept of opportunity cost and recognise its significance in decision-making, where benefits are subjectively measured against costs
- Classify the factors of production (land, labour, capital and entrepreneurial ability) and link these to income (rent, wages, interest and profit)
- Explain the concept of models in economics and how making assumptions aims to simplify and identify complex economic relationships
- Identify assumptions and use the production possibility curve to explain, by illustrating in diagrammatic form, the concepts of scarcity, choice, opportunity cost, trade-offs, underutilisation of resources, efficiency, productivity, unemployment and economic growth
- Analyse and evaluate the production possibility curve to show the effects of different economic events, e.g. improvements in health, education or productivity of labour, asymmetric technology advances, war and famine
- Explain: ways that an economy attempts to solve the economic problem by considering the three basic economic questions — ‘what and how much to produce’, ‘how to produce’ and ‘for whom to produce’, the distinction between efficiency (use of resources) and equity (who owns the resources)
- Select data and economic information, and analyse and evaluate the ways that different economic systems attempt to resolve the three economic questions, using real-world examples, e.g. Norway, Singapore, North Korea, Cuba, China, Saudi Arabia, United States and the United Kingdom
- Create responses that communicate economic meaning using data, information, graphs and diagrams to suit the intended purpose in paragraphs and extended responses
Topic 2: Economic flows
Unit 1: Markets and models > Topic 2: Economic flows
- Describe key concepts using economic terminology, including aggregate demand, aggregate supply, circular flow of income model, consumption, exports, government expenditure, gross domestic product (GDP), imports, investment, subsidy and taxes
- Construct the five-sector circular flow of income model, and explain the significance of its assumptions. The diagram shows withdrawals (Savings (S), Taxation (T) and Imports (M)) in one area, with injections (Investment (I), Government Expenditure (G) and Exports (X)) in the opposite area
- Explain the relationship existing between the five sectors of the circular flow of income model in closed and open form, both in words and in diagrammatic form
- Explain the components of aggregate demand: Consumption + Investment + Government Expenditure + net exports (Exports – Imports), or C + I + G + (X – M)
- Explain the equilibrium condition, where injections equal withdrawals, and understand why equilibrium is not where S = I and T = G and M = X
- Explain the connection between aggregate demand and GDP, and locate GDP on the Australian Bureau of Statistics website
- Explain the connection between the resources and goods markets, and the business and household sectors in the circular flow of income model
- Explain the economic cycle (business cycle) with booms and busts, and how the government can minimise fluctuations in the economic cycle (the level of complexity is less than the requirement for Units 3 and 4)
- Explain the paradox of thrift (fallacy of composition) exposed by the circular flow of income model
- Select data and economic information and analyse (the level of complexity is less than the requirement for Units 3 and 4): the various forces impacting on the size of the circular flow of income, e.g. retail sales growth, business investment, exports and imports using current data from the Australian Bureau of Statistics, the effects of government spending and taxation on the size of the economy using aggregate demand and the circular flow of income model, the effects of changes in the cash rate by the Reserve Bank of Australia on aggregate demand and the circular flow of income model, and explain the meaning of basis points and percentage points
- Explain the effects of changes in the factors of aggregate supply to the circular flow of income model (e.g. technology, innovation, entrepreneurship and immigration) and make connections to the production possibility curve, economic growth and employment
- Analyse and evaluate how current and topical economic events affect various economic flows, e.g. changes to confidence levels; minimum wage; government subsidies to an industry (e.g. renewable energy, mining or agricultural); currency movements; or economic conditions in a major trading partner
- Analyse and evaluate outcomes from changes in economic flows and draw conclusions or make decisions
- Create responses that communicate economic meaning using data, information, graphs and diagrams to suit the intended purpose in paragraphs and extended responses
Topic 3: Market forces
Unit 1: Markets and models > Topic 3: Market forces
- Describe key concepts using economic terminology, including consumer sovereignty, elasticity, equilibrium, the law of demand and the law of supply
- Describe the different characteristics of goods and services, including private, public, merit, substitute and complementary
- Explain: the concepts of a market and of consumer sovereignty, and apply the theory of demand and supply to determine market equilibrium, and express in diagrammatic forms, the significance of the ceteris paribus assumption with respect to the law of demand and supply
- Distinguish movements along from shifts of demand and supply curves; express each graphically and explain the impact on equilibrium price and quantity
- Analyse the impact of non-price factors on demand and supply curves, and equilibrium price and quantity in various situations, with diagrams. Challenging economic problems and application of economic theory can be considered, e.g. how housing prices increase despite increases in supply, or how Valentine’s Day flowers increase in price despite a significant increase in supply of flowers
