§-Unit

Unit 2: Modified markets

4 dot points, in syllabus order. Each dot point has a focused answer, with exam-style questions and worked answers where available.

Topic 1: Market failure and government intervention

Explain the forms of market failure (public goods, externalities, asymmetric information, market power) and analyse the rationale for and forms of government intervention to correct market failure

Market failure. Identifies the four types (public goods, externalities, asymmetric information, market power), draws the negative externality diagram, and analyses five intervention tools (taxes, subsidies, regulation, public provision, direct provision) with current Australian examples.

8 min read →

Topic 2: Macroeconomic indicators and government policy

Explain the expenditure multiplier process, including the marginal propensities to consume and save, the leakages that determine the size of the multiplier, and the effect of a change in injections on national income

Expenditure multiplier. Defines the marginal propensities to consume and save, derives the multiplier from the leakages (saving, taxation, imports), works through a numerical example, and explains why a change in injections changes national income by a larger amount.

8 min read →

Explain the measurement of macroeconomic activity including real GDP, the Consumer Price Index and the unemployment rate, and the limitations of each measure

Macroeconomic indicators. Defines real GDP, the CPI and the unemployment rate, identifies the ABS data sources, explains the limitations of each measure, and applies them to current Australian conditions.

7 min read →

Explain the factors that influence aggregate demand and aggregate supply in the Australian economy, and how each affects real GDP, employment and inflation

Determinants of AD and AS. Identifies the eight main AD factors and the six main AS factors, traces cause-and-effect chains to real GDP, employment and inflation, and applies the framework to recent Australian conditions.

7 min read →