VCE Economics 2024

A walkthrough of the 2024 VCE Economics examination, sat on 31 October 2024. It gives every Section A answer with a reason, maps every Section B question with the average mark from the VCAA report, works six practice questions based on the real paper (including the inflation calculation), and lists the specific errors the examiners reported. Section B was built around net overseas migration, long-term unemployment, the RBA's balancing of inflation and employment, the current account and the 2024-25 federal budget.

How to use this page

• Questions are from the 2024 VCE Economics examination, copyright Victorian Curriculum and Assessment Authority (VCAA), listed on the VCAA Economics examinations page. Each question is summarised here, not reproduced; open the official examination PDF for the stimulus material (the migration extract, the long-term unemployment graph, the RBA quote and the current account table).
• Answers and guidance are our own responses, written to the marking guidance in the 2024 VCE Economics external assessment report (Word document), not copied from VCAA's sample answers. Multiple-choice answers match the report's key, and percentages in brackets are the share of students who chose the correct option.
• Study design. This paper was set on the current VCE Economics study design (2023 to 2027), so all of it is relevant. The one exception is Section A Question 1, which VCAA invalidated because it did not align with the study design. Questions that say "over the past two years" or "current" expected contemporary Australian data as at late 2024; if you use this paper later, swap in data for your own two-year window.

Structure and timing

The paper was 80 marks in 2 hours of writing time, plus 15 minutes reading time, with a scientific calculator allowed.

• Section A: 15 multiple-choice questions, 15 marks. All compulsory, four options each.
• Section B: 6 written-response questions, 65 marks. Question 1 (3 marks), Question 2 (11), Question 3 (8), Question 4 (15), Question 5 (10) and Question 6 (18).

That is 1.5 minutes per mark. A sensible plan: about 20 minutes for Section A, about 95 minutes for Section B (roughly 1.5 minutes per mark, so about 22 minutes for Question 4 and 27 for Question 6), and 5 minutes to check. Use reading time to mark the task word and the time frame in every part: the report singled out answers that misread Questions 2b, 4d and 6a.

Section A: Multiple choice

Q1

Sunlight and rainfall that help a wheat farmer's crop grow: what kind of good or benefit are they? Invalidated - VCAA removed this question because it does not align with the study design, so no answer is given.

Q2

A PPF for coffee and tea that bows out from the origin. As coffee output rises in equal steps, what happens to the opportunity cost in tea? Answer: A - it increases: each equal step in coffee costs a larger amount of tea because resources are not equally suited to both goods. (65%; 28% chose B.)

Q3

Which event would shift the demand curve for a good to the right? Answer: B - lower direct taxation raises disposable income, a non-price factor that increases demand at every price. A fall in the good's own price (A) is only a movement along the curve, and a cheaper substitute (C) shifts demand left. (55%; 27% chose A.)

Q4

Which is most likely to increase aggregate demand? Answer: B - higher consumer confidence lifts consumption spending. (96%)

Q5

Milk stays at 2 dollars a litre from 2020 to 2024 while coffee rises from 4 to 6 dollars a cup. What happened to the relative price of milk? Answer: D - it decreased: milk now costs a third of a coffee instead of half. (56%; 30% chose B, "unchanged", looking only at milk's own price.)

Q6

Which pair are both features of an expansion in the business cycle? Answer: B - rising wages and rising business profits. (90%)

Q7

Quarterly CPI data from June 2021 to June 2023. What was inflation for the year ended June 2023? Answer: A - compare June 2023 with June 2022: $\frac{133.7 - 126.1}{126.1} \times 100 \approx 6.03\%$. (64%; 16% chose C.)

Q8

Demand is relatively inelastic and supply decreases. What happens? Answer: B - price rises and quantity demanded falls by a relatively smaller amount. (80%)

Q9

A government sets a maximum price for rice below the equilibrium price. Effect? Answer: D - at the lower price, the quantity sellers supply falls from Q1 to Q2, so less rice is available (and a shortage from Q2 to Q3 opens up). (66%; 19% chose C, confusing quantity demanded with rice actually available.)

