How to approach extended responses? (1 Viewer)

[malcolm21]

External stability is split into three components : CAD, NFD and exchange rate stability.

Intro: Define external stability and explain what its made up of (the 3 components)

Main body paragraphs:
Here is where you will mention several paragraphs on each 3 components.
- Things to consider talking about : mining resources boom, savings-investment gap as an issue in Australia (which leads to us having to borrow from overseas, worsening NPY section of the current account.
etc

Wouldn't the intro be like over a page long?

 

[atargainz]

Wouldn't the intro be like over a page long?

Why would it be a page long? Definition of external stability and a brief overview/definition of CAD, Foreign liabilities/debt, exchange rate.

 

[Untroubled]

Wouldn't the intro be like over a page long?

I know what you mean, but you need to show the marker that you know what external stability is. Therefore, you should mention its components because it is what you will (or really should) be discussing in your main body paragraphs. Brief discussion on each component in the introduction will suffice.

 

[aanthnnyyy]

If we are linking Exchange Rates with the CAD would it then be reasonable to say how an appreciation and depreciation both deteriorate it. Because they work both ways I.e. Depreciation - valuation effect (short term) but also Appreciation - imports > exports (long term)

Unless this does not matter because long term and short term cancel each other out

 

[atargainz]

If we are linking Exchange Rates with the CAD would it then be reasonable to say how an appreciation and depreciation both deteriorate it. Because they work both ways I.e. Depreciation - valuation effect (short term) but also Appreciation - imports > exports (long term)

Unless this does not matter because long term and short term cancel each other out

Also, since exchange rate volatility and foreign liabilities directly link to the CAD, are you supposed to be making links to how it affects the CAD and thereby external stability in your exchange rate and foreign liability paragraphs?

 

[Untroubled]

Appreciation of the AUD leads to more imports as domestic consumers see the purchasing power of their currency increase, thus deteriorating balance on BOGS.
At the same time, ^AUD will result in a decline in the dollar value of foreign debt (and thus interest rates to be repaid to foreign creditors.) This should improve the deficit on the NPY through the valuation effect.
These should offset any net increase or decrease in the CAD, thereby stabilising Australia's external stability.

You can safely mix and match and interrelate arguments. !

 

[aanthnnyyy]

Appreciation of the AUD leads to more imports as domestic consumers see the purchasing power of their currency increase, thus deteriorating balance on BOGS.
At the same time, ^AUD will result in a decline in the dollar value of foreign debt (and thus interest rates to be repaid to foreign creditors.) This should improve the deficit on the NPY through the valuation effect.
These should offset any net increase or decrease in the CAD, thereby stabilising Australia's external stability.

You can safely mix and match and interrelate arguments. !

Perfect ! And vice versa for a depreciating dollar

 

[Untroubled]

Perfect ! And vice versa for a depreciating dollar

Yep, you should mention briefly at the end of the paragraph that the opposite occurs just using a few sentences and BOOM, the markers will be over the moon xD

 

[malcolm21]

Yep, you should mention briefly at the end of the paragraph that the opposite occurs just using a few sentences and BOOM, the markers will be over the moon xD

do we have to do this for everything? like expansionary / contractionary fiscal/monetary stance

 

[Untroubled]

do we have to do this for everything? like expansionary / contractionary fiscal/monetary stance

I would recommend that you briefly do explain that the opposite occurs. Unless the question asks for the impact of contractionary macroeconomic policies then don't talk about expansionary, so your answer will only be focused on contractionary.
If they ask for just macroeconomic policies, then you should write about expansionary in more detail, then less for the other (or the other way around.)~ but really, if you know heaps of statistics and real life events that has happened in Australia, then I would say do one paragraph on expansionary then one on contractionary.

Here's an example:
Paragraph one could be on expansionary macroeconomic policies. e.g. The Rudd government introduced a stimulus package of $14bn in mid 2008 to tackle the slowdown in Australia's economic activity. The stimulus lifted AD as it targeted the groups who have the highest MPC such as families and people generally on low incomes etc...

Paragraph two would be on contractionary macroeconomic policies. e.g. the RBA has increased interest rates on several occasions during the global resources boom. This had a dampening effect on AD etc..

 

[aanthnnyyy]

I would recommend that you briefly do explain that the opposite occurs. Unless the question asks for the impact of contractionary macroeconomic policies then don't talk about expansionary, so your answer will only be focused on contractionary.
If they ask for just macroeconomic policies, then you should write about expansionary in more detail, then less for the other (or the other way around.)~ but really, if you know heaps of statistics and real life events that has happened in Australia, then I would say do one paragraph on expansionary then one on contractionary.

Here's an example:
Paragraph one could be on expansionary macroeconomic policies. e.g. The Rudd government introduced a stimulus package of $14bn in mid 2008 to tackle the slowdown in Australia's economic activity. The stimulus lifted AD as it targeted the groups who have the highest MPC such as families and people generally on low incomes etc...

Paragraph two would be on contractionary macroeconomic policies. e.g. the RBA has increased interest rates on several occasions during the global resources boom. This had a dampening effect on AD etc..

Just to add why wouldn't you want talk bout the opposite, it just adds more easy words to your essays and impresses the marker with your thorough knowledge ^^

 

[Untroubled]

Just to add why wouldn't you want talk bout the opposite, it just adds more easy words to your essays and impresses the marker with your thorough knowledge ^^

With the example answer that I gave for external stability, you just need to mention the opposite happens briefly because the same information will be repeated twice, except the opposite way. You don't want to bore the marker with repetition.
But for macroeconomic policies, for each type (contractionary and expansionary) there will be different examples of how Australia responded, therefore you need several paragraphs. When I said to not repeat for macro, only if you don't have much to talk about so you will be forced to use only one to expand on and the other will be brief (better than not mentioning one at all.)