HSC ECONOMICS EXAMINATION TECHNIQUE IN 2011 TIM RILEY Director Economic Literacy Centre and Tim Riley Publications Pty Ltd 2011 UBS HSC Economics Day Thursday June 9th 2011 Wesley Conference Centre 1
1. The Economics Syllabus and Course Outcomes The Economics Stage 6 Syllabus (1999) was amended in 2009 and implemented in the Preliminary course in 2010 and the HSC course in 2011. The first HSC examination based on the amended HSC course will be in 2011. The main areas of change in the Preliminary and HSC courses were making the syllabus more contemporary and current; inconsistencies were removed; and wording was adjusted to achieve greater clarity. The Higher School Certificate (HSC) Economics Examination in NSW is set by the HSC Economics Examination Committee on behalf of the Board of Studies. Students are encouraged to be familiar with the structure of the Economic Syllabus as the Economics Examination Committee examines the content and skills that students are assumed to have learnt in the syllabus in the HSC examination. Students should have the syllabus outline for each HSC topic and make a checklist of terms and concepts that could be examined in the HSC Economics Examination. The syllabus can be read and downloaded at the Board of Studies website at: www.boardofstudies.nsw.edu.au. The topics in the Preliminary and HSC courses are listed below. The Preliminary Course (120 hours of indicative time) six compulsory topics: 1. Introduction to Economics 10% of course time 12 indicative hours 2. Consumers and Business 10% of course time 12 indicative hours 3. Markets 20% of course time 24 indicative hours 4. Labour Markets 20% of course time 24 indicative hours 5. Financial Markets 20% of course time 24 indicative hours 6. Government and the Economy 20% of course time 24 indicative hours The HSC Course (120 hours of indicative time) four compulsory topics: 1. The Global Economy 25% of course time 30 indicative hours 2. Australia s Place in the 25% of course time 30 indicative hours Global Economy 3. Economic Issues 25% of course time 30 indicative hours 4. Economic Policies 25% of course time 30 indicative hours and Management Within each HSC topic there are designated objectives in three broad categories: Knowledge and understanding about the behaviour of individuals, firms, institutions and governments; the operation of markets; the operation and management of economies; and contemporary economic problems and issues facing individuals, firms and governments. Skills to investigate and engage in effective analysis, synthesis and evaluation of economic information from a variety of sources; and to communicate economic information, ideas and issues in appropriate forms. Values and attitudes about informed participation in economic debate and decision making; and responsible approaches towards people, societies and environments. 2
The HSC Course Outcomes are H1 to H12 in the syllabus: H1 H2 H3 H4 H5 H6 H7 H8 H9 H10 H11 H12 Demonstrates an understanding of economic terms, concepts and relationships; Analyses the economic role of individuals, firms, institutions and governments; Explains the role of markets within the global economy; Analyses the impact of global markets on the Australian and global economies; Discusses policy options for dealing with problems and issues in contemporary and hypothetical contexts; Analyses the impact of economic policies in theoretical and contemporary Australian contexts; Evaluates the consequences of contemporary economic problems and issues on individuals, firms and governments; Applies appropriate terminology, concepts and theories in contemporary and hypothetical economic contexts; Selects and organises information from a variety of sources for relevance and reliability; Communicates economic information, ideas and issues in appropriate forms; Applies mathematical concepts in economic contexts; and Works independently and in groups to achieve appropriate goals in set time lines. 2. The HSC Course Content: Knowledge and Skills Outcomes for each Topic In each of the four HSC course topics there are outcomes for the content students are expected to learn, and outcomes for the economic skills that students are expected to demonstrate. These knowledge and skills outcomes are listed below for each of the four topics in the HSC course. Topic 1: The Global Economy (i) Students should learn to examine the following economic issues: Examine the effects of globalisation on economic growth and the quality of life, levels of unemployment, rates of inflation and external stability; Assess the potential impact on the environment of continuing world economic development; Investigate the global distribution of income and wealth; Assess the consequences of an unequal distribution of global income and wealth; and Discuss the effects of protectionist policies on the global economy. (ii) Students should learn to apply the following economic skills: Analyse statistics on trade and financial flows to determine the nature and extent of global interdependence; Assess the impact on the global economy of international organisations and contemporary trading bloc agreements; and Evaluate the impact of development strategies used in a range of contemporary and hypothetical situations. 3
