ITT: rantings about stupid MC questions. Add your own, correct me, argue your point. (1 Viewer)

[BackCountrySnow]

These are some MC questions I disagree with. Feel free to correct me.

Which of the following is an advantage of free trade?
A. a more efficient allocation of resources
B. an increase in short-term unemployment
c. A wider range of goods and services available.
d. Increase in local firms closing down.

the answer is A. But C is also 100% correct.

A is not 'more' correct. If anything C is because there are direct benefits from more consumer choice.
a more efficient allocation of resources with lead to more competitive industries which leads to higher export receipts which leads to higher growth.

Which of the following is most likely to cause a decrease in a nation's debt servicing ratio?
A. Rising global interest rates
B. Rising export levels
C. Falling foreign debt levels
D. Falling global growth rates

The answer is B. But A and C are also correct. Debt servicing ratio is Debt/export revenue.
So whilst B increases increases export rev, A and C lower levels of foreign debt.

What of the following is not an impact on the government as a result of reduction in tariff levels?
A. Reduction in government revenue
B. Reduced likelihood of cutting tax rates
C. Increased spending on job retraining programs
D. Greater voter dissatisfaction with the government.

IMVHO there is no correct answer. However, I put down B which was correct.
A is obviously wrong.
B is wrong because tariffs are a big source of government revenue so the removal of them is likely to reduce the likelihood of a tax cut for households.
C is wrong because the gov needs to deal with the structural unemployment.
D is wrong because the unemployed workers will have a cry.

What is the impact of an appreciation of the Australian dollar on Australia's CAD?

A. increased export sales, decreased CAD
B. Decreased exports sales, decreased CAD
C. Decreased exports sales, increased CAD
D. Increased export sales, increased CAD.

Obviously B or C. The question states impact on AUSTRALIA's CAD. Our CAD is mostly because of our foreign debt. An appreciation makes this debt increase. Sure, an appreciation decreases export sales but financial flows play a larger role in our BOP than trade flows.


Michael1990's question ages back that was debated to death. Not going to include it.

CBF doing more atm. More rants to come.

 

[Dota55]

Re: ITT: rantings about stupid MC questions. Add your own, correct me, argue your poi

For the first one, free trade does not neccessarily mean that there'll be a greater range of goods and services. Yes, it enables it. Does not neccessarily guarantee it....or something like that.

 

[BackCountrySnow]

Re: ITT: rantings about stupid MC questions. Add your own, correct me, argue your poi

For the first one, free trade does not neccessarily mean that there'll be a greater range of goods and services. Yes, it enables it. Does not neccessarily guarantee it....or something like that.

I guess. But does it ensure an efficient allocation of resources all the time?
There have been cases where it just causes long-term unemployment...

 

[karnage]

Q1. Ok i woulda just based it on what answer is better and it'd be the efficient allocation of resources because thats what its all based on, comparative adv etc. etc.

Q2. Hmmm yea thats a tough one, i would have picked B still based on the fact that its a reduced 'likelihood' i.e. its not a direct impact of reduction in tariffs like the other 3 and is based on chance (if you get what i mean)

Q3.
Yes but its servicing costs not foreign debt. Thus, A would be wrong because if global interest rates rise, that means the debt servicing ratio would increase because you'd have to pay more.
C is wrong because debt servicing ratio doesnt measure debt, it measures the amount of export revenue used to pay off interest (dont have a textbook definition off the top of my head)

Q4. Id say B because appreciated $A will make our exports less internationally competitive resulting in decreased export sales, and as our CAD is mostly made of foreign debt, the size of it will decrease due to the greater $A i.e. valuation effect

EDIT LOL SORRY ABOUT ALL THAT TEXT, here ive simplified it.

 

[BackCountrySnow]

In response to Karnage


Which of the following is most likely to cause a decrease in a nation's debt servicing ratio?
A. Rising global interest rates
B. Rising export levels
C. Falling foreign debt levels
D. Falling global growth rates

The answer is B. But A and C are also correct. Debt servicing ratio is Debt/export revenue.
So whilst B increases increases export rev, A and C lower levels of foreign debt.

Yes but its servicing costs not foreign debt. Thus, A would be wrong because if global interest rates rise, that means the debt servicing ratio would increase because you'd have to pay more.

Oh shit, my bad, I misread it.

C is wrong because debt servicing ratio doesnt measure debt, it measures the amount of export revenue used to pay off interests (dont have a textbook definition off the top of my head)

but as debt levels fall it takes less export sales to service the debt. So the ratio decreases..


