HSC 2008, Question 26 - Planning (1 Viewer)

[Carl5]

Discuss the effects of an appreciation of the Australian dollar on Australia’s internal and external stability. In your answer, use the economic information provided.

My plan was:

1.Define Exchange rate
+ Give method of measure + trade-weighted index

2.Explain how appreciation occurs with diagram

3. Explain effect on internal stability
Price Stability:
M's are cheaper --> vM inflation

Employment:
^D for $A --> ^O --> ^ employment opp --> v unemployment
cheaper price of M's can --> ^ infrastructure + training programs --> ^ productive capacity


4. Explain effect on external stability (+define)
e.g. devaluation effect --> cheaper debt servicing --> vCAD --> ^ confidence in economy etc (is this right/relevant?) + no need for domestic borrowing which could --> crowding out

5. then wrap it up with current mix of policies + trends or something? How do I end this?


Is this how I should be planning it? What can I add? And what is wrong with it :S

 

[krnofdrg]

Discuss the effects of an appreciation of the Australian dollar on Australia’s internal and external stability. In your answer, use the economic information provided.

My plan was:

1.Define Exchange rate
+ Give method of measure + trade-weighted index

2.Explain how appreciation occurs with diagram

3. Explain effect on internal stability
Price Stability:
M's are cheaper --> vM inflation

Employment:
^D for $A --> ^O --> ^ employment opp --> v unemployment
cheaper price of M's can --> ^ infrastructure + training programs --> ^ productive capacity


4. Explain effect on external stability (+define)
e.g. devaluation effect --> cheaper debt servicing --> vCAD --> ^ confidence in economy etc (is this right/relevant?) + no need for domestic borrowing which could --> crowding out

5. then wrap it up with current mix of policies + trends or something? How do I end this?


Is this how I should be planning it? What can I add? And what is wrong with it :S

Intro- Get straight to the point don't mention the TWI OR exchange rate or measure. It's irrelevant.

Something like this as your intro


The appreciation of the Australian dollar has a wide range of effects on the Australian economy in terms of its internal and external stability. Appreciation of the AUD will reduce the international competitiveness of the Australian producers. This is because the export prices will rise and import prices may fall. This will harm Australia’s external stability as it increases the deficit in the current account due to this lack of international competitiveness. However, the appreciation in the Australian dollar also means more investment into the Australian economy from overseas investors as there are higher interest rates in Australia compared to foreign nations. There is also low inflation in the economy which helps the government achieve its goal of price stability and also help it achieve internal balance in the economy that is offset by reduced external stability.

 

[krnofdrg]

I think you should talk about

But yeah the structure is good overall

 

[determine]

remember, internal stability refers to unemployment, inflation, economic growth, income distribution and wealth and environmental management. for this question, i'd say that only the first three are at all relevant.
and external stability is obviously current account deficit/capital and financial account issues, foreign debt etc.

so make sure you make the distinction.

i would also recommend you start by defining an appreciation of the Australian dollar or a definition of the exchange rate. this is always a good way to get into things. but don't spend too long!

 

[aphorae]

remember, internal stability refers to unemployment, inflation, economic growth, income distribution and wealth and environmental management. for this question, i'd say that only the first three are at all relevant.
and external stability is obviously current account deficit/capital and financial account issues, foreign debt etc.

so make sure you make the distinction.

i would also recommend you start by defining an appreciation of the Australian dollar or a definition of the exchange rate. this is always a good way to get into things. but don't spend too long!

wait wait wait i always thought internal stability was ONLY in reference to the first three, but it actually refers to all of them?

if you had something like how macroeconomic policies help to achieve internal stability, or how effectively they can maintain internal stability, which ones would you talk about? and how about if it said the same thing, but with external stability?