- Analyse market situations that are not in equilibrium in the short term, and express graphically to demonstrate shortage and surplus (i.e. the operation of the ‘invisible hand’ as explained by Adam Smith)
- Explain: price elasticity of demand and the difference between elastic, inelastic and unitary elasticity, construct appropriate diagrams and apply to various situations, the factors affecting elasticity of demand, including necessities and luxuries, the existence of substitutes, the proportion of income spent on the good, and the length of time following a price change
- Calculate: the percentage change in prices from one period to the next, using the calculation for change, the price elasticity of demand using the total revenue and/or point method, explain the numerical values, and relate to real economic scenarios
- Analyse the significance of price elasticity of demand to consumers, business and government
- Explain price elasticity of supply, and elasticities of demand (income and cross)
- Select data and economic information and investigate how the price mechanism operates within a specific market
- Analyse the significant components within a specific market to explore trends in prices and the relationships between supply and demand and the impacts upon price and quantity
- Evaluate the effects of market forces on consumers and businesses
- Create responses that communicate economic meaning using data, information, graphs and diagrams to suit the intended purpose in paragraphs and extended responses
Unit 2: Modified markets
Topic 1: Markets and efficiency
Unit 2: Modified markets > Topic 1: Markets and efficiency
- Describe key concepts using economic terminology, including allocative efficiency, productive efficiency, dynamic efficiency, externalities, incentives, market failure, monopolistic competition, perfect competition, oligopoly, monopoly, goods (public, private, merit and demerit), and signals
- Describe: the meaning of allocative, productive and dynamic efficiency as these relate to the optimal operation of markets, the assumptions of a perfectly competitive market system, and outline the continuum between a perfectly competitive market and monopoly
- Compare optimal versus socially desirable outcomes
- Analyse the difference between complete market failure (missing markets) and partial market failure
- Explain and analyse the causes and effects of market failure
- Explain and analyse the different methods of market modification required to correct market failure, including direct and indirect taxation (e.g. Pigouvian taxes), subsidies, price floors/ceilings; in addition, suasion, tradable permits or direct state provision and regulation may be examined
- Explain how the features and characteristics of the extension of property rights may resolve economic inefficiencies associated with common resources, e.g. economic exclusion zones and economic zones in national parks
- Select data and economic information, and analyse and evaluate: how market failure can create opportunities for innovation and business, the tension between the costs to society of market failure and the unintended consequences of possible mitigation methods
- Create responses that communicate economic meaning using data, information, graphs and diagrams to suit the intended purpose in paragraphs and extended responses
Topic 2: Case options of market measures and strategies
Unit 2: Modified markets > Topic 2: Case options of market measures and strategies
- Describe and explain the meaning of market concentration and market power, and consider allocative, productive and dynamic efficiency as these relate to the desirable operation of markets
- Explain how market concentration can change over time resulting in changes to market structure, including perfect competition, monopolistic competition, oligopoly and monopoly; diagrammatic analysis is an optional extension
- Select data and economic information that offer evidence of concentrated markets in Australia and other countries (e.g. banking, grocery and petroleum industries), and examine these sources to appreciate their underlying assumptions and perspectives
- Explain the impact of competitive pressures on innovation and investment, resource allocation and market efficiency, using economic reasoning
- Analyse and evaluate: private and social costs and benefits of concentrated markets (e.g. under-provision of goods, and positive and negative externalities), and support with diagrams, the role of the Australian Competition and Consumer Commission (ACCC) and the courts in reducing anticompetitive behaviour, government strategies and/or interventions to increase competition in markets to achieve more efficient market outcomes, e.g. in oligopolistic industries such as banking, grocery and petroleum, and considering different perspectives
- Create responses that communicate economic meaning using data, information, graphs and diagrams to suit the intended purpose in paragraphs and extended responses
Unit 3: International economics
Topic 1: The global economy
Unit 3: International economics > Topic 1: The global economy
- Describe key concepts using economic terminology, including absolute advantage, comparative advantage, competitive advantage, currency devaluation, currency revaluation, economic integration, economic union, exchange rate appreciation and depreciation, external stability, internal stability, factor endowment, exchange rates (fixed, floating and managed), free trade, globalisation, sustainable economic growth, and trade liberalisation
- Recall the concept of an open economy and explain how it operates in terms of the circular flow of income model
- Explain the advantages and disadvantages of international trade, and how trade can impact economic policy, including the pursuit of sustainable economic growth, and external and internal stability