Q10

Which is unlikely to increase cost inflation in the short term? Answer: C - higher transfer payments add to spending (a demand-side effect), not to firms' costs. Oil, electricity and road tolls are all production costs. (74%; 19% chose D.)

Q11

Given employed (14 257 000) and unemployed (595 000) persons, plus distracting youth and participation data, find the unemployment rate. Answer: A - $\frac{595\,000}{14\,257\,000 + 595\,000} \times 100 \approx 4.0\%$. (69%)

Q12

What are aggregate supply policies designed to do? Answer: B - improve supply-side conditions so the domestic macroeconomic goals and higher living standards are easier to achieve. (90%)

Q13

Which will not slow labour productivity growth? Answer: B - lower barriers to entry for international investors, which tends to add capital and competition. The other options all reduce investment, entrepreneurship or skills. (85%)

Q14

Import price index 125 then 150; export price index 100 then 75. Terms of trade index in Year 2, and the trend? Answer: D - $\frac{75}{150} \times 100 = 50$ in Year 2, down from $\frac{100}{125} \times 100 = 80$ in Year 1, so it decreased. (77%)

Q15

Australia's international competitiveness will most likely improve if what happens? Answer: C - higher labour productivity lowers unit costs, so Australian goods can be priced more competitively. (86%)

What this paper assessed

Averages are from the VCAA report's mark-distribution tables.

Section B, Question 1 (3 marks)

• 1 (3 marks, outline): the link between relative scarcity and opportunity cost. Average 2.1 of 3.

Question 2 (11 marks): net overseas migration. Stimulus: an extract giving net overseas migration of 400 000 in 2022-23 and 315 000 in 2023-24, about 70% of permanent places going to skilled migrants, and a pre-pandemic level of about 235 000 a year.

• 2a (4 marks, explain with a fully labelled demand and supply diagram): the likely impact of 2023-24 net migration on the Australian labour market. Average 2.8 of 4.
• 2b (3 marks, analyse): how demand and supply forces affect equilibrium price and quantity in the housing market as a result of net migration. Average 1.9 of 3.
• 2c (4 marks, explain): how the focus on skilled migrants affects productive capacity, strong and sustainable economic growth, and non-material living standards. Average 2.8 of 4.

Question 3 (8 marks): unemployment. Stimulus: an ABS graph of the number of long-term unemployed ('000) from January 2021 to November 2023.

• 3a (2 marks, describe): the trend in long-term unemployment from January 2022, using the graph. Average 1.8 of 2.
• 3b (3 marks, distinguish): hidden unemployment and long-term unemployment. Average 1.3 of 3.
• 3c (3 marks, explain): one consequence of not achieving full employment and its effect on material living standards. Average 2.0 of 3.

Question 4 (15 marks): inflation and full employment. Stimulus: a June 2023 quote from Michele Bullock (then RBA Deputy Governor) saying that prioritising the inflation goal does not mean employment has taken a back seat.

• 4a (2 marks, describe): what economists mean by the NAIRU. Average 1.3 of 2.
• 4b (2 marks, explain): how one aggregate supply factor affected low and stable inflation in the past two years. Average 1.3 of 2.
• 4c (5 marks, explain): with one transmission mechanism, how the current monetary policy stance is designed to influence aggregate demand and low and stable inflation. Average 2.9 of 5.
• 4d (6 marks, evaluate): with reference to the quote, the extent to which Australia achieved low and stable inflation and full employment in the past two years. Average 3.4 of 6.

Question 5 (10 marks): the external sector. Stimulus: the balance on current account moved from 7782 million dollars (June quarter 2023) to minus 158 million (September quarter 2023), seasonally adjusted.

• 5a (2 marks, explain): how one structural influence might have contributed to that change. Average 0.7 of 2, joint lowest on the paper with 5b.
• 5b (2 marks, outline): how foreign investors buying a large Australian cotton farm affect two components of the balance of payments. Average 0.7 of 2.
• 5c (2 marks, explain): how one of three factors affects the value of the Australian dollar (a credit rating downgrade, higher US interest rates, or lower relative inflation in Australia). Average 1.4 of 2.
• 5d (4 marks, discuss): the effectiveness of trade liberalisation in achieving strong and sustainable economic growth. Average 2.3 of 4.

