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QLDEconomicsQuick questions

Unit 2: Modified markets

Quick questions on Aggregate demand and aggregate supply influences (QCE Economics Unit 2)

15short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.

What is the AD/AS framework?
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Aggregate demand (AD) is the total demand for goods and services at each price level:
What is factors that influence aggregate demand?
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1. Consumer confidence. Higher confidence raises C. Measured by the Westpac-Melbourne Institute Consumer Sentiment Index.
What is factors that influence aggregate supply?
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1. Productivity. Output per unit of input. Multifactor productivity has averaged 0.5 percent per year over the last decade in Australia, well below the 1.5 percent of the 1990s.
What is cause-and-effect chains?
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QCAA marking guides reward explicit chains. Examples:
What is application?
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A textbook case of multiple shocks acting together.
What is effects on the three macroeconomic indicators?
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Real GDP. A rightward shift in AD raises real GDP in the short run; a rightward shift in LRAS raises real GDP in the long run.
What is why the AD/AS framework matters?
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The AD/AS framework is the central tool for QCE Economics macroeconomic analysis. It:
What is 1. Consumer confidence?
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Higher confidence raises C. Measured by the Westpac-Melbourne Institute Consumer Sentiment Index.
What is 2. Business confidence?
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Higher confidence raises I. Measured by the NAB Business Confidence Index.
What is 3. Interest rates?
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The cash rate flows through to retail rates. Higher rates reduce C and I and dampen AD. The 2022-24 RBA tightening cycle is the textbook current example.
What is 4. Disposable income?
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After-tax household income. Affected by wages, taxes (the 2024 Stage 3 cuts raised disposable income), and transfer payments.
What is 5. The exchange rate?
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AUD depreciation raises export competitiveness and makes imports more expensive (supports AD). AUD appreciation does the opposite.
What is 6. Government economic activity?
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Federal, state and local spending. The 2020-21 COVID-19 stimulus was the largest fiscal expansion in peacetime history.
What is 7. Overseas economic conditions?
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Demand from trading partners. Australia's exports are sensitive to Chinese GDP (32 percent of exports), Japanese, Korean and ASEAN demand.
What is 8. Population growth?
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Net overseas migration of around 500,000 in 2023-24 supported AD through housing and retail demand.

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