Economics Marathon - 2010 (3 Viewers)

[1titanic]

The Central Bank in Australia can influence the value of the $AUD in a few ways. They can put in a fixed exchange rate system, a flexible pegged system (which it did) or just adjust the $AUD manually by either buying or selling $AUD. It can also use interest rates to improve foreign investment in Australia, although it rarely does because it can affect the domestic economy too greatly.

What consists under the balance of payments? (The major/general components)

P.S: Yes, you were right.

EDIT: Late response ftl.

wow this forum is so good, it does help me to understand more about economics
Anyways the current account and the capital and financial account

 

[Lolsmith]

Ask a question....

 

[0bs3n3]

Current account (non-reversible):

- Net Bogs
- Net Income
- Net Current Transfers

Capital and Financial (reversible):

Cap.
- Migration
- Foreign aid in the form of capital transfers
- Intellectual property

Fin.
- Portfolio investment
- Direct investment
- Other investment
- Reserve assets (or is it investments?)
- Sometimes derivatives are included.

Also Net Errors and Ommissions.

Define globalisation.

 

[b00m]

The increase economic integration between countries, leading to the emergence of a global economy; where this is characterised by increased trade flows, financial flows, increased investment and movements of capital, and the internationalisation of the labour market.

What is the effect of a more favourable terms of trade, in relation to an economy's imports?

 

[0bs3n3]

The increase economic integration between countries, leading to the emergence of a global economy; where this is characterised by increased trade flows, financial flows, increased investment and movements of capital, and the internationalisation of the labour market.

What is the effect of a more favourable terms of trade, in relation to an economy's imports?

Same volume of exports can buy more imports. Also reduced inflation.

Describe the relationsip between the Capital and Financial Account.

 

[showy]

A 'more favourable' terms of trade would include an increase in price of exports relative to imports. A decreased reliance on imports would promote a decreasing CAD, an appreciation in the $A, and international competitiveness.

Distinguish between direct and portfolio investment.

 

[b00m]

sorry, was meant to put ".. effect on the volume of imports" nvm.

A 'more favourable' terms of trade would include an increase in price of exports relative to imports. A decreased reliance on imports would promote a decreasing CAD, an appreciation in the $A, and international competitiveness.

Distinguish between direct and portfolio investment.

Direct investment refers to long term capital flows with the intention of establishing a controlling interest, or a management position, and are directly invested into economic activity. These flows are usually represented by 10% or more of a company's shareholdings. Conversely, portfolio investment are money flows that constitute less than 10% of a company's share holdings. They also refer to the purchases of land and other securities.

Explain the link between the Current Account and the K/F Account.. and why they will remain in equilibrium under a freely floating exchange rate (eg. Australia.)

 

[Lolsmith]

They 'make up' the balance of payments and always cause each other to reach equilibrium (in this case 0). Although, there are room for small errors and omissions from the calculations.

Explain the effect of a high valued $AUD on the economy, in relation to imports + exports.

 

[0bs3n3]

Explain the effect of a high valued $AUD on the economy, in relation to imports + exports.

Imports become cheaper, thus increasing imports and worsening the CAD. As well, exports become more expensive. This contributes to a slowing domestic economic growth rate.

Outline the structural changes undertaken aimed at increasing international competitiveness.

 

[b00m]

They 'make up' the balance of payments and always cause each other to reach equilibrium (in this case 0). Although, there are room for small errors and omissions from the calculations.

Explain the effect of a high valued $AUD on the economy, in relation to imports + exports.

A high valued $AUD causes the price of exports to rise whilst the price of imports decrease (less internationally competitive). In the long run, this results in increased demand for imports and less demand for exports. Greater CAD.

Who are the 'main' buyers and sellers of Australia's currency (list 3)

 

[0bs3n3]

Who are the 'main' buyers and sellers of Australia's currency (list 3)

- Speculators
- Traders
- Investors

My question is as above:

Outline (or list) the structural changes undertaken aimed at increasing Australia's international competitiveness.

 

[1titanic]

Ask a question....

sorry had to do some hw

Question: What are some factors that cause shifts in the supply curve for exchange rates?

 

[b00m]

Outline (or list) the structural changes undertaken aimed at increasing Australia's international competitiveness.

Not completely sure.. but i'm thinking:

• educational reform
• R & D to encourage innovation
• Labour market reforms (of the 90's 2000's) to increase productivity
• Relatively high interest rates, to reduce inflation and the costs of production
• Privatisation of gov businesses to increase efficiency and productivity/lower costs
• diversifying export base of the 80's.. although really, this is not evident atm.

someone answer 1titanic's question

 

[BHS10]

Factors which cause shifts in the supply curve for exchange rates include:
* current transfers made out of australia
* tourists travelling overseas
* people buying goods from overseas
* decisions to invest overseas
* overseas payments for interest and dividends

 

[0bs3n3]

sorry had to do some hw

Question: What are some factors that cause shifts in the supply curve for exchange rates?

- Negative speculator outlook: contributes to actual depreciation.
- Level of financial flows by Australians abroad: availability of investment opportunities, relative level of interest rates.
- Domestic demand for imports: level of domestic income, domestic inflation rate, competitiveness.

What markers make up HDI?

 

[b00m]

lol.. had to look this one up

-life expectancy at birth
-levels of educational attainment
-GDP per capita

The argument most suitable for protection? and..name three advantages of free trade

 

[Lolsmith]

FOR protection would be to protect domestic employment by reducing international firms' comparative advantage. Free trade advantages include:
- Efficient allocation of resources in economies
- Larger consumer base for firms to sell to
- Greater and easier levels of foreign investment (breakdown of barriers)

When was the last time the RBA intervened in the exchange rate of the $AUD?

 

[b00m]

The argument most suitable for protection?

FOR protection would be to protect domestic employment by reducing international firms' comparative advantage.

sorry, have to dispute this answer.

"using protectionist methods to prevent dumping is the only reason for protection that is widely accepted by economists"

When was the last time the RBA intervened in the exchange rate of the $AUD?

Probably during the GFC 2008... few months after the collapse in fact


Fill in the blank:
The negative impact that globalisaiton may have on the natural environment is also called ?? [2 words]

N_ _ _ _ _ _ _ // _ _ t _ _ _ _ _ _ _ _ _ s

 

[NEGROizzle]

Negative Externalities? haven'td one this topic yet D:

HMM QUESTION UMMMM.

Describe the term floating exchange rate.

 

[showy]

A floating exchange rate is when the values of a currency is determined by market forces, the interplay of supply and demand to reach an equilibrium price.

Question: What are the goals of the RBA? (prelim revision)