HSC Economics - Sample Paper 4


Section I: Multiple Choice 1. Which of the following indicates contractionary fiscal policy?

A) Lower interest rates and a lower exchange rate B) Higher income tax rates and reduced government expenditure C) Higher income tax rates and increased government expenditure D) Lower income tax rates and reduced government expenditure

2. What impact would lower than expected levels of economic growth have on the budget outcome?

A) Decrease a budget surplus through cyclical factors B) Decrease a budget surplus through structural factors C) Decrease a budget deficit through structural factors D) Decrease a budget deficit through cyclical factors

3. Which of the following is an example of foreign direct investment?

A) Derivatives trading B) Securities trading C) A transnational company establishing a foreign subsidy D) Australian government securities sold overseas

4. Other things being equal, what increase in investment is required to produce a $400m increase in national income in an economy with an MPS of 0.2?

A) $80m B) $320m C) $400m D) $2000m

5. A local manufacturer of building products decides to install new and more effective anti-poll

ution technology in its factories following the introduction of a carbon tax

Which of the following outcomes would arise due to this action?

A) An increase in private costs and a reduction in negative externalities B) An increase in private costs and an increase in negative externalities C) An increase in social costs and an increase in negative externalities D) An increase in social costs and a reduction in negative externalities

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