What is the impact of an appreciation of the Australian dollar on Australia's CAD?

A. increased export sales, decreased CAD
B. Decreased exports sales, decreased CAD
C. Decreased exports sales, increased CAD
D. Increased export sales, increased CAD.

Obviously B or C. The question states impact on AUSTRALIA's CAD. Our CAD is mostly because of our foreign debt. An appreciation makes this debt increase. Sure, an appreciation decreases export sales but financial flows play a larger role in our BOP than trade flows.

Id say B because appreciated $A will make our exports less internationally competitive resulting in decreased export sales, and as our CAD is mostly made of foreign debt, the size of it will decrease due to the greater $A i.e. valuation effect.

That was my answer. it's wrong. The answer is C

 

[karnage]

but as debt levels fall it takes less export sales to service the debt. So the ratio decreases..


SNIP SNIP

That was my answer. it's wrong. The answer is C

Ugh...in regards to the first line, id guess they shoulda said 'with all things being equal'? ceteris paribus?

And the next one, hmmm i guess since they already give you the impact i.e. exports, then ud have to say that the CAD is increased based on that fact only?

 

[2162]

Re: ITT: rantings about stupid MC questions. Add your own, correct me, argue your poi

In response to Karnage


Which of the following is most likely to cause a decrease in a nation's debt servicing ratio?
A. Rising global interest rates
B. Rising export levels
C. Falling foreign debt levels
D. Falling global growth rates

The answer is B. But A and C are also correct. Debt servicing ratio is Debt/export revenue.
So whilst B increases increases export rev, A and C lower levels of foreign debt.

Yes but its servicing costs not foreign debt. Thus, A would be wrong because if global interest rates rise, that means the debt servicing ratio would increase because you'd have to pay more.

Oh shit, my bad, I misread it.

C is wrong because debt servicing ratio doesnt measure debt, it measures the amount of export revenue used to pay off interests (dont have a textbook definition off the top of my head)

but as debt levels fall it takes less export sales to service the debt. So the ratio decreases..


What is the impact of an appreciation of the Australian dollar on Australia's CAD?

A. increased export sales, decreased CAD
B. Decreased exports sales, decreased CAD
C. Decreased exports sales, increased CAD
D. Increased export sales, increased CAD.

Obviously B or C. The question states impact on AUSTRALIA's CAD. Our CAD is mostly because of our foreign debt. An appreciation makes this debt increase. Sure, an appreciation decreases export sales but financial flows play a larger role in our BOP than trade flows.

Id say B because appreciated $A will make our exports less internationally competitive resulting in decreased export sales, and as our CAD is mostly made of foreign debt, the size of it will decrease due to the greater $A i.e. valuation effect.

That was my answer. it's wrong. The answer is C

The thing is 1. you have a deterioration of the goods and service account because of decreased exports and increased imports [v - bad]
2. As a result of decreased servicing cost, MORE people will start borrowing overseas and this will offset the fact that there are decreased servicing costs. [ this theory is similar to the fact that decreased import prices will deteriorate net trade because people tend to import more.

Those are my reasons. [i.e for deteriorating CAD]

 

[2162]

Re: ITT: rantings about stupid MC questions. Add your own, correct me, argue your poi

What of the following is not an impact on the government as a result of reduction in tariff levels?
A. Reduction in government revenue
B. Reduced likelihood of cutting tax rates
C. Increased spending on job retraining programs
D. Greater voter dissatisfaction with the government.

IMVHO there is no correct answer. However, I put down B which was correct.
A is obviously wrong.
B is wrong because tariffs are a big source of government revenue so the removal of them is likely to reduce the likelihood of a tax cut for households.
C is wrong because the gov needs to deal with the structural unemployment.
D is wrong because the unemployed workers will have a cry.


end quote


Should be B, your explanation is jumbled. AND B is indirectly related to protection levels.

 

[BackCountrySnow]

And the next one, hmmm i guess since they already give you the impact i.e. exports, then ud have to say that the CAD is increased based on that fact only?

yeah, that's what i thought. It's a shit MC question though, if something like that is expected to be inferred.

 

[Q2C-ME]

jst outta curiousity wats ITT??? :S

 

[BackCountrySnow]

jst outta curiousity wats ITT??? :S

IIT: pplz who duno netspeek.

 

[risole91]

IIT: pplz who duno netspeek.

lulz