Structural Change & MER (1 Viewer)

[passion89]

Ok, I'm having a bit of trouble with micro policy.

So, structural change refers to the changes in relative importance of certain industries where inefficient ones disappear and more efficient industries emerge, forcing a reallocation of resources.

That's all well and good but I don't understand how structural change and MER designed to promote it, influence external stability and the CAD.

I also would like to understand a little better, how Australia's trade performance/protection/trade negotiations relate to microec policy.

Thanks.

 

[mitsui]

For me,

microeconomic is used to promote structural changes, it is aiming to increase productivity of all factors of production and this means allocative, technical and dynamic effiencies

microeconomic policies aim to increase higher sustainable GDP (without causing inflation) thereby lower NAIRU and Aggregate supply. This increase in supply (using a AD/AS diagram) leads to more output (more employment, cheaper goods, economies of scale etc.).

it influences economic growth by increasing it without increase cost-push inflation.

It influences internal stability as it reduces inflation, lead to price stability. it rises amount of employment opportunities, lower unemployment & nairu

it influences external stability as it increases our international competitveness by reducing our cost of production and econmies of scale. this leads to an improved CAD due to more exports. however the effect is a trade off, more competitvness means more foreign investments coming into aus leads to more foreign liability. microeconomic policies also rise SOL and real income, thus increase our spending on imports and actually worsen CAD.

microeconmic policies affect product, factor, public markets. polcies like national competition policies, labour reform, trade liberalisation, joining FA improve our trade performances.

 

[Sparcod]

Ok, I'm having a bit of trouble with micro policy.

So, structural change refers to the changes in relative importance of certain industries where inefficient ones disappear and more efficient industries emerge, forcing a reallocation of resources.

That's all well and good but I don't understand how structural change and MER designed to promote it, influence external stability and the CAD.

I also would like to understand a little better, how Australia's trade performance/protection/trade negotiations relate to microec policy.

Thanks.

Microeconomic policy: Policies undertaken to improve allocation of resources and hence efficiency and productivity.

Structual Change: a change in what the economy produces over time.

microeconomic policies influence structual change and hence leads to short-term structual unemployment and high inflation and worsening CAD, maybe.


In the long term...
1. industries will adjust (structual change)
2. Industries then become more efficient and productive.
3. Greater productivity will decrease production costs.
4. Lower production costs=lower prices
5.Improved international compettitveness
6.Improved terms of trade.
7. Lower CAD.

On the part of trade policies, it's obvious that lowering protection policies will expose domestic firms to more competition and this'll improve allocation of resources. Domestic firms are finding more ways to improve technical efficiency and this'll make them more productive.

Blah blah blah

 

[mitsui]

how many policies are you guys aiming to remember for micro?

 

[Sparcod]

Protectionist policies.
and all the 'reforms'

 

[mitsui]

ok. i am doing 2 each, for product, factor & public

Q, do we need to know a lot about workrelation act? or focus on workchoice now?

 

[Sparcod]

Yes.

 

[passion89]

ok. i am doing 2 each, for product, factor & public

Q, do we need to know a lot about workrelation act? or focus on workchoice now?

Well according to my teacher, the exams were written in November/Dec of last year and they wouldn't focus on areas in the economy that are subject to the most prevalent changes.

Definately study it, but don't get too upset if you don't because it's unlikely they will ask us a question directly related to Workchoices.