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Student Resources On this page: Unit 1: Markets and Models Unit 1 Topic 1 : The basic economic problem Unit 1 Topic 2 : Economic flows Unit 1 Topic 3 : Market forces Unit 2: Modified Markets Unit 2 Topic 1: Markets and efficiency Unit 2 Topic 2: Inequality Unit 3: International Economics Unit 3 Topic 1 : International trade Unit 3 Topic 2 : Global economic issues Unit 4: Contemporary Macroeconomics Unit 4 Topic 1: Macroeconomic objectives and theory Unit 4 Topic 2 : Economic Indicators and past budget stances Unit 4 Topic 3 : Economic management Unit 1: Markets and models In Unit 1, students understand how the fundamental economic concepts of scarcity, choice and opportunity cost compel individuals, businesses and governments to make decisions about how best to allocate resources among competing needs. The nature of the basic economic problem is examined, and the consequences of scarcity are expressed in the production possibility curve and through the choices made by modern economic systems. Students analyse the factors that impact on the economy through the circular flow of income model and investigate the price mechanism as a model for the efficient allocation of resources. Unit 1 Topic 1: The basic economic problem In Topic 1, students understand the foundations of the subject in terms of scarcity and choices . Students learn key terminology as they consider the different stakeholders involved in the economy, and the basic economic problem of satisfying needs and wants. The first economic model presented in the course is the production possibility curve , which enables students to identify and examine relationships between resources and production. This topic allows students to consider finite resources and how these require choices to be made at an individual and at a national level. Click here to access learning resources Unit 1 Topic 2: Economic Flows In Topic 2, students explore the economic idea of the economy as a system of real and monetary connections between the five key sectors, using the circular flow of income model . They analyse: the forces that affect flows to and from the household, business, financial, government and overseas sectors, the effect of government decisions on the economy, and the interrelationships between each sector. This topic enables students to see links and connections in the economic system that they experience every day. Click here to access learning resources Unit 1 Topic 3: Market Forces In Topic 3, students examine the forces of demand and supply that underlie the operation of the price mechanism in the economy. Important concepts of shortages , surpluses and elasticities are scrutinised. This topic is studied through the lens of the economic problem in a specific current Australian context and market, for example: agricultural (e.g. wool, wheat and beef); other commodities (e.g. minerals and energy); community; financial; share; labour; property/housing and health. This topic develops students’ comprehension of market forces , and how they can use these to their advantage when understanding and predicting prices. Click here to access learning resources Unit 2: Modified Markets Unit 2 Topic 1: Markets and efficiency In Topic 1, students understand that markets can fail when the price mechanism results in a sub-optimal allocation of resources. They examine market failure and explore traditional and innovative measures and strategies using economic criteria , for example socially optimal and/or efficient outcomes. This topic analyses how markets may not always work efficiently and effectively, and the different choices and opportunities that exist when this phenomenon occurs. Unit 2 Topic 2: Case options of market measures and strategies In Topic 2, students study a choice of two of the three case options listed below of market measures and strategies to apply the economic concepts and economic ideas developed in Topic 1. Students analyse different situations to explain the causes and effects of the market failure and the need for intervention. They evaluate strategies and/or interventions to achieve socially desirable and/or optimal outcomes. Case option A: Market Concentration Case option B: Environmental Economics Case option C: Inequality Unit 3: International Economics In Unit 3, students focus on the complex ideas and relationships underlying the international economy and the impact that these have on Australia’s domestic economy and decision-making. Students consider Australia’s engagement in international trade and the global economy, including the theories behind trade and exchange rates. They examine the balance of payments in depth, considering elements of the current and capital accounts. In Global economic issues, students explain the factors that contribute to and have an impact on globalisation. Trade barriers and trade agreements are investigated from a theoretical and contemporary viewpoint and form the basis of student-led research. Current economic events and economic measurements will be used to support and develop understanding in this unit. Longer term international trends may be considered in an analysis to see structural changes over time. However, the emphasis must be on a current situation and not on an event in the economic history of Australia. Students will understand measurements of economic data and how to calculate changes in percentages. Unit 3 Topic 1: International trade Click here to access learning resources In Topic 1, students understand the dynamic nature and extent of Australia’s international trade interconnections. They examine the reasons for international trade and Australia’s place in the global economy. Current statistics are analysed to reveal relationships, patterns and trends that cause and affect Australia’s economic growth. Economic models are used to analyse movements in exchange rates over time and evaluate the consequent impacts on the domestic economy. Trends in the balance of payments are analysed to evaluate the implications for the Australian economy. Unit 3 Topic 2: Global economic issues In Topic 2, students study three major factors affecting Australia’s trade relationships with the rest of the world. Firstly, the factors that have contributed to globalisation are explored from Australia’s viewpoint. Secondly, economic ideas and models are used to examine the impacts of different barriers to trade, and the economic tensions they create. Finally, the impacts of international trading agreements are considered. Click here to access learning resources Unit 4: Contemporary macroeconomics In Unit 4, students concentrate on the practical application of the Australian Government’s domestic macroeconomic objectives. They investigate the performance of the economy by focusing on the economic cycle and analysing a variety of economic indicators to evaluate economic performance and budget stances. Students examine aggregate demand and supply to model the level of output in the economy and its relationship to the government’s current macroeconomic objectives. Available policy instruments are analysed and evaluated to make decisions about the relevant policy mix with reference to the current economic climate. Current economic events and economic measurements will be used to support and develop understanding in this unit. Students will understand measurements of data, how different economic indicators are measured, and basis point or percentage point movements. Unit 4 Topic 1: Macroeconomic objectives and theory In Topic 1, students study the primary macroeconomic objectives of the Australian Government and economic theory. They connect this knowledge to a variety of economic concepts, principles and models. Unit 4 Topic 2: Economic indicators and past budget stances In Topic 2, students apply their knowledge of economic indicators and theory to analyse and evaluate past economic events and decisions made in the annual federal budget of the government of the day. Click here to access learning resources Unit 4 Topic 3: Economic Management In Topic 3, students examine policy choices made in Australia about economic activity. This topic has three sub-topics, each of which focuses on an aspect of policy decision-making based on demand management and supply-side economic ideas and perspectives. Click here to access learning resources Additional resources for Unit 4 QCAA Syllabus for Economics : pages 26 - 29 Get in Touch brettonomics@gmail.com

Welcome to Brettonomics High school economics made easy Student Resources This website contains easy to understand explanations and learning activities linked to the Queensland Certificate of Education (QCE) syllabus for Economics . If you are studying in another state or country, the topics covered are similar, so you should find these resources useful. Go to Student Resources to access help for each unit and the QCE External Exam. Teacher Resources The teacher resources and activities are 'classroom tested and student approved'. These resources are made available free of charge. Go to Teacher Resources for teaching activities. Any feedback is appreciated. Why study Economics? Economics is a challenging and rewarding senior high school subject that will hone your skills in analysis, decision-making, and justifying your arguments. Economics occurs in real-time, and helps us to understand the intended and unintended consequences of decisions made by ourselves, and the people, firms and governments around us. Early economists were essentially the moral philosophers of their time, and I hope that through your study of economics you begin to question the world around you, and think of how you can contribute to a better future. "I'll probably never study economics again, but at least I now understand what's happening on the news." (Will - past student, 2022) About Brett Explainer Videos: QCE Economics External Assessment 2024 Q11 2024 Economics EA: Short Response Q12 2024 Economics EA: Short Response Q13 2024 Economics EA: Short Response Q14 2024 Economics EA: Short Response Q15 2024 Economics EA: Extended Response Multiple Choice 2024 Economics EA CLICK HERE to see all the videos for QCE Economics External Assessments from past years Get in Touch Send me any questions or feedback! brettonomics@gmail.com First Name Last Name Email Message Send Thanks for your message. I'll be in touch soon.