Topic 2: Australia s Place in the Global Economy (i) Students should learn to examine the following economic issues: Assess the impact of recent changes in the global economy on Australia s trade and financial flows; Examine the effects of changes in trade and financial flows on Australia s economic performance; Analyse the effects of changes in the value of the Australian dollar on the Australian economy; Discuss the impact of free trade and protection policies on the quality of life in Australia; and Propose likely changes to the structure of industry within Australia as a result of current trends in the global economy (ii) Students should learn to apply the following economic skills: Calculate the main components of Australia s balance of payments; Analyse the relationship between the balance of the capital and financial account and the net income balance; Explain the relationship between the current account balance and the balance of the capital and financial account; Use supply and demand diagrams to explain how the value of a currency is determined under different exchange rate systems; and Analyse the impact of changes in the components of the balance of payments on the value of the Australian dollar. Topic 3: Economic Issues (i) Students should learn to examine the following economic issues: Examine the arguments for and against increasing economic growth rates; Investigate the economic and social problems created by unemployment; Analyse the effects of inflation on an economy; Discuss the effect of a continued current account deficit on an economy; Investigate recent trends in the distribution of income in Australia and identify the impact of specific economic policies on this distribution; Analyse the economic and social costs of inequality in the distribution of income; and Examine the economic issues associated with the goal of ecologically sustainable development; (ii) Students should learn to apply the following economic skills: Identify and analyse problems facing contemporary and hypothetical economies; Calculate an equilibrium position for an economy using leakages and injections; Determine the impact of the simple multiplier effect on national income; Explain the implications of the multiplier for fluctuations in the level of economic activity; Calculate the unemployment rate and the participation rate using labourforce statistics; Interpret a Lorenz Curve and a Gini co-efficient for the distribution of income in an economy; Use economic concepts to analyse a contemporary environmental issue; and Assess the key problems and issues facing the Australian economy. 4
Topic 4: Economic Policies and Management (i) Students should learn to examine the following economic issues: Analyse the opportunity cost of government decisions in addressing specific economic problems or issues; Investigate structural changes in the Australian economy resulting from microeconomic policies; Apply economic theory to explain how a government could address an economic problem or issue in hypothetical situations; and Propose and evaluate alternative policies to address an economic problem in hypothetical and contemporary Australian contexts. (ii) Students should learn to apply the following economic skills: Explain how governments are restricted in their ability to simultaneously achieve economic objectives; Use (simple) multiplier analysis to explain how governments can solve economic problems; Analyse alternative ways to finance a budget deficit and their impact on the economy; Identify limitations of the effectiveness of economic policies; Explain the impact of key economic policies on an economy; Propose and evaluate alternative policies to address an economic problem in hypothetical and contemporary Australian contexts; Explain, using economic theory, the general effects of macroeconomic and microeconomic policies on an economy; and Select an appropriate policy mix to address a specific economic problem. 3. Key Competencies and Key Issues Key competencies are said to be embedded in the Economics Stage 6 syllabus to enhance student learning experiences. The six key competencies in the Economics syllabus are the following: (i) (ii) (iii) (iv) (v) (vi) Collecting, analysing and organising information; Communicating ideas and information; Using mathematical ideas and techniques; Working with others and in teams; Solving problems; and Using technology. A key feature of the Economics Syllabus is the Problems and Issues approach to the teaching and learning of economics, with the goal of relating the content of economics to the economic problems and issues experienced by individuals and society. The key economic issues include the following: Economic growth and the quality of life; Unemployment; Inflation; External stability; The distribution of income; and Environmental sustainability. 5
4. HSC Economics Examination Paper Specifications The HSC Economics Examination tests students knowledge, understanding and skills based on the individual outcomes for each topic in the HSC Course. The time allowed for the written examination is three hours plus five minutes of reading time. Board of Studies approved calculators may be used in the examination. The HSC Examination specifications and assessment requirements for economics are set out in the table below. Section 1 Marks 20 Objective response questions (multiple choice questions) 20 Section II 4 Short answer questions 40 (questions may be in parts and approximately 12 items in total) Section III Two stimulus based extended response questions 20 Students answer one question with an expected length of response of around six examination writing booklet pages (approximately 800 words) Section IV Two extended response questions 20 Students answer one question with an expected length of response of around six examination writing booklet pages (approximately 800 words) Students should use the reading time to select ONE essay from Section III (two stimulus based extended response questions, either question 25 or question 26) and ONE essay from Section IV (two extended response questions, either question 27 or question 28). Students are also advised to read the FOUR structured short answer questions in Section II as they are compulsory. Students are advised to complete the examination