- Analyse the composition and direction of Australia’s trade patterns (e.g. the five largest importers and exporters), compare them to emerging patterns and trends in international trade, and calculate the percentage change from one period to the next
- Explain the: development and contemporary relevance of trade theories, including the economic theories of absolute (see Adam Smith), comparative (see David Ricardo) and competitive advantage (see Michael Porter), and apply using relevant diagrams and models, factors that have contributed to the growth of multi-company and multinational supply chain integration, e.g. the location of natural factor endowments; digital and other innovation; infrastructure (including logistics); and government incentives, factors that have contributed to globalisation and current international trade patterns, including: technology; multi-national corporations; regional trading blocs; and deregulation of financial capital markets and of non-government institutions, e.g. the World Trade Organization, International Monetary Fund and World Bank
- Define an exchange rate and explain the factors underlying the demand and supply of a currency
- Distinguish between a fixed, floating and managed exchange rate system
- Construct diagrams to explain the demand and supply factors influencing a floating exchange rate
- Select data and economic information, and analyse and evaluate: effects of changes in Australia’s terms of trade on the economy from a range of perspectives, causes of exchange rate appreciation or depreciation movements
- Evaluate government policy responses to exchange rate movements and changing trade relationships using criteria e.g. employment in trade-exposed industries, economic growth (nationally or in state or local regions), efficiency (allocative and dynamic costs), and importation of goods and services
- Create responses that communicate economic meaning using data, information, graphs and diagrams to suit the intended purpose in paragraphs and extended responses
Topic 2: International economic issues
Unit 3: International economics > Topic 2: International economic issues
- Describe key concepts using economic terminology, including balance of payments, balance of trade, capital and financial account, current account deficit, current account, foreign investment, foreign debt, free trade agreements, trading blocs, methods of trade protection, and terms of trade
- Explain the methods of protection employed by nations, and construct supply and demand diagrams to demonstrate the effect of methods of trade protection, including tariffs and non-tariff barriers (e.g. subsidies, quotas and bureaucratic requirements)
- Evaluate the economic arguments for and against protectionism and trade liberalisation responses from different viewpoints using economic criteria (e.g. economic efficiency, economic growth, living standards or resource allocation) to draw conclusions or make decisions about the relative merits of trade policy alternatives
- Explain different trade agreements that Australia has, including bilateral, regional and multilateral agreements
- Select data and economic information, and analyse and evaluate the contemporary role of ‘free trade’ agreements and their impact on Australia’s international trade (e.g. trade creation and trade diversion) and the domestic economies of the nations involved
- Evaluate the economic outcomes of international trading bloc agreements (e.g. Australia–New Zealand Closer Economic Relations Trade Agreement (CER), European Union (EU), North American Free Trade Agreement (NAFTA), (ASEAN)–Australia–New Zealand Free Trade Agreement (AANZFTA)) on Australian economic growth, and decide on the net benefits using economic criteria, e.g. economic efficiency, economic growth, living standards or resource allocation
- Explain: and classify a country’s international transactions into current and capital account statements, the significance of foreign investment to Australian economic development, e.g. to finance mining booms
- Select data and economic information and: analyse the patterns of Australia’s balance of payments including the current account and balance of trade over the last 5 or 10 years, including the percentage change, investigate the causes and effects of Australian current and capital account trends, evaluate the significance of movements within the balance of payments on the domestic economy, from a variety of perspectives, e.g. import and export suppliers, and buyers, analyse and evaluate the significance of Australia’s foreign debt position and foreign invest men longitudinally
- Create responses that communicate economic meaning using data, information, graphs and diagrams to suit the intended purpose in paragraphs and extended responses
Unit 4: Contemporary macroeconomics
view_agenda query_statsTopic 1: Macroeconomic objectives and theory
view_agenda query_statsUnit 4: Contemporary macroeconomics > Topic 1: Macroeconomic objectives and theory
- Describe key concepts using economic terminology, including consumer price index; deflation; headline and underlying inflation; labour force underutilisation; leading, lagging and coincident indicators; marginal propensities to consume and save; the multiplier; nominal and real gross domestic product; non-accelerating inflation rate of unemployment; participation rate; price stability; stagflation; and unemployment rate
- Distinguish nominal and real gross domestic production, wages and interest rates
- Recall the circular flow of income model, the components of aggregate demand (represented by Consumption + Investment + Government + Net exports (Exports – Imports) or C + I + G + (X – M)) and the key factors affecting these components
