HSC Economics Question Thread

[Lumenoria]

Hey guys!
I was wondering whether anyone can help me with the concept of terms of trade?
when there's an improvement in the tot, does that mean that the revenue gained from exports exceeds the amount the country pays for imports?
so if for example, we sell 100 exports for a $1 each (for simplicity), we get 100 in total, but if the following yr we  sell 200 exports for a $1 each, we get 200 in total- is that an improvement in the tot?
Please, i'll really really appreciate any clarification.

Hey, the example you provide doesn't really provide any indication of the ToT because it's all relative to the PRICE of a given amount of imports - not the VOLUME, as you seem to be under the impression of.

If the ToT improves, this means exports are increasing relative to import prices. For example, if in 2017, exports and imports were both $1, the ToT would be 1/1 x 100 = 100 (remember ToT = export price index/import price index x 100). But say in 2018, export prices rose to $3 due to higher global demand, whilst imports only rose to $2, this would mean that export prices are outpacing import prices, so the ToT would improve from 100 to 150. That would mean we can buy 1.5x more imports with the same amount of exports. So in this case, the export revenue earned from 20 transactions would be $60, which can buy 30 imports (because they're priced lower at $2 remember).

I hope this makes sense!

[key to success]

Hey, the example you provide doesn't really provide any indication of the ToT because it's all relative to the PRICE of a given amount of imports - not the VOLUME, as you seem to be under the impression of.

If the ToT improves, this means exports are increasing relative to import prices. For example, if in 2017, exports and imports were both $1, the ToT would be 1/1 x 100 = 100 (remember ToT = export price index/import price index x 100). But say in 2018, export prices rose to $3 due to higher global demand, whilst imports only rose to $2, this would mean that export prices are outpacing import prices, so the ToT would improve from 100 to 150. That would mean we can buy 1.5x more imports with the same amount of exports. So in this case, the export revenue earned from 20 transactions would be $60, which can buy 30 imports (because they're priced lower at $2 remember).

I hope this makes sense!

thank you so much- so its the price of the exports/imports that effects it so nothing to do with the total value of the imports/exports?
i'm confused as to how they may work out a price if there are so many different types of exports- is it an average of the price of all exports/imports?

[Brun]

thank you so much- so its the price of the exports/imports that effects it so nothing to do with the total value of the imports/exports?
i'm confused as to how they may work out a price if there are so many different types of exports- is it an average of the price of all exports/imports?

Yep, that's correct! If you take a look at some of the HSC papers, a common question will be: Which of these factors could have caused a rise in the terms of trade?

The answers would include: a) A rise in the volume of exports; b) A rise in the price of exports

The correct answer would be (b) not (a) as the TOT only measures price of exports/imports rather than volume.

As for how the TOT measures multiple goods/services, the formula for TOT is: Export price index/Import price index. This price index differs from country to country, but it could simply be an average of all prices or it could be weighted according to the significance of a particular good in a country's trade (similar to the consumer price index for inflation).

You won't have to worry about how this is calculated, as it does involve complicated formulas which are beyond the scope of the course. You would always be given the price index for imports and exports if you were asked to calculate TOT. Hopefully, this explanation clears things up for you! 

[ilikeapples]

Hi I just have a question based on the globalisation topic: so I have a prepared essay in point form for a broad question on 'assessing the impact of globalisation', while the syllabus specifies that we must have a case study showing the effects of globalisation on an economy other than Australia (which I also have prepared for) it doesn't specify that it can ask for the effects of globalisation on Australia specifically - is this something that we are assumed to have stuff prepared for that they can ask and if so what things should we be talking about?

Thankyou

[Caleb Campion]

Hi I just have a question based on the globalisation topic: so I have a prepared essay in point form for a broad question on 'assessing the impact of globalisation', while the syllabus specifies that we must have a case study showing the effects of globalisation on an economy other than Australia (which I also have prepared for) it doesn't specify that it can ask for the effects of globalisation on Australia specifically - is this something that we are assumed to have stuff prepared for that they can ask and if so what things should we be talking about?

Thankyou

Yeah look, I would definitely suggest that your prepared essay be broad, and be very much general dot points and arguments, because usually its just not worth the risk or effort to use a prepared essay in an economics exam. If it doesn't fit the question, you just will not get top marks at all.