questions in the right order i.e. Section 1 first, then Sections II, III and IV. The structure of the HSC Economics Examination paper is as follows: Section I: Twenty Multiple Choice Questions (20 marks) Allow a maximum of 35 minutes but most students complete this section in 10 to 15 minutes. Questions 1 20 test multiple choice skills based on the four HSC topics and all questions are compulsory and of equal value. Some questions may be based on stimulus material (such as diagrams and tables of data) and all answers are to be recorded on the multiple choice answer sheet. Marks are NOT deducted for incorrect answers. It is important to score highly in Section 1 (i.e. 16+ out of 20) in order to have the opportunity to achieve a high examination mark overall. Based on past examination papers multiple choice questions in economics tend to test five major skills: 1. Definitions of basic concepts, e.g. globalisation, structural unemployment, fiscal policy, monetary policy, cost inflation, the MPC, the effect of a tariff, public good, enterprise bargaining and so on. 2. Economics calculations, e.g. the rates of economic growth, inflation and unemployment, real GDP, the terms of trade, marginal rates of taxation and the simple multiplier. 6
3. The interpretation of diagrams, statistics and economic models e.g. tariffs, quotas, subsidies, exchange rates, aggregate demand and supply, the Lorenz Curve and Gini co-efficient. 4. The application of economic analysis to current economic issues e.g. the impact of changes in the stance of monetary and fiscal policies on economic activity. 5. The use of logical reasoning skills e.g. the effects of changes in macroeconomic policy settings or the exchange rate on economic activity. Sample Questions from the 2010 HSC Economics Examination 1. Which statement best describes public goods? (A) (B) (C) (D) They are provided at zero marginal costs. Property rights tend to be easily defined. Their price incorporates social costs. They are non-rival and excludable. 2. The table shows selected data for a hypothetical economy. What is the value of the multiplier? (A) 0.2 (B) 0.5 (C) 1.0 (D) 2.0 Year C S I 1 100 50 400 2 200 150 400 3 300 250 400 3. The table shows Consumer Price Index (CPI) data by expenditure group for an economy. Expenditure Group Weighting factor CPI by expenditure in CPI (%) group (base year = 100) Food 30 110 Health 10 130 Housing 15 125 Clothing 20 120 According to the data, which CPI expenditure group contributes most to the inflation rate? (A) (B) (C) (D) Food Health Housing Clothing 7
4. The graph shows an economy in equilibrium at We Wage D 0 S 0 W 1 W e What will be the impact if the government set a minimum wage of W1? (A) (B) (C) (D) The demand for labour will increase. The labour force participation rate will fall. There will be an increase in unemployment. Firms will demand less labour at every wage rate. 5. Which scenario best demonstrates the benefits of a fixed exchange rate system? (A) (B) (C) (D) 0 S 0 Q e A country experiencing a recession fixes its currency to that of a country in which interest rates are low. A country experiencing a boom fixes its currency to that of a country experiencing a recession. A country experiencing a recession fixes its exchange rate above the equilibrium rate. A country experiencing a boom fixes its exchange rate below the equilibrium rate. 6. Which of the following is most likely to shift both the aggregate demand and aggregate supply curve to the right? D 0 Labour (A) (B) (C) (D) An increase in investment and a reduction in subsidies to producers An increase in the budget deficit and a decrease in the cost of labour An increase in the productivity of labour and an increase in interest rates An increase in the budget surplus and an increase in the cost of raw materials 7. Which of the following policies is most likely to result in a decrease in demand inflation and an increase in cost inflation? (A) (B) (C) (D) A decrease in non-discretionary government expenditure and loose monetary policy An increase in non-discretionary government expenditure and increased import tariffs An increase in discretionary government expenditure and a reduction in subsidies to producers. A decrease in discretionary government expenditure and a depreciation of the domestic currency 8
Section II: Four Short Answer Questions (40 marks) Allow a maximum of 72 minutes; but most students complete this section in 40 to 50 minutes. Questions 21 to 24 test short answer skills such as the interpretation and analysis of statistics relating to key concepts in the four compulsory topics in the HSC course. All questions are of equal value (i.e. four 10 mark questions) and are divided into parts, with marks allocated according to the degree of difficulty of the question. Most (but not all) of the short answer questions are based on stimulus material (e.g. an economic diagram, extract of text or data from a relevant source such as Budget Statements or the Reserve Bank of Australia Bulletin). The short answer questions may involve a calculation and the use of a student s knowledge of economics in applying, interpreting, analysing or explaining an economic concept, term, issue, model, policy or principle. Answers have to be recorded in the spaces provided in the examination paper. Students should provide adequate detail in relation to the allocation of marks, which tend to reflect the progression from low order to higher order thinking skills. Students should show all working if a calculation is involved. The economic concepts and issues examined in the 2010 HSC Examination were as follows: Q21 Q22 Q23 Q24 Calculation of the terms of trade; reasons for the recent increase in Australia s service exports; reasons for the recent increase in the value of