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Unit 4: Contemporary macroeconomics

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

Topic 1: The macroeconomic objectives

Explain the major macroeconomic objectives (strong and sustainable economic growth, full employment, low and stable inflation, equity, environmental sustainability), how each is measured, and the trade-offs between them

Macroeconomic objectives. Defines growth, full employment, low inflation, equity and environmental sustainability, identifies measures and current Australian performance, and explains the short-run Phillips curve trade-off and long-run consistency.

7 min read →

Explain the objective of strong and sustainable economic growth, the difference between actual and potential growth, the main sources of economic growth, and analyse the benefits and costs of growth

Economic growth. Defines actual and potential growth, distinguishes demand-side from supply-side sources, links growth to aggregate demand and long-run aggregate supply, and analyses the benefits and costs of growth including the meaning of sustainable growth.

7 min read →

Topic 2: Macroeconomic policy

Explain the role of fiscal policy and monetary policy in achieving the macroeconomic objectives, including the structure of the Commonwealth Budget, the cash rate as the RBA instrument, and the transmission mechanism

Macro policy. Defines fiscal policy and the Budget structure, distinguishes automatic stabilisers from discretionary changes, explains the RBA cash rate and the four transmission channels, and analyses the 2022-24 policy mix.

9 min read →

Topic 3: Aggregate supply policies and productivity

Explain the role of aggregate supply policies in achieving the macroeconomic objectives, including training and education, infrastructure, innovation and R&D, immigration, competition and deregulation, and tax reform

Aggregate supply policies. Identifies the six categories (training, infrastructure, R&D, migration, competition, tax reform), explains how each shifts LRAS right, and reviews current Australian policy including Future Made in Australia and the 2023 Productivity Commission inquiry.

8 min read →

Topic 4: Income distribution and equity

Explain the distribution of income and wealth in Australia, the role of the tax and transfer system in redistribution, and analyse the impact of income distribution on aggregate demand, social cohesion and intergenerational equity

Inequality. Distinguishes income from wealth, draws the Lorenz curve and defines the Gini coefficient, describes the Australian tax-transfer system, and analyses recent trends including intergenerational and housing-driven wealth inequality.

8 min read →