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Unit 3 Topic 2: Global Economic Issues On this page: Free Trade Agreements: useful websites Economic effects of Free Trade Agreements Tariffs: explainer video Trade tariffs: interactive practice Assessment IA2: Help with data, research report structure, and report layout Syllabus / Subject matter for Unit 3 Topic 2 Global Economic Issues Free Trade Agreements: useful websites Australia's trade through time (interactive): https://www.dfat.gov.au/publications/minisite/tradethroughtimegovau/site/index.html About Free Trade Agreements: https://www.dfat.gov.au/trade/about-ftas/about-free-trade-agreements Australia's Free Trade Agreements: https://www.dfat.gov.au/trade/agreements/trade-agreements Source: Department of Foreign Affairs and Trade Economic effects of Free Trade Agreements When examining FTA's, it is important to distinguish between outcomes and economic effects. The outcomes listed on the DFAT website are the changes to trade barriers between nations as a result of the enacted FTA. Generally this is the removal of trade barriers such as tariffs, quotas etc. The bigger question to analyse is: what have been the economic effects as a result of nations enacting the FTA? So we can do some intertemporal analysis to determine the nature and size of trade before the FTA and after the introduction of the FTA. Let's workshop an analysis example of through examining the FTA between Australia and Indonesia: Australia entered an FTA with Indonesia in 2020. Prior to the FTA (2007 - 2019), total trade between the two nations grew at an annual average of about 5%. The dip around 2020 is likely a result of economic downturn of COVID pandemic, so let's start next analysis at 2021. After the implementation of the FTA, total trade between the two nations grew at an annual rate of 27% (2012 - 2024). It is important to recognise that correlation doesn't always equal causation, so it is important to deepen analysis by looking at different aspects of trade and relationships to determine the connections and economic effects. However, in this instance, the significant change in annual growth of trade can very likely be attributed to the improved market access (for both nations) introduced by the FTA. How could I deepen my analysis to evaluate the economic effects of the FTA? Step 1: Review the specific industry sectors where nations have sought to improve access to markets by the removal of trade barriers (eg. beef exports to Indonesia). Step 2: Develop your own analysis of the intertemporal changes within those industries (before and after FTA) to determine the relative effects of the FTA. Try to find examples where there is a positive effect, as well as examples where the FTA has had a limited (or negative) economic effect. Use your examination of the positive versus negative effects to create your 'on balance' evaluation. Source: Marginal Revolution University Assessment IA2: Research Report Useful data tools for your research. Here is a video explaining how to use the data visualisation tools at the International Monetary Fund website. This website has the most comprehensive range of economic data sets available. Go to https://www.imf.org/en/Data Research report structure Here is a video that provides a clear structure for a research report in economics. It can be difficult to know where to start, so the outline provided helps you to: Link your comprehension of economic theory to an economic issue in society. Understand how to analyse the issues from the perspectives of various stakeholders. Develop a logical and persuasive evaluation and balanced judgement. Internal Assessment (IA2) for this topic is a REPORT. Here is a video giving some guidance on report structure and layout, using MS Word. Remember: 4 of the 25 marks for this IA relates to "creating a response", so spend some time getting your report up to an excellent professional standard, and grab four easy marks. Subject matter Topic 2: Global economic issues In Topic 2, students study three major factors affecting Australia’s trade relationships with the rest of the world. Firstly, the factors that have contributed to globalisation are explored from Australia’s viewpoint. Secondly, economic ideas and models are used to examine the impacts of different barriers to trade, and the economic tensions they create. Finally, the impacts of international trading agreements are considered. Describe key concepts using economic terminology, including methods of trade protection, economic integration, economic union, globalisation and trade liberalisation. Explain, analyse and evaluate the factors that have contributed to the growth of multi-company and multinational supply chain integration, e.g. the location of natural factor endowments; digital and other innovation; infrastructure (including logistics); and government incentives factors that have contributed to globalisation and current international trade patterns, including technology; multi-national corporations; regional trading blocs; and deregulation of financial capital markets and of non-government institutions, e.g. the World Trade Organization, International Monetary Fund and World Bank Explain the methods of protection employed by nations, and construct supply and demand diagrams to demonstrate the effect of methods of trade protection, including tariffs and non-tariff barriers (e.g. subsidies, quotas and bureaucratic requirements). Analyse and evaluate the economic arguments for and against protectionism and trade liberalisation responses from different viewpoints using economic criteria (e.g. economic efficiency, economic growth, living standards or resource allocation) to make a decision about the past, present or future regarding the relative merits of trade policy alternatives. Explain bilateral, regional and multilateral trade agreements that involve Australia the contemporary role of ‘free trade’ agreements and their impact on Australia’s international trade, including trade creation and trade diversion. Analyse and evaluate the economic outcomes of international trading bloc agreements (e.g. Australia–New Zealand Closer Economic Relations Trade Agreement (CER), European Union (EU), North American Free Trade Agreement (NAFTA), ASEAN–Australia–New Zealand Free Trade Agreement (AANZFTA)) on Australian economic growth, and decide on the net benefits using economic criteria, e.g. economic efficiency, economic growth, living standards or resource allocation. Create responses that communicate economic meaning using data, information, graphs and diagrams in paragraphs and extended responses to suit the intended purpose. Reproduced from Queensland Curriculum and Assessment Authority, Economics 2025 v1.2 General senior syllabus October 2024, page 43

Unit 4 Topic 3: Economic Management On this page: Overview video: Macroeconomics and Government Intervention in Markets Fiscal policy: interactive practice Monetary policy: interactive practice Syllabus / Subject matter for Unit 4 Topic 3 Economic Management External Exam specifications Fiscal Policy: Interactive Practice Source: Marginal Revolution University Monetary Policy: Interactive Practice Source: Marginal Revolution University Subject matter Topic 3: Economic Management In Topic 3, students examine policy choices made in Australia about economic activity. This topic has three sub-topics, each of which focuses on an aspect of policy decision-making based on demand management and supply-side economic ideas and perspectives. Comprehend and explain a rationale for the government to develop and implement economic policies that consider efficiency, equity and trade-offs stabilise the economic cycle and attain a range of economic objectives including sustainable economic growth; economic prosperity and wellbeing; internal stability; external stability. Comprehend and explain demand management and supply side policies and their limitations including structural deficits, time lags, global influences and political constraints. Sub-topic A: Demand management policies — fiscal policy Comprehend and explain the sources of government revenue (direct and indirect taxation; progressive, proportional, and regressive taxation) and the components of government expenditure (current, capital and transfer payments; public utilities and merit goods) in the federal budget. Analyse and evaluate the impact and/or effectiveness of fiscal policy responses to achieve Australia’s economic objectives in the future. Sub-topic B: Demand management policies — monetary policy Comprehend and explain the role of the Reserve Bank of Australia (RBA) and the objectives of monetary policy as outlined in its charter. Comprehend, explain, analyse and evaluate the concept of inflation targeting and the significance of monetary policy on the level of economic activity, and include a discussion of percentage change and basis point change transmission mechanism and channels of monetary policy, and their influence on the level of aggregate demand impact on and/or effectiveness of monetary policy responses to achieve Australia’s economic objectives. Sub-topic C: Supply side and microeconomic policies Comprehend and describe the nature and aims of aggregate supply policies (including microeconomic reforms) and explain their relationship to domestic macroeconomic objectives. Comprehend and explain how a government policy focused on a supply side improvement can impact Australia’s economic growth through productivity, efficiency or competitiveness, using infrastructure; education and training; research and development; innovation, and deregulation. Analyse and evaluate the impact of and/or effectiveness of policy responses to achieve Australia’s economic objectives. Reproduced from Queensland Curriculum and Assessment Authority, Economics 2025 v1.2 General senior syllabus October 2024 External Assessment Exam Specifications External assessment: Examination — combination response (25%) External assessment is developed and marked by the QCAA. The external assessment in Economics is common to all schools and administered under the same conditions, at the same time, on the same day. Assessment objectives Comprehend economic concepts, principles and models of macroeconomic objectives, theory and economic management. Analyse an economic issue that involves macroeconomic objectives and economic management. Evaluate an economic outcome relevant to macroeconomic objectives and economic management. Specifications This examination: Consists of a number of different questions relating to Unit 4 Topic 1 and Unit 4 Topic 3 may ask students to - respond using multiple choice, sentences or paragraphs and an extended response - annotate, calculate or draw diagrams - use unseen stimulus materials. Mode: written Time allowed - Planning time: 15 minutes - Working time: 120 minutes Students may use a QCAA-approved non-programmable calculator. Reproduced from Queensland Curriculum and Assessment Authority, Economics 2025 v1.2 General senior syllabus October 2024

