Economics Marathon 2014 anyone??? (4 Viewers)

[lpodtouch]

Define the term Trade Weighted Index

The Trade Weighted Index refers to an index which measures the value of the AUD against a basket of foreign currencies; comparing the exchange rate against the nation's trading competitors.

 

[mreditor16]

since there are no questions pending, I'll chuck one in. a nice question from 2012 hsc:

Explain the possible effects on the domestic economy if domestic inflation is high relative to inflation in other countries. (4 marks)

 

[mreditor16]

OMG I KNOW THIS. Okay here goes:

High inflation in a country relative to inflation overseas tends to reduce a country’s
international competitiveness by increasing the price of inputs into the domestic production
process (eg labour). In this way, domestically produced final goods become more expensive
relative to foreign produced goods. This may lead to an increase in the current account deficit.
Another impact of high domestic inflation is higher domestic interest rates, which will reduce
spending and economic activity. This may also result in a currency appreciation, dampening
export demand and in the short run cause a further deterioration of the CAD

good job. you know how to copy+paste from http://www.boardofstudies.nsw.edu.a...s/pdf_doc/economics-hsc-sample-answers-12.pdf

 

[Futuremedstudent]

Which of the following would reduce the level of protection for a domestic industry?
(A) Increasing the level of tariffs
(B) Increasing the size of subsidies
(C) Increasing the size of quotas on imports
(D) Increasing the use of embargoes

 

[lpodtouch]

Which of the following would reduce the level of protection for a domestic industry?
(A) Increasing the level of tariffs
(B) Increasing the size of subsidies
(C) Increasing the size of quotas on imports
(D) Increasing the use of embargoes

C? All the other options would increase protection for the domestic industry.

 

[trungduong12]

Which of the following would reduce the level of protection for a domestic industry?
(A) Increasing the level of tariffs
(B) Increasing the size of subsidies
(C) Increasing the size of quotas on imports
(D) Increasing the use of embargoes

B??


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[Phaze]

C? All the other options would increase protection for the domestic industry.

I agree, I think it's C.

 

[trungduong12]

I agree, I think it's C.

explanation please ?




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[Intrinsic]

B??


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The answer is C. If you increase the quota on e.g. cars from 50 to 100, that means that there is less restriction on imports, and more cars are able to enter Australia. The answer did say reduce, so read carefully!

 

[trungduong12]

The answer is C. If you increase the quota on e.g. cars from 50 to 100, that means that there is less restriction on imports, and more cars are able to enter Australia. The answer did say reduce, so read carefully!

Thanks !!!

I am always confused between increasing and decreasing quotas !!



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[avi888]

its a great answer.

just be careful with expression. and your first sentence is way too long.

btw your bolded part is not explained properly - from what you say, it seems you are implying that increase in AD leads to deficit. what you should be saying is that the increased expenditure led to a deficit and so on.

and one last thing, be careful, because you do have a wonderful range of impacts that show your extensive knowledge. but don't link so many of them back to quality of life. it detracts from your answer.

Otherwise it is an excellent excellent answer. a model answer

would probably get 4/4.

Thanks for the feedback

 

[avi888]

What question are we on atm?

 

[mreditor16]

What question are we on atm?

this

since there are no questions pending, I'll chuck one in. a nice question from 2012 hsc:

Explain the possible effects on the domestic economy if domestic inflation is high relative to inflation in other countries. (4 marks)

 

[avi888]

Explain the possible effects on the domestic economy if domestic inflation is high relative to inflation in other countries. (4 marks)
If inflation is high in the domestic economy, this will result in an increase in the costs of labour due to inflation matched wage increases and a subsequent rise in the prices of the factors of production. This will result in an increase in the relative price of our exports relative to overseas, meaning a decline in our international competitiveness, therefore resulting in a reduction in demand for our exports. the effect of this will be a reduction in aggregate demand in the domestic sector as (X will fall) as per AD=C+I+G+(X-M), meaning a subsequent decline in economic growth and employment in the domestic economy. Furthermore if high inflation is being experienced relative to overseas countries, the RBA will seek to tighten monetary policy through the sale of second hand commonwealth government securities , meaning an increased in the level of domestic interest rates in the economy to prevent the rise in the level of inflation. Higher interest rates will dampen consumer demand, meaning a reduction in (C) in AD=C+I+G+(X-M) , resulting in a decrease in aggregate demand which will result in a decrease in economic growth and will lead to a decrease in quality of life for the citizens in the domestic economy.

A bit too much again, but am i on the right track?

 

[avi888]

New question?
A simple one,

What is the macroeconomic policy mix, most appropriate to dealing with an economy with high levels of inflation and high levels of economic growth? (4 marks)

 

[trungduong12]

Contractionary FP -> reduce gov spending and/or increase taxation -> decrease AD & production -> decrease consumer spending and investment -> lower EG

Tightening MP -> increase cash rate through selling securities through DMO -> influence general level of interest rates -> reduce consumer spending and business investment -> decrease AD -> constraint on EG -> reduce inflation (e.g. Reduce demand pull inflation)


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[trungduong12]

Please correct me if im wrong



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[trungduong12]

Explain the possible effects on the domestic economy if domestic inflation is high relative to inflation in other countries. (4 marks)
If inflation is high in the domestic economy, this will result in an increase in the costs of labour due to inflation matched wage increases and a subsequent rise in the prices of the factors of production. This will result in an increase in the relative price of our exports relative to overseas, meaning a decline in our international competitiveness, therefore resulting in a reduction in demand for our exports. the effect of this will be a reduction in aggregate demand in the domestic sector as (X will fall) as per AD=C+I+G+(X-M), meaning a subsequent decline in economic growth and employment in the domestic economy. Furthermore if high inflation is being experienced relative to overseas countries, the RBA will seek to tighten monetary policy through the sale of second hand commonwealth government securities , meaning an increased in the level of domestic interest rates in the economy to prevent the rise in the level of inflation. Higher interest rates will dampen consumer demand, meaning a reduction in (C) in AD=C+I+G+(X-M) , resulting in a decrease in aggregate demand which will result in a decrease in economic growth and will lead to a decrease in quality of life for the citizens in the domestic economy.

A bit too much again, but am i on the right track?

Im not sure if im right but:

I think its good to link it to the external stability when ya talking abt high inflation forced the govnt to tighten MP by increasing IR -> attract foreign investors to invest in Aus -> increase financial inflows in the form of foreign equity -> adds to CAD on the BoP due to returns on foreign investments in form of dividends , which recorded as debits on the net primary part of the CA -> worsening CAD & external stability

I think you kinda repeat urself in the second part as I think you can just link that bit "decrease in AD results in decrease EG results in decrease quality of life and living standard" to the first bit of your answer
And linking increase IR to a broader aspect - the global economy CAD stuff like that



Feel free to correct me if im wrong

Great answer BTW !!!!


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[Maxwell]

Nobody answered my question I made up from a page back :c. It is:

Outline TWO product market and TWO factor market reforms and analyse their impacts. (6)

 

[Maxwell]

Contractionary FP -> reduce gov spending and/or increase taxation -> decrease AD & production -> decrease consumer spending and investment -> lower EG

Tightening MP -> increase cash rate through selling securities through DMO -> influence general level of interest rates -> reduce consumer spending and business investment -> decrease AD -> constraint on EG -> reduce inflation (e.g. Reduce demand pull inflation)


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Seems correct

Omg I hate second hand government securities and commonwealth repurchase agreements. I always mix up what they need to do to lower the overnight cash rate l0l