Question 1
The graph shows a hypothetical economy's quarterly real GDP growth rate over eight quarters (invented figures). At the end of which quarter was the level of real GDP at its highest before the downturn?
HSC Economics calculations, step by step
The syllabus asks you to calculate an equilibrium from injections and leakages, the multiplier's effect, the unemployment and participation rates and the balance of payments components, and to read a Gini coefficient.
| Multiplier | k = 1 ÷ (1 − MPC) |
|---|---|
| Unemployment rate | Unemployed ÷ labour force × 100 |
| Participation rate | Labour force ÷ civilian population aged 15 and over × 100 |
| Equilibrium | Where injections equal leakages |
The measures to know
- The simple multiplier: k = 1 ÷ (1 − MPC). The change in national income is k times the change in an injection.
- Equilibrium national income: where injections (investment, government spending, exports) equal leakages (saving, taxation, imports).
- The unemployment rate: unemployed ÷ labour force × 100. The participation rate: labour force ÷ civilian population aged 15 and over × 100.
Show the working
Write the measure, substitute the figures, give the answer with its unit, then one sentence on what it means. A right number with no working can lose marks; a slip in the arithmetic with clear working can still earn some.
Try 2 questions
Question 2
In a hypothetical economy (invented figures), the civilian population aged 15 and over is 18.75 million, 11.4 million people are employed and 0.6 million are unemployed. What is the unemployment rate?
Next step
Questions people ask
Do I need units in my answer?
Yes: a rate is a percentage, a multiplier is a number and a change in national income is in dollars. Give the unit, and round only at the end.
What happens to the multiplier when people save more?
A higher marginal propensity to save means a lower marginal propensity to consume, so the multiplier is smaller and a change in spending moves national income less.