2020 EA Sample

What is the fundamental role of fiscal policy?

• controlling the budget deficit

• establishing automatic stabilisers

• reducing government regulations

• making revenue and expenditure decisions

Of the following microeconomic reforms, which is most likely to reduce unemployment?

• increasing the minimum wage

• increasing unemployment benefits

• increasing tariffs on imported goods

• increasing protection against unfair dismissal

Which of the following Australian Federal Government policy decisions would increase inflationary pressures (ceteris paribus)?

• raising personal income taxes

• setting a surplus federal budget

• appreciating the Australian dollar

• increasing government expenditure

Which of the following is an example of a time lag when policymakers decide on a fiscal course of action?

• the time between the removal of government subsidies and the onset of higher unemployment

• the time taken for the government to reduce the company tax to encourage business investment

• the time between the government authorising additional health expenditure and the building of a hospital

• the time taken for the government to decide how best to reduce the economic impact of a natural disaster

Identify the most likely effect of a government decision to finance a budget deficit by borrowing from domestic sources (ceteris paribus).

• The exchange rate of the Australian dollar will depreciate.

• Australian interest payments on foreign debt will fall.

• Money supply in Australia will increase.

• Interest rates in Australia will rise.

Identify the sign of external instability in the Statement on Monetary Policy, ceteris paribus.

• increases and decreases in the exchange rate

• lifting disposable income and consequent spending

• China’s higher demand for exports and commodity prices

• effects of the cash rate reduction on households and local businesses