Economics Questions Thread

[chasej]

Oh ok; but I thought GDP was a value indicator not a volume indicator?
Volume implies the quantity not the total dollar figure of goods and services produced?

Nevertheless, the answer is indeed, D (the volume); I probably would remember from now on it's volume not value but I just need an explanation on why..

Economics growth is an increase in production of goods and services. Yeh GDP is a value indicator, that's why to determine real economic growth the chain volume measure of GDP is used which multiplies prices from x amount of time ago by the amount of goods and services being produced now which determines the increase in volume of production. Economic growth is a change in volume. GDP is value at any given point in time. Real GDP is GDP adjusted for inflation/deflation so the two values (GDP from x time ago and current GDP) are comparable over time, thus is used to measure economic growth.

[abcdqdxD]

Hey
I am stuck on this:
Which of the following demand factors would be the most volatile?
A) Government Expenditure
B) Private Consumption Expenditure
C) (Exports - Imports)
D) Private Investment Spending

Option D is correct. (I) is most volatile.

[M_BONG]

Option D is correct. (I) is most volatile.

Ok that is strange.

I chose external stability (chasej's answer) initially.. but the answer for this is Private Consumption Spending...

Is the QAT paper wrong?

[abcdqdxD]

Ok that is strange.

I chose external stability (chasej's answer) initially.. but the answer for this is Private Consumption Spending...

Is the QAT paper wrong?

If you go through the down under textbook, it actually states that I is most volatile so I would say it is a mistake by QATs

[M_BONG]

Can I get help with this question

"Discuss one reason why the GDP is not an accurate indicator of changes in material living standards"

I said the GDP does not effectively measure the level of income equality and wealth distribution. It only measures the volume of total goods and services produced and thus does not indicate how well off the citizens of a country are.

This is a CPAP practice SAC question; in the marking scheme, income equality was not listed as a reason why GDP is not accurate. So is it a valid reason?
Thanks.

[abcdqdxD]

Can I get help with this question

"Discuss one reason why the GDP is not an accurate indicator of changes in material living standards"

I said the GDP does not effectively measure the level of income equality and wealth distribution. It only measures the volume of total goods and services produced and thus does not indicate how well off the citizens of a country are.

This is a CPAP practice SAC question; in the marking scheme, income equality was not listed as a reason why GDP is not accurate. So is it a valid reason?
Thanks.

yep its correct

[sam.utute]

Been a while since I last posted, but just came across this article in The Age. Ignore the message and look at the way Ross uses basic Economic principles to analyse a proposed policy change.

http://www.theage.com.au/business/university-fees-to-be-regulated-under-pynes-reforms-20140530-399pd.html

[melbin123]

Is this where I post , if I need help with a question ?

[chasej]

Is this where I post , if I need help with a question ?

Sure is.

[M_BONG]

Hey can someone help me with this question?

"Discuss the likely impact of an appreciating Australian dollar on the net income component of the Current Account" 3 marks VCAA exam question.

I wrote that:
* An appreciating $AUD will see reduced foreign investment in the country since the purchasing power of foreign currencies is eroded due to the higher $AUD. Thus, multinational investors (eg. Ford) may likely offsource their investment from Australia to countries with a comparative advantage in lower currency costs. This has the effect of reducing the net income component of our net incomes.

But according to the VCAA examiner report:

"Students often confused net income with capital and investment flows or with service flows. Better answers talked about the valuation effect of an appreciating $AUD and were able to say that an appreciation of the $AUD will reduce net foreign debt to the extent it is denominated in foreign currencies. In turn, this will reduce the interest payments recorded in net incomes, thus improving the net incomes deficit."

So is the examiner report saying that my answer (ie. higher $AUD will see less net incomes through wages, investment) is wrong? And the only acceptable way to answer this is through the alleviation of our Net Foreign Debt?

Thanks!
*Also, how is Net Foreign Debt part of Net incomes?

[Jono_CP]

I have an Economics SAC on External Stability, Inflation and Equity of Income Distribution coming up.

In relation to supply and demand factors affecting Inflation (there are so many!) but our school has hinted that we only need to know one demand and supply factor affecting inflation over the past 4 years for this SAC. Could anyone recommend to me any factors to focus on, e.g. our teacher said not to do consumer confidence and/or business confidence as this is too straight forward.

[chasej]

I have an Economics SAC on External Stability, Inflation and Equity of Income Distribution coming up.

In relation to supply and demand factors affecting Inflation (there are so many!) but our school has hinted that we only need to know one demand and supply factor affecting inflation over the past 4 years for this SAC. Could anyone recommend to me any factors to focus on, e.g. our teacher said not to do consumer confidence and/or business confidence as this is too straight forward.

A great one for external stability and inflation is exchange rates (also a requirement under study design) and interest rates (directly affects inflation as you will learn in u4 aos1 also).

Equity you don't need to learn aggregate demand/supply factors but rather the study design states you must know "factors" so just things which have effected equity, a good one to use is inflation rates and also the GST.

[chasej]

Hey can someone help me with this question?

"Discuss the likely impact of an appreciating Australian dollar on the net income component of the Current Account" 3 marks VCAA exam question.

I wrote that:
* An appreciating $AUD will see reduced foreign investment in the country since the purchasing power of foreign currencies is eroded due to the higher $AUD. Thus, multinational investors (eg. Ford) may likely offsource their investment from Australia to countries with a comparative advantage in lower currency costs. This has the effect of reducing the net income component of our net incomes.

But according to the VCAA examiner report:

"Students often confused net income with capital and investment flows or with service flows. Better answers talked about the valuation effect of an appreciating $AUD and were able to say that an appreciation of the $AUD will reduce net foreign debt to the extent it is denominated in foreign currencies. In turn, this will reduce the interest payments recorded in net incomes, thus improving the net incomes deficit."

So is the examiner report saying that my answer (ie. higher $AUD will see less net incomes through wages, investment) is wrong? And the only acceptable way to answer this is through the alleviation of our Net Foreign Debt?

Thanks!
*Also, how is Net Foreign Debt part of Net incomes?

Net Foreign Debt affects net incomes as the associated interest payments are recorded as a net incomes outflow. Interest repayment on debt is a major component of net incomes. An appreciating AUD means interest repayments denominated in overseas currency will decrease in Australian dollars, thus reducing net incomes outflow, reducing the net incomes defecit, which decreases the CAD, meaning Australia has a greater chance of being able to meet associated payments of the CAD without debt increasing to a level which harms internal stability, that is, Australia would achieve external stability.

(You're answer was sort of relevant but what VCAA would have been looking for was the reduced interest repayments.

(Not an exam quality answer but I tried to explain it simply).

[Jono_CP]

Hey chasej,

How much of the BOP do I need to know? It is quite complicated, is it more definition and for multiple choice questions? Or should I discuss the effect that the BOP has on the CAD?

[chasej]

Hey chasej,

How much of the BOP do I need to know? It is quite complicated, is it more definition and for multiple choice questions? Or should I discuss the effect that the BOP has on the CAD?

You need to know the BOP in detail, that is, know all the accounts it consists of, what they include/record and how they all effect each other, it seems complicated and it consistently comes up as a point many students find challenging so you're not alone in finding it difficult, but the good thing is most things in the course are quite a bit easier than it from then on.

I remember finding the BOP a little difficult, I basically had to memorize a picture of a BOP flowchart with all the accounts to understand it fully.