External Exam: Video Explainers Below are video explainers unpacking the external exam for economics for Queensland Certificate of Education. Please ensure that you access all the past exam resources for economics at the Queensland Curriculum and Assessment Authority (QCAA) website prior to watching these videos. Use the videos to learn the strategies and writing structures for multiple choice, short response, and extended response questions for the economics external exam in Queensland. On this page: Explainer videos for 2024 Economics External Assessment Multiple choice explainer videos Short response explainer videos Extended response explainer videos Exam specifications Explainer Videos: QCE Economics External Assessment 2024 Q11 2024 Economics EA: Short Response Q12 2024 Economics EA: Short Response Q13 2024 Economics EA: Short Response Q14 2024 Economics EA: Short Response Q15 2024 Economics EA: Extended Response Multiple Choice 2024 Economics EA Multiple Choice Explainers 2021 Exam 2022 Exam 2023 Exam Short Response Explainers Unpacking "Explain" short response questions Unpacking "Analyse" short response questions 2022 exam question 11 2022 exam question 12 2022 exam question 13 2023 exam question 11 2023 exam question 12 2023 exam question 13 2023 exam question 14 Extended Response Explainers Writing structure and strategies for extended response 2022 exam extended response question 14 2023 exam extended response question 15 External Assessment Exam Specifications External assessment: Examination — combination response (25%) External assessment is developed and marked by the QCAA. The external assessment in Economics is common to all schools and administered under the same conditions, at the same time, on the same day. Assessment objectives Comprehend economic concepts, principles and models of macroeconomic objectives, theory and economic management. Analyse an economic issue that involves macroeconomic objectives and economic management. Evaluate an economic outcome relevant to macroeconomic objectives and economic management. Specifications This examination: Consists of a number of different questions relating to Unit 4 Topic 1 and Unit 4 Topic 3 may ask students to - respond using multiple choice, sentences or paragraphs and an extended response - annotate, calculate or draw diagrams - use unseen stimulus materials. Mode: written Time allowed - Planning time: 15 minutes - Working time: 120 minutes Students may use a QCAA-approved non-programmable calculator. Reproduced from Queensland Curriculum and Assessment Authority, Economics 2025 v1.2 General senior syllabus October 2024

Unit 4 Topic 2: Economic Indicators and Past Budget Stances On this page: Strategies for success in IA3 Syllabus / Subject matter for Unit 4 Topic 2 Economic Indicators and Past Budget Stances Internal Assessment 3: exam specifications Subject matter Topic 2: Economic Indicators and Past Budget Stances In Topic 2, students apply their knowledge of economic indicators and theory to analyse and evaluate past economic events and decisions made in the annual federal budget of the government of the day. Explain and categorise economic indicators of past economic performance, including leading, lagging, and coincident indicators, using current data from objective sources, e.g. the Australian Bureau of Statistics and the Reserve Bank of Australia. Calculate the rate and changes of economic data, including real economic growth, inflation, the rate of unemployment, and the participation rate. Select data and information to analyse and evaluate past economic indicators, to assess the position of the Australian economy on the economic cycle at previous points in time the relationship between the economic cycle and economic objectives using past economic indicators and trade-offs, including conflicting objectives, intertemporal relationships, and the short- and long-run Phillips curve. Select data and information to analyse and evaluate the accuracy, reliability and efficacy of common indicators used to measure econ omic objectives in a past scenario recent Australian federal budget outcomes including cyclical and structural causes and effects of expansionary and contractionary fiscal policy stances within the last 3–10 years the Australian Government’s economic management and achievement of its macroeconomic objectives for a period within the last 3–10 years. Create responses that communicate economic meaning using data, information and diagrams to suit the intended purpose in paragraphs and extended responses that form an analytical essay format. Reproduced from Queensland Curriculum and Assessment Authority, Economics 2025 v1.2 General senior syllabus October 2024 Internal Assessment 3 Extended Response to Stimulus: Exam Specifications Assessment objectives Specifications The teacher provides an examination that: Comprehend features and economic concepts, principles and models of macroeconomic objectives, theories, economic indicators and budget stances. Analyse an economic issue that involves economic indicators and budget stances . Evaluate an economic outcome relevant to economic indicators and budget stances. Create a response that communicates economic meaning to suit the intended purpose in an analytical essay. relates to Unit 4 Topic 1 and Unit 4 Topic 2 is focused on a contemporary economic issue that is of national, state and/or regional significance to Australia requires an analytical essay in response to an unseen question with seen and unseen stimulus allows students to choose two economic criteria for their evaluation must elicit a variety of possible responses. Stimulus specifications The teacher provides seen and unseen stimulus that: enables a selection of current, accurate and relevant data and information from a variety of sources, e.g. government and other institutional websites, published reports, media articles and expert commentaries is a minimum of nine sources that include data and information in visual and written forms that fit on both sides of four A4-size pages or equivalent facilitates both the analysis and evaluation components of the task allows for unique responses. The teacher provides unseen stimulus that: fits on both sides of one A4 page or equivalent is succinct enough for students to engage with during planning time includes information that is critical to the item, so that students cannot write pre -prepared responses or predict the focus of the unseen question. Reproduced from Queensland Curriculum and Assessment Authority, Economics 2025 v1.2 General senior syllabus October 2024

Unit 1 Topic 1: The Basic Economic Problem On this page: Topic overview video What is economics? The division and specialisation of labour Why study economics? Factors of production Economic activity versus economic growth (and the factors of production) The Production Possibilities Curve (economic activity and economic growth) Production Possibilities Curve (interactive practice) Video Overview of Unit 1 Topic 1: linking the content to the syllabus PART 1: WHAT IS ECONOMICS? Syllabus: Describe the basic economic problem of relative scarcity and the need for decision-making by individuals, businesses and governments at local, state, national and international levels. Economics is the study of how humans make decisions in the face of scarcity. These can be individual decisions, family decisions, business decisions or societal decisions. If you look around carefully, you will see that scarcity is a fact of life. Scarcity  means that human wants for goods, services and resources exceed what is available. Resources, such as labour, tools, land, and raw materials are necessary to produce the goods and services we want but they exist in limited supply. Of course, the ultimate scarce resource is time - everyone, rich or poor, has just 24 hours in the day to try to acquire the goods they want. At any point in time, there is only a finite amount of resources available. Think about it this way: in November 2021, the labour force in Australia contained over 13,177,300 workers, according to the Australian Bureau of Statistics (ABS)[1]. Similarly, the total area of the Australia is 7,692,020 square kilometres[2]. These are large numbers for such crucial resources, however, they are limited. Because these resources are limited, so are the numbers of goods and services we produce with them. Let’s delve into the concept of scarcity a little deeper, because it is crucial to understanding economics. The Problem of Scarcity Think about all the things you consume: food, shelter, clothing, transportation, healthcare, and entertainment. How do you acquire those items? You do not produce them yourself. You buy them. How do you afford the things you buy? You work for pay. Or if you do not, someone else does on your behalf. Yet most of us never have enough to buy all the things we want. This is because of scarcity. So how do we solve it? Every society, at every level, must make choices about how to use its resources. Families must decide whether to spend their money on a new car or a fancy vacation. Towns must choose whether to put more of the budget into police and fire protection or into the school system. Nations must decide whether to devote more funds to national defence or to protecting the environment. In most cases, there just isn’t enough money in the budget to do everything. So why do we not each just produce all of the things we consume? The simple answer is most of us do not know how, but that is not the main reason. When you study economics, you will discover that the obvious choice is not always the right answer—or at least the complete answer. Studying economics teaches you to think in a different of way. Think back to pioneer days, when individuals knew how to do so much more than we do today, from building their