Few Questions (1 Viewer)

[E*star*]

Been looking over my notes which I thought I was all done with and into the second topic I review my Balance of Payment notes and now I am confused.

a.) First of all the 2006 HSC MC section question 19 is

Which of the following would be recorded as a debit item in the capital and financial account of Australia's BOP

1. Interest repaid by Australian firms on overseas loans
2. Forein aid from the Australian government for road building in Bali
3. Dividends received by Australian shareholders for overseas investments
4. Tacation revenue collected by the Australian government from foreign based firms

I orginally couldn't find an answer because I always believed the current transfers in the CA included aid payments as per the leading edge book but it has something after it saying (unless these funds are being used to build capital in the developing nation, in which case they are included under the capital and financial account.)
My problem then became that I thought capital was the produced means of production as per the leading edge book so are my definitions wrong or is a road capital?
This is made more confusing because 'foreign aid to assist other countries build up infrastructure' is included as capital transfers in the capital and financial account

b.) The capital account contains 'capital transfers'. What exactly is a capital transfer?
> leading edge is saying that one example is 'foreign aid to assist other countries build up infrastructure' - explaining question 19 maybe but still leaving me confused as to the current transfers vs capital account and which one aid fits into

c.) What is the difference between economic growth and economic development?
> I had always been confident that economic development was the physical quality of life as per leading edge and the premium notes which are kind of an exact copy of the book. So it can be measured by the HDI sure thats great but then cambridge economics says 'economic development refers to structural changes in the economy which make growth selfsustaining and long term.' Which to me sounds like a completely different thing?

d.) In one recent thread a prediction for an essay was the impact of globalisation on our case study which is ok an also the impact of globalisation on Australia. Where is the guideline for the Australian one in the syllabus. Is it just the 'impact of globalisation' with international convergence and all those other points just applied to australia?

Hopefully alteast some of those questions made sense and any help would be great

 

[Crusader]

b)I Guess a road or infrastructure can kinda be counted as capital, because businesses require infrastructure to produce and distribute their goods, e.g. Roads are required for transporting resources and distributing products. In this question, i reckon the answer is 2, because it makes sense and all the other answers are clearly wrong.

-The definitions are kinda bad, because it says
-NET CURRENT TRANSERS refer to receipts less payments of money for foreign aid, migrants funds and pensions. Capital items (such as FOREIGN AID??????) are recorded in the capital account.

The way i see it is Foreign Aid from the Government goes under the capital account, but money from Charities, and pensions that migrants receive go under Net Current Transfers.



c)- Economic growth refers to increases in real GDP over time. (quantitative concept)
-Economic Development refers to the structural changes needed in an economy for economic growth to occur (qualitative concept).

So basically, The process is :

Economic development (e.g improvements in infrastructure) -----> Economic Growth ------> Higher Standards of living.

Physical quality of life is basically a seperate concept that is a result from eco. development + growth.



d) Yeah, the whole section on impact of globalisation is meant to be based on Australia, and then the case study is just the same thing in a different country.

 

[Ozza]

a) and b)

Net current transfers refer to unearned payments and receipts. A net current transfer occurs when no specific good or service has been supplied.

So I think the only reason you wouldn't put foreign aid in here is if it was 'in the form of foriegn aid to assist other countries to build up their infrastructure or capital stock'. Which is when you count it as capital transfers.

If you think about it, straight financial aid can be squandered or just spent on food etc. But if it's to improve their infrastructure or build up their capital stock, then we're actually improving their ability to produce etc. So foreign aid that improves their ability to produce counts as a capital transfer.

It's called a capital transfer, because that's what it is... transferring or capital from one country to the next.

c)

I'm quite sure that simply using the textbook definiation about quality of life indicators would be fine in the exam... what they're looking for when they ask you is so that you know the difference between growth and development. Specifically that growth doesn't necessarily mean development.

d)

Pretty much the whole textbook is on the impact of globalisation on Australia when you think about it. i.e. exchange rates, protection, trade and financial flows, gov't policy, unemployment, inflation...