Australia s imports from Asia; and the reasons for Australia being a net importer of capital. Distinction between a newly industrialised economy and a transition economy; the reasons for the world economy experiencing international convergence; and an explanation of the role of trade and investment in promoting globalisation in an economy other than Australia. Calculation of the unemployment rate; the causes of a change in the unemployment rate; an explanation of the effects of long term unemployment on the Australian economy; and explanation of how fiscal policy can be used to increase the labour force participation rate. Drawing on a diagram a new equilibrium exchange rate resulting from a reduced demand for foreign assets by Australian investors; explaining trends in Australia s exchange rate relative to the currencies of two hypothetical countries; and explaining the possible impacts of loose monetary policy on the value of the exchange rate and economic growth in Australia. Students are advised to practise the calculation of inflation and unemployment rates, and the rate of economic growth from hypothetical data; how to interpret economic trends from the business cycle; and how to apply their knowledge of economic policy to address specific economic problems or issues. Students should also revise the interpretation of economic models and diagrams. 9
Sample Question from the 2010 HSC Economics Examination Marks Question 24 (10 marks) (a) The graph shows the market for $A in terms of $US. 2 $US /$A D 0 S 0 E 0 0 S 0 Q 0 The market is initially in equilibrium at an exchange rate of E0 and a quantity of $A at Q0. On the diagram, draw the new equilibrium which results if there is a reduced demand for foreign assets by Australian investors. Label the new equilibrium exchange rate and quantity, E1 and Q1. (b) The table shows the value of Australia s currency against 3 Country A and Country B, under a floating exchange rate. Briefly explain the trends in Australia's exchange rate with Country A and Country B. D 0 10 Q of $A Year Country A Country B Currency units/$a Currency units/$a 1 0.90 0.70 2 0.80 0.75 3 0.70 0.80
(c) Explain the possible impacts of loose monetary policy on the value 5 of the exchange rate and on economic growth in Australia. 11
Section III: One Extended Response Question based on stimulus (maximum of 20 marks) Allow a minimum of 35 minutes; but most students complete this section in 50 to 60 minutes. Questions 25 and 26 test essay writing (extended response) skills where students are asked to apply and communicate their knowledge to a specific question based on stimulus material. Students must choose from either Question 25 or 26 and write their answer in a writing booklet. The questions in Section III can be in a one or two sentence format. This requires careful planning so that the essay is structured into parts in a logical sequence. The other important feature of questions in Section III is the use of operative words such as discuss, examine, analyse, evaluate, explain, assess and contrast. The Assessment Support Document contains a glossary of key words which students should be familiar with. Students should also be familiar with the rubric (i.e. instructions) used at the top of the page to present or introduce the questions in Section III: In your answer you will be assessed on how well you: Demonstrate knowledge and understanding relevant to the question Use the information provided Apply relevant economic terms, concepts, relationships and theory Present a sustained, logical and cohesive response Possible areas of examination in Section III (and Section IV) include content from the four HSC topics of The Global Economy, Australia s Place in the Global Economy, Economic Issues and Economic Policies and Management. Some of the main guidelines that students might follow in planning and writing an extended response answer to a question from Section III include the following: Learn to incorporate the rubric skills in your answer; Practise planning as many one and two sentence questions as possible; Refer to the plan as you write the answer to the extended response question; Refer to the stimulus material in your answer; Demonstrate an understanding of the integrated nature of questions such as the relationship between an economic problem or issue and possible government economic policy responses; Learn the list of operative terms published by the Board of Studies; and Practise the interpretation of stimulus material, especially quotations of text, economic statistics, graphs or diagrams. Section IV: One Extended Response Question not based on stimulus (maximum of 20 marks) Allow a minimum of 35 minutes; but most students complete this section in 50 to 60 minutes. Questions 27 and 28 are two extended response questions but are not based on stimulus material as in Section III. Students must answer one of the two questions in a separate writing booklet and the same rules for interpreting, planning and writing the essay answer apply as in Section III. Extended response questions in Section IV can come from any of the four topic areas of The Global Economy, Australia s Place 12