- Explain: the factors affecting both the short- and long-run aggregate demand and supply, and apply the aggregate demand/aggregate supply model to determine the overall price level and equilibrium level of real output in an economy, the concept of the multiplier effect and calculate the value of the simple Keynesian multiplier, in terms of the marginal propensity to consume, the four phases of the economic cycle, in the context of macroeconomic objectives, policy tools that are used to influence the achievement of economic objectives, including the Reserve Bank of Australia, the federal budget and microeconomic policies
- Examine and categorise economic indicators of economic performance, including leading, lagging, and coincident descriptors, using current data from objective sources, e.g. the Australian Bureau of Statistics (ABS) and the Reserve Bank of Australia (RBA)
- Examine the accuracy, reliability and efficacy of common indicators used to measure macroeconomic objectives
- Select data and economic information and investigate key economic indicators in order to assess the position of the Australian economy on the economic cycle
- Describe the macroeconomic objectives of sustainable economic growth: full employment; price stability; external stability; sustainable development; and improved living standards
- Analyse the importance, causes and effects of the following to different groups and stakeholders, unemployment, including cyclical, structural, frictional, seasonal, natural, hard-core, hidden, long-term and voluntary, and underemployment, inflation, including demand-pull, cost-push and imported, and inflation expectations
- Analyse and evaluate the benefits and costs of economic growth
- Calculate the rate of real economic growth, rate of unemployment, labour force participation rate, and changes
- Analyse the relationship between the economic cycle and economic objectives, and explain inherent trade-offs, conflicting objectives, and intertemporal relationships, including the short- and long-run Phillips curve
- Evaluate the Australian Government’s economic management and achievement of its macroeconomic objectives in the last 10 years
- Create responses that communicate economic meaning using data, information, graphs and diagrams to suit the intended purpose in paragraph and extended responses
Topic 2: Economic management
view_agenda query_statsUnit 4: Contemporary macroeconomics > Topic 2: Economic management
- Determine a rationale for the government to develop and implement macroeconomic policies, including the stabilisation of the economic cycle and the attainment of the range of economic objectives
- Distinguish between demand management and supply side policies and their limitations including time lags, global influences and political constraints
Demand management policies — fiscal policy
view_agenda query_statsUnit 4: Contemporary macroeconomics > Topic 2: Economic management > Demand management policies — fiscal policy
- Summarise the sources of government income (direct and indirect taxation, revenue from government enterprises and sale of government assets) and the components of government expenditure (current, capital and transfer payments) in the federal budget
- Analyse the role of automatic stabilisers and the role of discretionary spending in influencing aggregate demand and stabilising the economic cycle, and apply using diagrams
- Investigate recent Australian federal budget outcomes to analyse the causes and effects of expansionary and contractionary fiscal policy stances
- Analyse and evaluate the effectiveness of fiscal policy responses in achieving the government’s economic objectives of sustainable economic growth, internal and external stability in order to improve living standards
Demand management policies — monetary policy
view_agenda query_statsUnit 4: Contemporary macroeconomics > Topic 2: Economic management > Demand management policies — monetary policy
- Explain the role of the Reserve Bank of Australia (RBA) and the objectives of monetary policy, as outlined in its charter
- Understand the concept of inflation targeting and the significance of cash rate changes on the level of economic activity, and include discussion of percentage change and basis point change
- Examine the transmission mechanism of monetary policy and its influence on the level of aggregate demand
- Analyse and evaluate the impact of different monetary policy stances on the levels of aggregate demand and the government’s economic objectives of sustainable economic growth, internal and external stability
- Analyse and evaluate the effectiveness of monetary policy responses in contributing to the government’s economic objectives
Microeconomic policies
view_agenda query_statsUnit 4: Contemporary macroeconomics > Topic 2: Economic management > Microeconomic policies
- Describe the nature, operation and aims of aggregate supply policies (microeconomic reforms), and explain their relationship to domestic macroeconomic objectives
- Recall and apply the production possibility curve and long-run aggregate supply curve to microeconomic policies
- Explain the historical significance of aggregate supply policies to Australia’s economic growth and development, e.g. prices and income accord, financial industry deregulation, and floating of the exchange rate
- Analyse at least one recent microeconomic policy aimed at improving Australia’s economic growth through efficiency or competitiveness, including at least one of the following initiatives: investment in infrastructure; investment in education and training; research and development; innovation, deregulation and competition policy; welfare and taxation reform; privatisation of government business enterprises; and labour market reform
- Analyse and evaluate the effectiveness of microeconomic policy responses in achieving the government’s economic objectives