homes, to growing their crops, to hunting for food, to repairing their equipment. Most of us do not know how to do all—or any—of those things. It is not because we could not learn. Rather, we do not have to. The reason why is something called the division and specialization of labour, a production innovation first put forth by Adam Smith,  in his book, The Wealth of Nations. PART 2: The Division of and Specialisation of Labour The formal study of economics began when Adam Smith (1723–1790) published his famous book  The Wealth of Nations in 1776. Many authors had written on economics in the centuries before Smith, but he was the first to address the subject in a comprehensive way. In the first chapter, Smith introduces the  division of labour, which means that the way a good or service is produced is divided into a number of tasks that are performed by different workers, instead of all the tasks being done by the same person. To illustrate the division of labour, Smith counted how many tasks went into making a pin: drawing out a piece of wire, cutting it to the right length, straightening it, putting a head on one end and a point on the other, and packaging pins for sale, to name just a few. Smith counted 18 distinct tasks that were often done by different people—all for a pin, believe it or not! Modern businesses divide tasks as well. Even a relatively simple business like a restaurant divides up the task of serving meals into a range of jobs like top chef, sous chefs, less-skilled kitchen help, servers to wait on the tables, a greeter at the door, janitors to clean up, and a business manager to handle paychecks and bills—not to mention the economic connections a restaurant has with suppliers of food, furniture, kitchen equipment, and the building where it is located. A complex business like a large manufacturing factory, or a hospital can have hundreds of job classifications. Why the Division of Labour Increases Production When the tasks involved with producing a good or service are divided and subdivided, workers and businesses can produce a greater quantity of output. In his observations of pin factories, Smith observed that one worker alone might make 20 pins in a day, but that a small business of 10 workers (some of whom would need to do two or three of the 18 tasks involved with pin-making), could make 48,000 pins in a day. How can a group of workers, each specializing in certain tasks, produce so much more than the same number of workers who try to produce the entire good or service by themselves? Smith offered three reasons. First, specialisation in a particular small job allows workers to focus on the parts of the production process where they have an advantage. People have different skills, talents, and interests, so they will be better at some jobs than at others. The particular advantages may be based on educational choices, which are in turn shaped by interests and talents. Only those with medical degrees qualify to become doctors, for instance. For some goods, specialization will be affected by geography and climate—it is easier to be a wheat farmer in rural Western Australia than in Cairns, but easier to run a tourist hotel in Cairns than in the Western Australian wheatbelt. Whatever the reason, if people specialise in the production of what they do best, they will be more productive than if they produce a combination of things, some of which they are good at and some of which they are not. Second, workers who specialise in certain tasks often learn to produce more quickly and with higher quality. This pattern holds true for many workers, including assembly line laborers who build cars, stylists who cut hair, and doctors who perform heart surgery. In fact, specialised workers often know their jobs well enough to suggest innovative ways to do their work faster and better. A similar pattern often operates within businesses. In many cases, a business that focuses on one or a few products (sometimes called its “core competency”) is more successful than firms that try to make a wide range of products. Third, specialisation allows businesses to take advantage of economies of scale, which means that for many goods, as the level of production increases, the average cost of producing each individual unit declines . For example, if a factory produces only 100 cars per year, each car will be quite expensive to make on average. However, if a factory produces 50,000 cars each year, then it can set up an assembly line with huge machines and workers performing specialized tasks, and the average cost of production per car will be lower. The ultimate result of workers who can focus on their preferences and talents, learn to do their specialised jobs better, and work in larger organisations is that society (as a whole) can produce and consume far more than if each person tried to produce all their own goods and services. The division and specialisation of labour has been a force against the problem of scarcity. Trade and Markets Specialisation only makes sense, though, if workers can use the pay, they receive for doing their jobs to purchase the other goods and services that they need. In short, specialisation requires trade. Instead of trying to acquire all the knowledge and skills involved in producing all of the goods and services that you wish to consume, the market allows you to learn a specialised set of skills and then use the pay you receive to buy the goods and services you need or want. This is how the economy has evolved in modern society. PART 3: Why Study Economics? Now that we have gotten an overview on what economics studies, let’s quickly discuss why you are right to study it. Economics is not primarily a collection of facts to be memorized, though there are plenty of important concepts to be learned. Economics is better thought of as a collection of questions to be answered or puzzles to be worked out. Most importantly, economics provides the tools to work out those puzzles. If you have yet to be bitten by the economics “bug,” there are other reasons why you should study economics. Virtually every major problem facing the world today, from global warming, to world poverty, to the conflicts in Syria, Afghanistan, and Somalia, has an economic dimension. If you are going to be part of solving those problems, you need to be able to understand them. Economics is crucial. It is hard to overstate the importance of economics to good citizenship. You need to be able to vote intelligently on budgets, regulations, and laws in general. When the Australian Government had to make tough economic and financial decisions during the “Covid lockdowns” in 2020, what were the issues involved? Did you know? A basic understanding of economics makes you a well-rounded thinker. When you read articles about economic issues, you will understand and be able to evaluate the writer’s argument. When you hear classmates, co-workers, or political candidates talking about economics, you will be able to distinguish between common sense and nonsense. You will find new ways of thinking about current events and about personal and business decisions, as well as current events and politics. The study of economics does not dictate the answers, but it can illuminate the different choices. Source: https://openstax.org/books/principles-economics-2e/pages/1-introduction Footnotes [1]https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/latest-release [2]https://info.australia.gov.au/about-australia/our-country/the-australian-continent Factors of Production Syllabus: Classify the factors of production (land, labour, capital and entrepreneurial ability) and link these to income (rent, wages, interest and profit) Let's start with a question.... WHAT are the four factors of production? Answer: Land, Labour, Capital, and Enterprise (or Entrepreneurship). Easy! You've learnt this in class and can explain each of the the factors. And you know that the four factors are all required (in different combinations) to make different goods and services. So let's go deeper .... Economic Activity versus Economic Growth (and the factors of production) I believe that being able to distinguish between economic activity and economic growth this is one of the most important concepts that you need to understand in your study of economics. Economic activity represents the cyclical changes in the economy (also referred to as the 'short-run'). Sometimes economies are expanding / expansionary phase (as households, firms and government buy more goods and services), and sometimes economies are contracting / contractionary phase (as we buy less stuff). At any point in time, the available factors of production are somewhat fixed. For example: available labour is determined by the quantity of labour available to work with appropriate skills, knowledge and experience; land resources are relatively scarce, and generally allocated to a certain production function (eg. agriculture or mining); capital such as machinery and factory size is relatively fixed at a point in time. So the short-run refers to the level of output an economy with the currently available factors of production. In other words, the amount of possible output with a fixed amount of factors of production. Factors of production may not always be utilised to their full capacity When the level of demand in the economy is high, we will see that the available factors of production will be close to fully engaged in the process of making goods and services. For example, labour will have jobs, and we see this when the unemployment rate is low. Factories will be working near to full capacity, and maybe doing overtime shifts. Economy is in an expansionary phase of the economic cycle. If firms can't produce enough G+S to meet demand, they will tend to increase prices of the available stock to maximise profit. We call this demand-push inflation (more on this later). BUT, When the level of demand is low, the available factors of production will not be used to their full extent. For example, some workers will lose their jobs, and the unemployment rate will rise. Factories will cut back on production output, and some machines will not produce to their production capacity. So we will see a contraction in the level of economic activity. The 'ups and downs' in the economy represents changes in the level economic activity, and we refer to these changes as expansionary and contractionary . Economic activity :: data examples 1/3 Economic growth is a sustained increase in the level of output, caused by structural growth in the economy (the long-run). Over time, economies experience an increase in the quantity and quality of the factors of production. For example: Population increases leads to an increase in the quantity of labour Improvements in education and training improves the quality of labour, and workers tend to be more efficient (or productive) in their work. Improvements in technology can increase the level of output given the available resources (factors of production). An increase in capital investment (firms purchasing goods and services - such as additional machinery - to increase the production of final goods and services). What is an example that you can think of?? Eg. how can we improve our land resources to increase agricultural output? Economic growth occurs when an economy: Increases output due to an increase in the available factors of production; and/or Improves productivity - An increase in output the available for a given quantity of the factors of production (factor inputs). Productivity improvements occur when higher quality factor inputs are used (eg. more efficient technology, smarter people etc). Experiences a sustained increase in demand for goods and services, influenced by factors such as population increase, greater levels of international trade etc. Given the relative scarcity of factors of production, economists end to argue that improving productivity is the critical step for economic growth - it means that we are using the current factors of production in a more efficient way. That means that we can leave some factors - resources such as minerals in the ground - so that future generations can access these factors for future production. So the long-run refers to the situation where there is a change (generally an increase or improvement) in at least one of the factors of production. Economies generally exhibit long-run - or structural - economic growth, even though we will experience 'up and downs' in the level of economic activity in the short-run. Source: Andrew Norton Source: Reserve Bank of Australia Source: International Monetary Fund 1/1 The Production Possibilities Curve (economic activity and economic growth) Syllabus: Identify assumptions and use the production possibility curve to explain, by illustrating in diagrammatic form, the concepts of scarcity, choice, opportunity cost, trade -offs, underutilisation of resources, efficiency, productivity, unemployment and economic growth. Analyse and evaluate the production possibility curve to show the effects of different economic events, e.g. improvements in health, education or productivity of labour, asymmetric technology advances, war and famine. The Production Possibilities Curve (PPC) is the first economic model that you will learn in QCE Economics. In this section, I will focus on how the PPC can be used to illustrate changes in economic activity (short-run / cyclical) and economic growth (long-run / structural) - see the section above to review these concepts. This will also be important for later in Unit 1 when you learn about models for economic (business) cycles - all economic models are connected! If you want to review your calculations of changes in production possibilities, then scroll down for an interactive from our friends at econgraphs.org Image 1: Production possibilities curve Economic activity and the PPC The production decisions of goods and services in an economy falls into two camps: to produce capital (or intermediate) goods and services OR to produce consumer (or final) goods and services. Each economy will make a choice of how to distribute available factors of production to suit the needs and wants of economic stakeholders who purchase goods and services: Consumer goods and services for households Capital goods and services for firms and government The PPC represents the maximum output possible with the current amounts of the factors of production. At a point in time, the factors of production are considered fixed in quantity and quality. In economics, we call this the short-run. This is a really important term - make sure that you remember it. Therefore, the maximum level of output in the short-run would be any point along the PPC. But remember: it is a possibility! When total (aggregate) demand from economic stakeholders (household, firms and governments) is high, economic activity is expansionary, and firms will respond by increasing production, until all factors of production are fully employed. This is represented by a level of output that is on the PPC itself (eg point A in image 1 above). But once at full employment / production on the PPC, firms will struggle to further increase output - they are constrained by the relative scarcity of the factors of production. When an economy experiences contractionary economic activity, production levels may decrease, but the PPC doesn't change. During an economic downturn (contractionary economic activity), firms will respond by reducing output. Firms generally want to produce only the amount of goods and services to meet demand. They don't want to have unsold stock sitting in warehouses. Nor do they want to employ staff when there isn't enough work available. So they will reduce output to meet demand, and this means that the available factors of production are not fully utilised in creating output. In image 2 , this change is demonstrated as a shift in output of consumer goods and services from a value of y to a value less than y, and same for capital goods and services (from x to <x). Total production has decreased from point A to point B. Image 2: Change in production output in a contractionary economy It is important to note that the theoretical production possibilities are unchanged. We still have the factors of production available to produce output anywhere on the PPC, but a decision has been made to decrease output to suit a change in the level of demand in the economy. Concluding points: Changes in economic output in the short-run (eg from point A to point B) are primarily influenced by changes in demand (purchasing of goods and services by households, firms and governments). The amount of combined purchases across the economy is called Aggregate Demand (more on this later). If Aggregate Demand falls, the economy is contracting . If Aggregate Demand is increasing, the economy is expanding . The fluctuations in the level of of Aggregate Demand is called cyclical economic activity. Economic growth occurs when there is an increase in the quantity or quality of the factors of production Let's start with an example. Since the 1300's, The Netherlands has increased its available land mass by nearly 20%, and most of it with pretty simple technology by today's standards! You can read more about how they did it here . From an economics perspective, the first step in the improvement in factors of production would have been the organisation of the major projects - individual landowners working together for the mutual benefits from the improvements. We can call this enterprise / entrepreneurship in our factors of production framework. Land reclamation in The Netherlands 1300 - today. The increase in land would yield an increase in output (supply) of goods and services. In this instance, likely an increase in agricultural production. The increasing output would also require an increase in labour , which in the short-term is best achieved through migration. Then once you hit an output ceiling, you can increase the quality or quantity of capital - use more machines instead of labour. In The Netherlands agricultural production continues to increase through the use of greenhouses and hydroponic production methods (capital). They are the second largest exporter of agricultural products in the world, which is pretty incredible for a relatively small country! The PPC will shift outwards when there is an increase in the quantity or quality of the factors of production An outward shift of the PPC represents structural, long-run economic growth We know from the examination of cyclical economic activity earlier that the short-run is where all factors of production are fixed in quality and quantity. The long-run is where at least one (but likely all) of the factors of production are variable in quantity or quantity. When an economy, increases the quantity or quality of factors of production, then all production possibilities increase , hence the outward shift of the PPC. Image 3 illustrates this: the original PPC (and production at point A) is the orange curve. As factors of production increase, the curve shifts outwards (blue curve). No production decisions are yet made - all we know is that we have more inputs, or that we use our inputs more efficiently to create more output. An economy could decide to produce in any combination on the blue curve, and overall output is higher. Image 3: Outward shift of PPC represents economic growth The decision to produce at point B would be determined by demand factors such as consumer preference. At production point B: Production of consumer goods and services has increased from y to y1 Production of capital goods and services has increased from x to x1 In the long-run, there is no opportunity cost connected to the decision to increase production of either category of goods. The increase in output is due to either an increase in factor inputs - this is what we call structural (or long-run) economic growth . Concluding points: The level of economic activity (short-run) is generally determined by level of Aggregate Demand in the economy. It will experience expansionary and contractionary phases. It is cyclical in nature. Economic growth (long-run) occurs when there is a sustained increase in level of output in an economy. It is structural in nature. We focus on the longer term trend, rather than short-term fluctuations. Economic growth occurs through: an improvement in quality of factor inputs - productivity improvements (more output for the same quantity of factor inputs) an increase in the quantity of factor inputs - eg. more population leads to more work undertaken, which leads to increased output A sustained increase in demand for goods and services, influenced by factors such as population increase, greater levels of international trade etc. An outwards shift of the PPC represents structural (long-run) economic growth. Thanks to econgraphs.org for creating this open source interactive of the Production Possibilities Curve

Teaching Resources QCAA Economics Unit 1: Markets and Models On this page: Unit 1 Topic 1: Economic problem. A game to introduce decision-making, opportunity cost and trade-offs. Unit 1 Topic 3: Market forces. Content library Unit 1 Topic 3: Market forces. A game to introduce price signals, equilibrium, consumer and producer surplus Unit 1 Topic 1: Economic Problem A game to introduce decision-making, opportunity cost and trade-offs This is an easy game to set up in class, and students can figure out the play process themselves. Step 1 : Access the resources Instruction sheet Picture cards Step 2: Play the game Set up your class in preferred student small groups, and give each group instructions and a picture card sheet - I keep laminated versions of each in my classroom. Groups have to decide who gets kidney dialysis and who doesn't. The second goal is to get exactly 30 hours of machine use - anything less is underutilisation of resource. The conversations in this game are very engaging, especially when they class figures out what happens to patients who don't receive dialysis! Step 3: Compare results and discuss There are some critical elements to cover in the discussion to engage student learning and support development of cognitions (analyse and evaluate): Economic concepts of scarcity, opportunity cost and trade-offs (analysis) Use of criteria to justify decision (evaluation) Examination of stakeholders (patient, hospital, family members etc) Economic concept of ceteris paribus - you can only make your decisions based upon the information on the cards. Some critical thinking discussion can cover questions such as "what else would we need to know about the patients to enable us to make more informed decisions?". Suggestion for extension: Ask groups to produce a Decision-Making Matrix or a PCQ chart to create a visual record of decisions made. Further notes: A very useful discussion point throughout all economics lessons is discussion of the scope and depth of information and data available to guide decision making - what do we know, and what do we need to find out AKA the 'known unknowns' and the 'unknown unknowns'. Developing a students' ability to discern what they still need to find out is very beneficial in developing their own research approach, as well as helping them to critically evaluate the scope and depth of any work that they produce. Unit 1 Topic 3: Market forces Content library As a project during some university study, I put together a document using web-based and open-source resources to create a fairly complete document for high school study of market forces. The embedded videos may not work in the document, but the links should all still work. Let me know if you find it useful. DOWNLOAD the document Unit 1 Topic 3: Market forces A game to introduce price equilibrium, and consumer and producer surplus I've used this game as an effective method to introduce trading markets, price equilibrium , and consumer and producer surplus with year 11 classes at the beginning of teaching Unit 1 Topic 3 Markets and Models. I have found that this game works best prior to any explicit content teaching. It helps students to intuit concepts themselves, and also gives a reference point to refer back to during subsequent lessons on the market theory. It works best when there are more than 14 students. and is great when you have a bigger class size. Feedback from students is generally great, and the subsequent learning is 'sticky'. I'd highly recommend that you allocate a lesson for this game, What you will need: A deck of playing cards (or two) Instructions for buyers (click here ) Instructions for sellers (click here ) Excel spreadsheet to track trades (click here ) A bell or similar to signal end of trading period. Please note: This game has been modified from the version published by Charles A. Holt to suit high school students. You can read his original article here . It'll probably help you to understand my instructions below. Also see Smith, Vernon L. “An Experimental Study of Competitive Market Behavior.” Journal of Political Economy, 70.2 (1962): 111-137 for the original literature on competitive market experiments. How to play: Step 1: Split the class into equal groups - one being the vendor group and one being the buyer group - and hand each person an instruction sheet. Give them a moment to read the instruction sheet. Note that my commodity is called a Wegnut but you can edit as you wish. Step 2: Explain that the classroom is now a trading floor, and the goal of each person is to make a trade. Emphasise the following: In a moment, teacher will be handing out a playing card with a number on it. THE NUMBER ON YOUR CARD IS SECRET !!! That number represents either the cost to produce the commodity (seller) or the cash available to buy commodity (buyer). You will only make one trade per round If you are a buyer, you want to buy for the lowest price BELOW the value of your card, meaning that you save money. The aim for buyers is to maximise savings (consumer surplus). If you are a seller, you want to trade for the highest price ABOVE the value of your card, meaning that you make profit. The aim for sellers is to maximise profit (producer surplus). Once the trade is agreed bring it to teacher to check and place onto trade board (the spreadsheet) Step 3: Hand out the trading cards as follows: Hand out the Black cards to buyers, starting with the "10" cards and then descending order - this maximises the cash that buyers have to negotiate trade. Hand out the Red cards to sellers, starting with the "2" cards and then ascending order - this minimises the cost of production for sellers - best opportunity for profit Step 4: Round 1 trade. Open the trading floor for trading - remind the class that value on their trading card is secret! Give students five minutes to negotiate a trade. When a trade price is agreed the pair can come to teacher to check trade is legitimate, and if so log it into round 1 on spreadsheet - project spreadsheet to class if possible. I usually call out the trade loudly to build some excitement and get other students motivated to trade. Importantly, it sends a price signal to the market. Continue to add trades to spreadsheet as they come in. The line graph that will display helps class to determine a price equilibrium Ring the bell at end of five minutes. You may find that quite a few students haven't executed a trade. Collect back all trading cards. Debrief: check for understanding of how the game functions , rules etc. Discuss role of price signals to inform market co-operation and trade. Step 5: Keep students in the same roles of buyer and seller and redistribute trading cards. Step 6: Round 2 trade. Now that the "practice round 1" has been debriefed, open trading for round 2. Keep timer to five minutes. Deending on the group I sometimes have let them just work through trades again, but if the class demonstrates clear understanding of game play then I will make this a round to execute as many trades as possible in the time available. Repeat process in step 4 above, and deepen understanding in debrief through discussion of: Price signal - how does the line graph help to discern a trade price to aim for in negotiations? Price equilibrium - does there appear appear to be a price where most trades seem to be occurring? Market efficiency - are all available units of the commodity being traded, or are some buyers and sellers still unable to trade? Consumer and producer surplus - if you saved some money in your trade what would you use it for in the future? If a producer sells above cost, how might the profit be allocated? Step 7: Round 3 trade . I have two choices here - I can either play another round where students stay on the same team, and we aim for 100% market efficiency - realising all available trades, or students swap sides and buyers become sellers, vice versa. I've also had some classes where students can also tally their surpluses across the rounds to establish who saved the most, and who created most profit. That then finishes the game. Aim for a final debrief, and use it to front-load the theory work in upcoming lessons. As a homework reflection task, ask students to write or record a summary of their role in the game, what happened, what they understand about price signals and price equilibrium etc.

Online Tutoring I am pleased to offer online tutoring in Economics to Australian senior secondary students, and specifically to Queensland students working towards their QCE. My approach to tutoring is to challenge you to help you reflect and develop your own learning and thinking strategies and structures to help you succeed in your assessments in secondary school, and in later higher education studies. My tutoring approach is especially useful for students in year 12 for both research reports and exams. I am a registered teacher with Queensland College of Teachers. I am not currently teaching in a Queensland school as I am living in The Netherlands from 2025 to 2028. What I offer: Individual support to develop content knowledge, and application of theory to analysis of economic issues. Guidance to develop your understanding of marking guides, and strategies to align your written work to the marking requirements. Frameworks to improve research skills and writing structures. Individualised p ractise tasks. Feedback and review of your work. Good chat. What I don't offer: Exemplars of work produced by former students. Editing of drafts for syntax and grammar. Explicit instruction on the "correct answer". But remember: economics is about figuring out possible solutions to complex problems, and I can help you develop your abilities to express your ideas in a clear and concise manner, supported by academic rigour. How we do these sessions: Zoom meeting. You are welcome to record the meeting for later review. Cloud servers for access to additional resources. How much does it cost? There is an old expression that 'economists know the price of everything and the value of nothing '. Get in touch via the form below. Let me know what you would specifically like to improve in your work and we can figure out a price. And I hope that you see the value in it! Let’s Work Together Get in touch so we can start working together. First Name Last Name Email Message Send Thanks for submitting!

Unit 1 Topic 2 Overview

Unit 3 Topic 1: International Trade On this page: Composition of Trade Direction of Trade Net Exports / Balance of Trade (BoGS) Terms of Trade Exchange Rate AUD to USD Foreign Investment Balance of Payments Syllabus / Subject matter for Unit 3 Topic 1 International Trade Australia Composition of Trade What is "composition of trade"? Composition of trade refers to the mix of goods and services that a nation exports and imports. How is it represented in data and graphs? The graphs generally reflect the data as the percentage (%) that a particular industry constitutes as a total of export or import trade. You will most often see time series graphs, which help us to interpret changes over time ("temporal change" if you want to use some fancy words). Sometimes you might see a pie graph which will give you the information for a point in time. It is important to remember that this shows the industry share of exports and imports. It doesn't show the total export volumes (which are likely rise across time aross out industries). Why is understanding the composition of trade important? Interpreting temporal change in composition of trade helps us to identify structural changes in the types of industries in global economies. We can spot emerging industries, as well as industries in decline. We can also identify changes in demand for different types of exports and imports, as well as changes in supply. So then we can identify the industries where a nation may have a comparative and / or competitive advantage. Analysis of Australia's export composition of trade You can easily identify some big changes in Australia's composition of exports: The growth of resources exports - now constituting over 60% of Australia's total exports. The decline in agricultural exports as a share of total exports. What other changes can you spot? eg. manufacturing? REMEMBER: the graph shows share of exports - not volume of exports, so whilst an industry may have a smaller share, it still may be exporting more goods and services at historically high levels! Explain the effects of changes to Australia's composition of trade The second marking criteria under Analysis is 'discerning explanation of economic relationships', so let's try and get 'discerning': What are the theoretical positive effects of the changes that you have identified in the data? What are the theoretical negative effects of the changes? And then what data could help you to expand your response and provide a deep discussion and justification of outcomes? Example: Australia has high share of total exports in resources. Most likely flowing to China as the major customer. Positive: Likely increase in productive capacity and output, utilising our abundance of 'land' factors of production, which creates employment and increases national income in high productivity industries. Negative: Heavy reliance on a particular export industry - what happens to our total export volume when demand for resource exports decreases? How does that affect GDP? (Hint: have a look at the decline in Australia's GDP around 2016 when the Chinese economy experienced contraction (or 2020 during the Covid pandemic). What other positives and negatives can you think of, and what additional economic information would you need to access to help to expand your response and provide deep discussion of outcomes? Source: Reserve Bank of Australia Analysis of Australia's import composition of trade The import composition of trade doesn't indicate the same level of significant changes as the export composition of trade. We can note that consumer goods are on the rise (as a share of total imports) as well as transport equipment. This makes sense. The decline in manufacturing in Australia means that we rely more heavily on imports of final goods (including motor vehicles) than we did back in the 1960's. Another interesting aspect in the graph (related to the decline in Australian manufacturing) is the decrease in Industrial supplies - the materials that are used in manufacturing processes. Source: Reserve Bank of Australia Now over to you: Use the method of analysis demonstrated above for export composition of trade and make the analysis for the import data. Identify trends, patterns, similarities and differences Make sure that you are clear on the big changes and compare and contrast to the small changes ('discerning') Quantify and calculate (eg % change, range, $ values, rate of change, volatility etc) Explain the positive and negative effects (both theoretical effects, and any effects reflected in data) Australia Net Exports / Balance of Trade (BoGS) How to analyse the data 1. Calculation and economic theory Before you begin analysing any data, make sure that your understanding of the relevant economic theory is solid. Net Export data is the same as Balance of Trade and Balance of Goods Sold / Services (as we refer to it in the the Balance of Payments). The formula is value of exports minus value of imports. In other words X-M. See the link here back to leakages and injections in the Circular flow model! Net exports is a component of the Aggregate Demand formula, where AD=C+I+G+(X-M). 2. Review the information in the graph Make sure you are clear on: title, explanatory notes, the units of measure. Check if price values are abbreviated on the y-axis. Link your formula to the data to build some understanding. 3. Interpret the data Where net export value is less than zero, Australia has imported more goods and services than it has exported. So there is a net loss of income out of Australia. Where net export value is greater than zero, Australia is exporting more goods and services than it is importing, So we see a net inflow of income into Australia. 4. Make meaning of the data Use your analysis 'toolkit' (eg. cause and effect, compare and contrast etc) to deepen your interpretation. My take is that historically (up until 2008/9) Australia has been a net importer of goods and services. Effect is that we are sending our income overseas, so leakages are greater than injections, and therefore, the Net Export position is having a contractionary effect on economic activity. Then in 2009 we see a significant change to a positive net export position around the time of the 'mining boom' (big increase in commodity exports to China. There were a few contributing factors: Higher value AUD (higher price for the same quantity of the export) - check the currency data above Higher commodity prices (high levels of demand led to higher per-unit prices) - check the terms of trade data above Increased volume of sales In 2022 we see the most significant change in Net Exports in the data set. So what caused the changes? Here are some likely reasons: Exports increased whilst Imports remained the same, or Exports stayed the same and Imports decreased, or Exports increased and Imports decreased. Also, how could we interpret the Terms of Trade data on relative prices to help us determine causes ? And what was the AUD value at the time? Now its up to you to find the real world information to determine the reasons for this significant change. 5. Consider the effects on stakeholders and implications for the economy In step four you considered the economic events that caused the changes. Your understanding of economic theory can help you to extrapolate effects on stakeholders (households, firms and government). You can also dive into further data find effects (eg. did export-oriented firms receive increased income during the positive Net Export periods). Give this method a try with other data and let me know if it works! Terms of Trade Australia OECD definition: Terms of trade reflect the relative price between a country’s exports and imports, and are measured as the ratio of the export price index to the import price index. Terms of trade indicate whether a country can purchase more or fewer imports for the same amount of exports. An increase in export prices relative to import prices signals an improvement in terms of trade. The indicator is presented as an index, with 2020 as the base year. Quick analysis: Australia's terms of trade have improved significantly over the last 25 years primarily due to a sustained boom in commodity export prices (iron ore, coal, LNG), driven by rapid industrialisation in China and emerging Asian economies. This was supported by increased export volumes, competitive depreciation of the Australian dollar at times, and falling import prices for technology. Key factors driving the improvement include: The Mining Boom (Structural change) Export Volume & Price Growth Declining Import Prices Diversification & Trade Agreements Service Export Growth Deepen your understanding: Click here for the Australia and the Global Economy – The Terms of Trade Boom Explainer from the Reserve Bank of Australia Exchange Rate: Australian dollar to US dollar Review your understanding with resources from the Reserve Bank of Australia (RBA): Click here for the Exchange Rates and their Measurement Explainer by the RBA (or click here for the video version) Click here for the Exchange Rates and the Australian Economy Explainer by the RBA (or click here for the video version) Click here for the Drivers of the Australian Dollar Exchange Rate Explainer by the RBA (or click here for the video version) Key Periods in AUD History (1999–2026) 1999–2001: The Trough (Low Point): Following the Asian financial crisis in the late 1990's, the AUD fell to a low of 47.75 US cents in April 2001. 2002–2011: The Mining Boom & Appreciation: The currency experienced a massive, sustained appreciation driven by increased demand for Australian commodity exports (iron ore, coal) from China. Consequently, increased demand for AUD to pay for these commodities leads to currency appreciation. 2010–2013: Parity with the USD: In October 2010, the AUD reached parity (1:1) with the USD for the first time since it became a floating currency (1983). It peaked above US$1.10 in July 2011. 2014–2020: Post-Boom Normalisation: Following the end of the mining investment boom and falling terms of trade, the AUD depreciated from its 2013 highs. It hit a low point during the initial COVID-19 pandemic market stress in March 2020. 2021–2026: Consolidation and Volatility: The AUD has generally hovered lower, influenced by interest rate differentials between the RBA and the US Fed. The Australian cash rate has been lower than US cash rate, thus influencing flow of financial investment to US. In turn, this increases demand for USD, and consequently reduces demand to AUD - so AUD value falls relative to USD. Also, China's economic performance is below historic demand, which reduces commodity exports . As of early 2026, the AUD is considered undervalued by some, acting as a buffer (automatic stabiliser) for the economy - eg. maintaining export volumes / output as export goods are relatively cheaper for overseas buyers. Primary Drivers of the AUD (Since 1999) Terms of Trade (Commodity Prices): The most significant driver. High commodity prices (mining boom) drive appreciation, while declining terms of trade (post-2013) drive depreciation. China Exposure: Because a large portion of Australian exports go to China, the AUD is highly sensitive to China's economic health and manufacturing sector. Interest Rate Differentials: The gap between RBA rates and other major central banks (especially the Fed) influences capital flows. Higher relative rates in Australia tend to support the AUD. Global Risk Sentiment: As a "risk-on" currency, the AUD often appreciates during times of global economic optimism and depreciates during crises (flight to quality). Structural Changes to the Australian economy Internationalisation: The AUD has become the 6th most traded currency globally, with the AUD/USD pair being the 4th most traded. Floating Exchange Rate: The RBA has maintained a free float, which has allowed the currency to act as a "shock absorber" for the economy, adjusting to commodity price shocks. Inflation & Purchasing Power: $100 in 1999 had the same purchasing power as approximately $209.94 in 2026, reflecting a 109.94% cumulative price increase over that period. Foreign Investment There are two main ways in which foreign residents or companies can invest funds in the Australian economy: Portfolio investment (PI) refers to the purchase of securities (such as stocks or bonds) or equity and debt transactions that do not offer the investor any control over the operation of the enterprise. Common examples include the purchase of property (equity), shares in Australian companies (equity) or government bonds (debt) by foreign superannuation or pension funds. Foreign direct investment (FDI) is when an individual or entity from outside Australia establishes a new business or acquires 10 per cent or more of an Australian enterprise, and so has some control over its operations. Common examples include the establishment of Australian branches of multinational companies or joint ventures between Australian and foreign companies. (from: https://www.dfat.gov.au/trade/investment/about-foreign-investment) Graph 1: Graph 2: How to analyse the data 1. Calculation and economic theory Before you begin analysing any data, make sure that your understanding of the relevant economic theory and key terminology is solid. Some ideas to review: What is the purpose of FDI into Australian economy? What do we call the financial returns to on FDI to international investors? (Hint: think back to your sources of income from factors of production in Unit 1) What are the two ways in which investors acquire a financial return on PI - Equity? What is the financial return on government bonds and other debt called? Net International Investment Position = Australian Investment abroad / outflows (assets) minus Foreign Investment in Australia / inflows (li abilities) 2. Review the information in the graph Make sure you are clear on: title, explanatory notes, the units of measure. Check if price values are abbreviated on the y-axis. Link your formula to the data to build some understanding. 3. Interpret the data Using graph 1 (above at left), we can determine the following investment outcomes in 2024: Australia is a net liability holder (negative value) in Direct Investment - higher investment inflows into Australia than Australia invests abroad (outflows). Australia is a net asset holder (positive value) In Portfolio Investment (Equity) - Australians invest into overseas share markets at a higher value than international investment into Australian share market. Outflows are greater than inflows. International markets have significantly higher investment in Australian debt markets than we have in international debt markets. Outflows are less than inflows. Graph 2 shows the trends over time of international investment position. We can see that international investment into Australia has always been higher than Australian investment abroad. Australia’s International Investment Position (IIP) was a liability of $653.2b at 31 December 2024, a decline of $165.5b from the end of 2023. Net Investment data from the World Bank can help us to deepen our analysis: The trend to negative net FDI values means that there are increasing levels of International FDI into Australia relative the level of Australian FDI investment abroad The trend to positive net PI values means there are increasing levels of Australian PI investment abroad, relative to the level of PI investment coming into Australia from overseas 4. Make meaning of the data Use your analysis 'toolkit' (eg. cause and effect, compare and contrast etc) to deepen your interpretation. From the data available above, my take is that generally Australia has experienced net inflows of FDI - more investment dollars from Australia being invested overseas than foreign stakeholders are investing in Australia. In contrast to the FDI liability position, the PI position displays a trend towards positive values, signifying greater net outflows of PI. So we get FDI into Australia to build our productive capacity so firms can increase output and deliver profit through direct ownership in firms (which has low liquidity / difficult transfer of ownership). And Australia invests overseas in equities such as shares (high liquidity / easy transfer of ownership) that will deliver either capital growth in value, or dividend returns, or both. 5. Consider the effects on stakeholders and implications for the economy In step four you considered the economic events that caused the changes. Your understanding of economic theory can help you to extrapolate effects on stakeholders (households, firms and government). eg. these investments will yield income return for investors - what will be the net flows of income from, say, a negative FDI position? eg. Australian portfolio investment abroad is very strong - where did this money come from and what are the longer-term effects? Some ideas to help you along the last two steps: Key Trends in Australia’s Net Investment Position Resources Boom (2002–2007): The mining boom spurred massive foreign capital investment into Australia to increase the productive output of the mining sector. Shift to Net Equity Assets (2013–Present): A major structural change occurred around 2013, where Australia shifted from being a net foreign equity liability position to a net foreign equity asset position. This means Australians now own more equity in foreign companies than other nations own in Australian companies. This change has been largely driven by the growth of the Australian superannuation sector, which totals AUD$4.3 trillion (as of October 2025). Key Drivers of Change Superannuation Growth: The mandatory superannuation system has increased national savings, reducing the need for foreign funding for domestic investment, as well as providing cash for investment in other overseas firms and government Valuation Effects: Strong performance of foreign equity holdings (eg. shares in foreign companies) by Australian funds has boosted outward investment values. Currency Value: a structural decline in value of AUD from 2012 onwards increases the value of overseas investments held by Australians. Australia's Balance of Payments Balance of Payments (BoP) account is a statistical record of the money value of all financial transactions between Australia and the rest of the world. BOP is important because : BOP summarises economic conditions in a nation BOP helps to evaluate a country’s solvency Summarises nature, size, composition and direction of a country’s international trade It clarifies the foreign exchange position of a country e.g. high Aust exports = high demand for AUD from other nations = increase in relative value of AUD It informs the trade, industrial and economic policies of the Government: If balance of payments is favourable, the Government will take liberal view of imports, otherwise different types of restrictions (tariff and non-tariff measures) will be imposed as corrective measures. Syllabus / Subject matter Topic 1: International trade In Topic 1, students understand the dynamic nature and extent of Australia’s international trade interconnections. They examine the reasons for international trade and Australia’s place in the global economy. Current statistics are analysed to reveal relationships, patterns and trends that cause and affect Australia’s economic growth. Economic models are used to analyse movements in exchange rates over time and evaluate the consequent impacts on the domestic economy. Trends in the balance of payments are analysed to evaluate the implications for the Australian economy. Comprehend and describe key concepts using economic terminology, including absolute advantage, comparative advantage, competitive advantage, currency devaluation, currency revaluation, economic integration, economic union, exchange rate appreciation and depreciation, external stability, internal stability, factor endowment, exchange rates (fixed, floating and managed), free trade, sustainable economic growth, trade liberalisation, balance of payments, balance of trade, capital and financial account, current account deficit, current account, foreign investment, foreign debt, and terms of trade. Comprehend the concept of an open economy to explain how it operates in terms of the circular flow of income model. Comprehend and explain the advantages and disadvantages of international trade, and how trade can impact economic policy, including sustainable economic growth, and external and internal stability. Analyse the composition and direction of Australia’s trade patterns (e.g. the five largest importers and exporters), compare them to emerging patterns and trends in international trade, and calculate the percentage change from one period to the next. Comprehend and explain the development and contemporary relevance of trade theories, including the economic theories of absolute (see Adam Smith), comparative (see David Ricardo) and competitive advantage (see Michael Porter), and apply these theories using relevant diagrams and models. Comprehend, explain and construct diagrams applying demand and supply factors in a floating exchange rate system. Comprehend and explain the factors underlying the demand and supply of the Australian currency and how a floating exchange rates insulates the Australian economy from external shocks. Select data and information to analyse and evaluate effects of changes in Australia’s terms of trade on the economy from a range of perspectives causes of exchange rate appreciation or depreciation movements government policy responses to exchange rate movements and changing trade relationships using criteria e.g. employment in trade-exposed industries, economic growth (nationally or in state or local regions), efficiency (allocative and dynamic costs), and importation of goods and services. Comprehend, explain and classify a country’s international transactions into current and capital account statements. Comprehend and explain the significance of foreign investment to Australian economic development, e.g. to finance mining booms. Select data and information to analyse and evaluate patterns of Australia’s balance of payments including the current account and balance of trade over the last 5 or 10 years, including the percentage change cyclical and structural causes and effects of Australian current and capital account trends the significance of movements within the balance of payments on the domestic economy, from a variety of perspectives, e.g. import and export suppliers, and buyers the significance of Australia’s foreign debt position and foreign investment longitudinally . Create responses that communicate economic meaning using data, information, graphs and diagrams to suit the intended purpose in paragraphs and extended responses.