Economics Questions Thread

[chrisjb]

ARGHHHHH. We need Sam to help us xD.

Yeah, I haven't seen Sam around these parts for a while!

WHERE ARE YOU SAM!?

[Saur11]

Also, with a neutral cash rate it makes discussing channels harder. I mean if the RBA are not encouraging spending or saving and are just waiting what should we even be writing. For the exam it seems easier and more logical to accept them as mildly restricitve/tight and just make a statement in passing about MP neutrality.
Thought?

[Saur11]

Ahh yes, you're right. However, the thing is the RBA don't want to encourage spending. They merely want to discourage saving to a certain extent.

[Water]

Ahh yes, you're right. However, the thing is the RBA don't want to encourage spending. They merely want to discourage saving to a certain extent.

Short Term Decrease in the "cash rate".... It is clear they will increase the cash rate, as the global economic activity increases and as a result increase Australia's level of AD (we are a commodity exporting country) . Directly, this will lead to  decreased spending, inadvertently, increase saving.

[ANILBALA]

Also, with a neutral cash rate it makes discussing channels harder. I mean if the RBA are not encouraging spending or saving and are just waiting what should we even be writing. For the exam it seems easier and more logical to accept them as mildly restricitve/tight and just make a statement in passing about MP neutrality.
Thought?

Umm.. u still talk about it as an expansionary move but say overall the higher AD resulting from it is just being counteracted by other subdued demand side conditions and global uncertainty leading to AD growing at a steady rate.

[chrisjb]

Righty-o, I have a question about policy mix questions... If I get a question like this:

Discuss how the government has used one aggregate supply policy and one aggregate demand policy as part of the policy mix to achieve to goal of strong and sustainable economic growth.

Do I talk about just one aggregate supply policy and one aggregate demand policy in achieving the goal....

OR because is says 'as part of the policy mix' do I have to choose another couple of random policies (immigration, microeconomic reform,  environmental policy etc.) to talk about as well?

[RossiJ]

Righty-o, I have a question about policy mix questions... If I get a question like this:

Discuss how the government has used one aggregate supply policy and one aggregate demand policy as part of the policy mix to achieve to goal of strong and sustainable economic growth.

Do I talk about just one aggregate supply policy and one aggregate demand policy in achieving the goal....

OR because is says 'as part of the policy mix' do I have to choose another couple of random policies (immigration, microeconomic reform,  environmental policy etc.) to talk about as well?

One AS policy and one AD policy is all I would personally do.
Possibly would talk about a micro-economic policy and then a budget initiative

[soldier_on16]

Just talk about one AS & one AD policy, because together they form part the 'policy mix' which is what you only need to talk about. No need to over complicate what the question is asking.

Probably Trade Lib for Microeconomic reform, discussing cuts to tariffs on Motor industrry and textiles. AD I'd discuss infrastructure spending.

[Saur11]

It really depends on the mark allocation. In general if they ask for one policy, i would assume that is not more than a 4-6 marker.

[chrisjb]

Thanks guys!

[the sean]

On the Engage Education practice exam a question is "Explain how inflation could reduce the efficiency with which prices allocate resources".

Firstly, can they even ask this question on the real exam? The study design says only knowledge is needed of the 'role of relative prices in the allocation of resources'. If so, discard the rest of this post.

But anyway, the model answer says "in the presence of inflation prices or not only affected by supply + demand, but also by changes in the general price level. Inflation creates 'static' in the price system, obscuring information transmitted by prices and redicing the efficiency of the market system."

My answer talked about how inflation causes people to invest in items that are protected against inflation, such as gold, and away from the production of goods and services. Thus as a result of inflation, resources aren't allocated efficiently because price signals caused by demand and also inflation are ignored to protect against a loss of purchasing power.... Is that ok?

[Saur11]

Higher inflation may reallocate resources away from industries that require heavy capital investment towards high return areas such as shares and property. In the long term, resources are pulled away from productive long term sues in the pursuit of short term gain. This will result in a lower long term rate of economic growth, undermining living standards.

[tigerfan11]

Someone PLEASE give me some help with the following;

When referring to Monetary Policy are the following figures and concepts correct ?
2011-12: slightly contractionary/neutral after the RBA chose to lower rates from 4.75% to 4.5%
Conflicting relationship with BP
2010-11:neutral until November 3 when the RBA finally took a contractionary stance increasing the cash rate to 4.75%
Compatible relationship with BP until November 3
2009-10: expansionary, continuing to recover from the onset of the GFC
Compatible relationship with BP

[tigerfan11]

ANYONE  please ?

[Hutchoo]

Someone PLEASE give me some help with the following;

When referring to Monetary Policy are the following figures and concepts correct ?
2011-12: slightly contractionary/neutral after the RBA chose to lower rates from 4.75% to 4.5%
Conflicting relationship with BP
2010-11:neutral until November 3 when the RBA finally took a contractionary stance increasing the cash rate to 4.75%
Compatible relationship with BP until November 3
2009-10: expansionary, continuing to recover from the onset of the GFC
Compatible relationship with BP

Yeah, from a quick glance it's quite fine.
Remember, when two policies conflict whilst trying to achieve the same goal, talk about it in terms of the 'policy mix'.


http://www.rba.gov.au/statistics/cash-rate.html
The numbers match