in the Global Economy, Economic Issues and Economic Policies and Management. Students should also be familiar with the rubric (i.e. instructions) used at the top of the page to present or introduce the questions in Section IV: In your answer you will be assessed on how well you: Demonstrate knowledge and understanding relevant to the question Apply relevant economic information, terms, concepts, relationships and theory Present a sustained, logical and cohesive response The operative words used in Section IV questions in the 2008, 2009 and 2010 HSC examinations were analyse and evaluate and all questions were in a one sentence format. Analyse means to identify components and draw out the relationship between these components such as Analyse the causes and effects of fluctuations in Australia s external stability (2010 HSC). Evaluate means to make a judgement about an issue or policy by referring to specific criteria such as Evaluate the effectiveness of monetary policy in achieving Australia s economic objectives (2008 HSC). Students should study the interrelationships between the four HSC topics (such as the use of monetary, fiscal, microeconomic and labour market policies to address issues such as economic growth, inflation and unemployment) in preparing to answer questions in Section III and Section IV of the HSC Economics examination. Glossary of Key Words or Operative Terms In economics all of these key words may be used but discuss, analyse, explain and evaluate are commonly used in extended response questions. Analyse: Assess: Calculate: Compare: Contrast: Define: Demonstrate: Describe: Discuss: Distinguish: Evaluate: Examine: Explain: Identify: Interpret: Outline: Propose: Recommend: State: Synthesise: Identify components and the relationship between them; draw out and relate implications Make a judgement of value, quality, outcomes, results or size Ascertain/determine from given facts Show how things are similar or different Show how things are different or opposite State the meaning and identify essential qualities Show by example Provide characteristics and features Identify issues and provide points for and/or against Recognise or note/indicate as being distinct or different from; to note differences between Make a judgement based on criteria; determine the value of Inquire into Relate cause and effect; make the relationships between things evident; provide why and/or how Recognise and name Draw meaning from Sketch in general terms; indicate the main features of Put forward (for example, a point of view, idea, argument or suggestion) for consideration or action Provide reasons in favour of Write down the term or word for Putting together various elements to make a whole 13
Sample Question 25 from the 2010 HSC Economics Examination Question 25 (20 marks) Discuss the economic concerns that the Australian government takes into account when formulating policies to manage the environment. In your response, you should refer to the economic information provided. In 2007, the Australian government proposed an emissions trading scheme to reduce the pollution externalities arising from human activity. The government believed other forms of intervention would impose a far heavier burden on economic activity. As a result of market failure in the provision of water the Federal Government has instituted a 10 year, $12.9 billion strategy that aims to secure a sustainable water supply for current and future generations. Introduction: define key terms and concepts and identify the issues raised by the question. Body: present sustained arguments using examples to identify issues and points for and against the policies used (or could be used) by the Australian government to manage the environment. 14
Conclusion: use of concluding statements that reveal the findings of your essay or extended response. 15
5. HSC Economics Marking The short answers and extended responses are marked according to criteria developed by the exam committee for the HSC markers. Whilst these criteria are well defined there is some tolerance shown in accepting a variety of student answers, although these are in well defined limits. Students should be aiming to achieve Band 5 or Band 6 answers in the extended response section of the paper which is worth 40% of total marks. Extended responses in economics are marked out of 20 according to a criteria based marking system known as Marking Guidelines. Marking criteria are developed to describe student performance in each of the six bands of performance, starting from the lowest bands (Bands 1 and 2) and proceeding to the highest bands (Bands 5 and 6). The descriptors of student achievement in Band 6 are as follows: Band 6 - Criteria 17-20 Marks Integrates economic terms, concepts, relationships and theory in a variety of economic contexts Displays superior analysis of the role of economic participants and markets in a variety of economic contexts Uses extensive economic vocabulary and illustrative examples in exposition of problems and policies in a variety of contexts Demonstrates critical judgement and sound reasoning to select, organise, synthesise and evaluate relevant information from a variety of sources Presents excellent explanation and evaluation of the impact of government economic policies in contemporary and hypothetical economic contexts Presents comprehensive application of appropriate mathematical concepts in a variety of economic contexts Produces comprehensive economic arguments to evaluate the consequences of economic problems and issues on economic participants Student Resources Aside from using textbooks, study guides, teachers notes, newsletter and newspaper articles and research materials from the Internet, students are encouraged to also use resources developed by the Board of Studies and found on its website at www.boardofstudies.nsw.edu.au: Assessment and Reporting in Economics The Economics Stage 6 Syllabus and Amendments Copies of past HSC Economics Examination papers Notes from the Marking Centre and Marking Guidelines HSC Economics Examination Rubrics NSW HSC Online for information on each topic in the HSC Economics course Performance Band Descriptions Practising past questions is the best way of preparing yourself for the Trial HSC and HSC examinations, in addition to making summaries of key knowledge and skills outcomes for each of the four topics in economics. 16