Economics Multiple Choice (1 Viewer)

[amberbambi]

Hi guys!

Could someone please explain the reasoning behind the following qns? (past HSC)

6. (2007)
What is a possible reason for the unemployment rate remaining high, despite increased
levels of economic activity?
(A) Increased levels of aggregate supply
(B) Decreased levels of labour productivity
(C) Increased rates of hidden unemployment
(D) Increased labour force participation rates

12. (2008)
How could the Australian government finance a budget deficit while maintaining external
stability?
(A) By increasing domestic income tax rates
(B) By selling bonds to international investors
(C) By reducing the level of government expenditure
(D) By borrowing funds from the domestic private sector

Thank you

 

[Ekman]

6. D
During times of high economic activity, non-employed individuals, tend to start seeking for jobs due to the prosperous economic conditions. Hence as more non-employed people start seeking for jobs, they are classified as unemployed and seeking for jobs, causing an increase in the labour force (as it contains employed + unemployed but seeking for jobs). Thus the increase in labour force causes an increase in the labour force participation rate, as well as the unemployment rate. Or you could of gotten D through the process of elimination, by eliminating A,B,C as they contradict the questions statement about the economy having high levels of growth.

12. D
The only way the Budget can finance its deficits is through obtaining money via borrowing. So we can instantly cross out A and C. Since the question said that it wanted to maintain external stability, B would be incorrect as selling government securities overseas tends to cause volatile economic conditions for the country though investor speculation and whatnot (take Japan or the USA's debt crisis as an example). Hence through process of elimination D is the answer.