Question 6 (18 marks): budgetary and aggregate supply policy.

• 6a (3 marks, identify and describe): the stance of the 2024-25 federal budget and one reason for it given current conditions. Average 1.8 of 3.
• 6b (4 marks, explain): the effect of one automatic and one discretionary stabiliser on the budget outcome over the past two years. Average 2.2 of 4.
• 6c (2 marks, explain): one way to finance a deficit or one way to use a surplus. Average 1.3 of 2.
• 6d (4 marks, explain): one strength of monetary policy and one of budgetary policy in affecting aggregate demand and strong and sustainable growth over the past two years. Average 2.0 of 4.
• 6e (5 marks, explain with a recent example): how one budgetary AS policy (training and education, research and development, subsidies, infrastructure or tax reform) affects aggregate supply, international competitiveness and full employment. Average 3.3 of 5.

Worked practice questions (exam-style)

Common errors students made

These come from the 2024 VCAA examination report.

• Section A Question 3: many students chose a fall in the good's own price, which is a movement along the demand curve, not a shift.
• Section A Question 5: many said the relative price of milk was unchanged, missing that relative price compares milk with coffee.
• Question 1: treating opportunity cost as the price of the next-best alternative rather than the benefit forgone, and distinguishing the two concepts instead of linking them.
• Question 2a: shifting labour supply to the left (net migration was lower than the year before but still positive), writing "quantity supplied" when the market change is in quantity traded, and spending time on an equilibrium adjustment analysis the question did not ask for.
• Question 2b: continuing the labour market analysis instead of switching to housing, and naming a shortage without explaining how it pushes prices up.
• Question 2c: asserting that more productive capacity automatically raises GDP, and claiming that lower production costs raise productivity.
• Question 3a: describing every rise and fall, using data from before January 2022, or ignoring that the graph was in thousands.
• Question 3c: confusing disposable income with purchasing power, and explaining one consequence but linking a different one to living standards.
• Question 4a: giving a bare definition of the NAIRU in a 2-mark "describe" question.
• Question 4b: using generic AS factors without a recent example, and treating interest rates or business confidence as AS factors (both work through aggregate demand).
• Question 4c: explaining a different transmission mechanism from the one named, or treating consumer confidence as a mechanism.
• Question 4d: one-sided or missing evaluation of each goal.
• Question 5a: citing cyclical factors (exchange rates, commodity prices) as structural, and confusing the current account with the budget.
• Question 5b: not showing how foreign investment is recorded in the balance of payments.
• Question 5c: arguing that lower relative inflation in Australia depreciates the dollar; it makes exports more competitive, raising demand for the dollar.
• Question 5d: not discussing both short-term costs and long-term benefits of trade liberalisation.
• Question 6a: writing about the 2023-24 budget instead of 2024-25.
• Question 6b: explaining how stabilisers smooth the business cycle instead of how they changed the budget outcome, and mentioning commodity prices without linking them to company tax revenue.
• Question 6c: answering both the deficit and the surplus parts, giving answers too thin for 2 marks, and claiming a deficit can be financed by raising taxes.
• Question 6d: generic strengths not tied to the past two years, explaining how the policy works rather than the strength, calling a short implementation lag a strength of budgetary policy (only automatic stabilisers act quickly), and mixing up the short implementation lag of monetary policy with its flexibility.
• Question 6e: not linking the policy to a specific AS factor, focusing too much on AD, and reusing skilled migration from Question 2.
• General: writing in arrows and symbols instead of full sentences, and asserting links (such as "more AD means more inflation") without explaining why.

How to use this paper

Do Section A in about 20 minutes, then write Section B in one sitting of about 95 minutes, before reading this page. Mark each part against the "to achieve full marks" points in the VCAA report, and pay special attention to Questions 5a and 5b, which the report singled out for revision. Because Questions 4b, 4c, 4d, 6a, 6b and 6d all needed contemporary data, build a one-page data sheet for your own two-year window (cash rate, headline and underlying inflation, unemployment against the NAIRU, real GDP growth, the latest two budget outcomes) and rewrite 4d and 6d with it. Finally, take any sentence where you wrote "X leads to Y" and extend it to explain why, as the report's examples show.