But yes, if they asked for the impact of globalisation, I assume that they would very much expect you to talk about Australia. I would suggest maybe a 2/3rds Australia, and 1/3rd other economy, if you wanted or even 100% Australia. But if they ask specifically for another economy other than Australia, then do more obviously.

I don't think they would ask specifically for Australia as it is a given that it is about Australia if not specified otherwise.

[Fergus6748]

Hi I just have a question based on the globalisation topic: so I have a prepared essay in point form for a broad question on 'assessing the impact of globalisation', while the syllabus specifies that we must have a case study showing the effects of globalisation on an economy other than Australia (which I also have prepared for) it doesn't specify that it can ask for the effects of globalisation on Australia specifically - is this something that we are assumed to have stuff prepared for that they can ask and if so what things should we be talking about?

Thankyou

Heya, from past exams, they have usually specificied whether they want either Australia, another country, or both at once.

Yeah look, I would definitely suggest that your prepared essay be broad, and be very much general dot points and arguments, because usually its just not worth the risk or effort to use a prepared essay in an economics exam. If it doesn't fit the question, you just will not get top marks at all.

But yes, if they asked for the impact of globalisation, I assume that they would very much expect you to talk about Australia. I would suggest maybe a 2/3rds Australia, and 1/3rd other economy, if you wanted or even 100% Australia. But if they ask specifically for another economy other than Australia, then do more obviously.

I don't think they would ask specifically for Australia as it is a given that it is about Australia if not specified otherwise.

Otherwise, Caleb is on the point, it isn't really worth preparing an essay specifically. Since economics is such a broad and connected subject, the question can be on basically anything and trying to pin it down with a prepared essay is risky and might be a inefficient use of time. More generally speaking, they expect you to have fairly extensive knowledge on Australia's economic policies and very well may ask us in the exam to go on at length about them. I would recommended summarising and revising the strategies of both Australia and another country but I wouldn't go much further than that. Hope this helps!!

[ilikeapples]

Thanks heaps guys! One of my options (which I didn't pick) for my trial essays was this: "Discuss the impact of free trade and protection policies on the structure of industry within Australia and the quality of life in Australia" and it had an excerpt on based on Trump's tariffs attached with it. Could anyone give me a few pointers as to what to talk about as I really don't know how to connect the two ideas together (Esp structure of industry and other nation's protectionist policies)

[sarahsachhha]

Hi could someone help me out as I get bit confused between the different types of efficiency.. If a resource is not being used in the most efficient way is this a lack of technical or allocative efficiency and why?
Thanks in advance

[Fergus6748]

Hi could someone help me out as I get bit confused between the different types of efficiency.. If a resource is not being used in the most efficient way is this a lack of technical or allocative efficiency and why?
Thanks in advance

Hey, so in that case it would be a lack of technical efficiency. As it is talking about the use of a resources, so it's talking about the productivity. Here is a quick definition of the three main efficiences:

Allocative efficiency: ensuring resources are distributed to the most valued production (i.e. resource allocation).
Technical efficiency: maximizing production from fixed resources (i.e. increased productivity).
Dynamic efficiency: the ability of the economy to adapt to changing conditions.

Hope this helps!!!

[EclipseApocalypse]

Hi could anyone help complete these questions I'm completely confused and there are no answers https://imgur.com/a/UYl78pg

[Fergus6748]

Hey, I'll give it a go.

(1) So for the first part, it would be 12 as free trade is about removing the barriers to trade, namely protectionist policies, so in this case it would be a subsidy.
(2) The world price would be 8 for similar reasoning. The price without any subisidies or tariffs.
(3) Quantity supplied would be 200 units, just follow the price and match up with the Supply curve.
(4) Quantity supplied is 150 for same reasoning
(5) Quantity demanded with free trade is 150 as that's where the price meets the demand curve
(6) The quantity of exports is the same as above so 150 units as the curves are at equilibrium so the supply meets the demand.
(7) This gets tricky, so you have to find the amount of units of product is sold to do this you look at the quantity supplied at the price 12 (200 units) and the quantity demanded at the same price (100 units) and then subtract it, then you times that quantity by the price sold, so 12:

200-100=100 units
100 x 12 = $1200 (Supplier revenue without free trade)

( Similar to above but this time since the supply meets the demand curve at the world price (with free trade) of 8, it is just a straight multiplication:

8 x 150 = $1200

(9) