Question

1.) Managing economic challenges and coming up with policy solutions is a tricky task. When striving to optimise overall wellbeing, every policy decision involves some sort of trade-off. An essential element of good policy-making is to consider these trade-offs, by weighing up the costs and benefits, across the short-term and long-term, and identifying the winners and losers of a policy change. What have you learnt in this course about trade-offs? Referring to any of the topics that we have covered in this course, give an example of a trade-off that policymakers need to consider. In your discussion, you should aim to make reference to the economic concept of ‘opportunity cost’. (2-5 sentences)

2.) To help inform your thinking about policy recommendations, what have you learnt in this course about the role of confidence in explaining and influencing what happens in the economy? In providing your answer, consider how the Australian Government announced in its Federal Budget that it planned to give income tax cuts to households, as a way to stimulate more spending and boost economic activity. In what way does this tax cut policy depend on people’s overall level of confidence, and what is your own assessment of the likely effectiveness of this policy given the current pandemic environment? (2-5 sentences)

Answer 1

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1) Say, for instance, a new airport needs to be built in a locality. However, this will create a lot of noise pollution which will be an issue for the locals. However, a new airport would mean improved real estate prices and connectivity which would bring a lot of economies of scale and thus the opportunity cost of halting the construction is huge. The problem can be reduced by compensating local residents by providing double glazing fitted to reduce the noise pollution.

This is one way in which public policy is formulated after looking into the possible trade-offs.

2) The tax cut is part of Australia's Fiscal policy and can be highly effective. In the current scenario puchasing power of individuals may dwindle due to soaring unemployment and stunted growth. In such a time, it is essential to sustain the demand for goods by allowing the citizens to have more disposable income which is possible through tax-cuts. Increased demand will ensure that the supply side also continues without many issues.