Australia experienced a drought in 2018 which caused its agricultural output to fall. Australia's secondary and tertiary sectors performed better in 2018 than its primary sector. All three sectors were affected by the measures taken by the central bank to avoid deflation. Some firms benefited from these measures and increased their output.

Mark scheme

Marking points from the official mark scheme (May/June 2021). The mark or mark type is shown in brackets.

1. [1] Mining
2. [1] fishing
3. [1] forestry
4. [1] oil extraction
5. [1] Shortage of food / famine (1) may have to import more food (1) export less food (1) worsen the current account position (1).
6. [1] Price of food may rise (1) may increase poverty / might worsen health (1).
7. [1] Less food production (1) unemployment may increase (1) if lack of labour mobility / structural unemployment (1).
8. [1] May result in migration from rural to urban areas (1) putting pressure on resources in urban areas (1).
9. [1] Economic growth / GDP will fall (1) if lower agricultural output is not offset by rise in output of secondary and tertiary sectors (1).
10. [1] Deflation is a fall in the price level (1).
11. [1] The central bank could lower the rate of interest (1) reduce return from saving (1) encourage borrowing (1) encourage a rise in consumer expenditure (1) encouraging firms to raise their prices (1).
12. [1] It could increase the money supply (1) increasing bank lending (1) increasing investment (1).
13. [1] Expansionary monetary policy (1) increases total (aggregate) demand (1) causing prices to rise (1).
14. [1] may increase market share
15. [1] may increase market power
16. [1] may increase profits / keep shareholders happy
17. [1] may enable the firm to take greater advantage of economies of scale
18. [1] may increase pay and job security of managers / directors
19. [1] may make it more difficult for another firm to take it over as will involve a greater cost
20. [1] if demand is falling, survival may be a more appropriate main objective
21. [1] if demand is limited e.g. a niche market, growth may be an unlikely objective
22. [1] profit maximisation as an objective, if successful, will provide the funds for growth in the longer run
23. [1] state-owned enterprise may have social welfare as an objective
24. [1] growth may result in diseconomies of scale
25. [1] growth may put pressure on workers which could lower productivity / result in higher labour turnover
26. [1] may make it more attractive for a firm to take it over