Economic Practice Test: Questions on Population, Employment, and Change

VCE Economics Unit 2 practice test – Population, employment & change

Section A: Multiple-choice questions

Circle the answer that is correct or that best answers the question. No marks will be given if more than one answer is circled.

Question 1

Which of the following aggregate demand factors is more likely to reduce cyclical unemployment? A. falling levels of consumer confidence B. rising levels of government expenditure C. rising levels of finance costs D. falling levels of business confidence

Question 2

All of the following are forms of natural unemployment, except: A. structural. B. frictional. C. seasonal. D. cyclical.

Question 3

Unemployment that is caused by industry growing and shrinking is called: A. hidden unemployment. B. frictional unemployment. C. structural unemployment. D. discouraged unemployment.

Question 4

Which of the following statements is incorrect in relation to the calculation of the unemployment rate? A. part-time employees who work at least 1 hour a week are classified as employed B. employees who are on strike are classified as employed C. unemployed persons who are actively seeking work are classified as unemployed D. unemployed persons who are not actively seeking work are classified as unemployed

Question 5

Weaker labour market conditions will most likely be characterised by a: A. decline in job vacancies. B. decline in unemployment figures. C. rise in participation rate. D. rise in levels of full-time employment.

Question 6

The participation rate is considered an aggregate supply-side factor because: A. it increases the productive capacity of an economy with a rise in the quantity of resources available. B. it increases the productive capacity of an economy with a rise in the quality of resources available. C. it increases the productive capacity of an economy with an improvement in labour productivity. D. it creates more spending, adding to the level of household consumption.

Question 7

Which of the following aggregate demand-side factors would contribute to cyclical unemployment rising? A. an increase in disposable income B. a decrease in the exchange rate C. an increase in interest rates D. a decrease in householders’ propensity to save

Question 8

Which of the following will not occur if the unemployment rate in Australia falls? A. a greater incidence of depression and feelings of personal failure B. increased disparity in the distribution of income across Australia C. a rise in family breakdown and the divorce rate D. an increased level of social harmony and reduced crime

Question 9

Which of the following is unlikely to increase the supply of labour and size of the labour force? A. a rise in net migration B. a stronger ‘work ethic’ by those aged 15 years and over C. a rise in the birth rate D. a rise in the number of discouraged workers

Question 10

Country X employment data 2013
|Labour force |10 million |
|Population |20 million |
|Employed persons |9 million |
|Unemployed persons |1 million |

With reference to the data in the table, calculate the unemployment rate for country X in 2013. A. 15 per cent B. 11 per cent C. 10 per cent D. 5 per cent

Section B: Short-answer questions

Question 1 (2 marks)

Define the term ‘labour force’.
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Question 2 (7 marks)

a. Refer to the graph below. Describe the trend in the participation rate from 2010 to 2013. [pic]

Reserve Bank of Australia, Chart Pack, ‘Factors of Production and Labour Market’, 8 May 2013, http://www.rba.gov.au/chart-pack/factors-prod-labour-mkt.html
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b. Outline how a fall in the participation rate will impact on aggregate supply and the productive capacity of the economy.

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Question 3 (4 marks)

In order to avoid retrenchment during the global financial crisis (GFC), many employees agreed to part-time work arrangements; thus Treasury’s initial prediction of 7 per cent unemployment was much lower and peaked at 5.8 per cent in late 2008. In contrast, because of very weak labour market conditions in 2013, many people have left the labour force after being unemployed for an extended period of time.

Explain the difference between hidden unemployment and disguised unemployment.
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Question 4 (4 marks)

In calculating the monthly unemployment figures, the ABS survey of 0.45 per cent of the population includes any person working at least 1 hour a week week as employed.

Discuss why the Australian Bureau of Statistics’ (ABS) measure of unemployment is not an accurate reflection of labour market conditions in Australia.
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Question 5 (4 marks)

Explain the difference between cyclical unemployment and natural unemployment.
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Question 6 (4 marks)

In May 2012, the cash rate (RBA official interest rate) was 3.75 per cent. Since then the cash rate has been cut to 2.75 per cent (May 2013). Effectively, all interest rates offered by banks have been cut by around 1 per cent from May 2012 to May 2013.

Explain how the change to interest rates will impact on cyclical unemployment.
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Section C: Extended response (8 marks)

The federal budget 2013–2014 is set to deliver a $19.4 billion deficit. The government will invest $24 billion in building/rebuilding roads and rail networks across Australia over the next four years.

Analyse how the budget stance or the investment in roads and rail will impact on unemployment in Australia over the next four years.
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LEGEND
LHS: % of unemployed
RHS: % participation rate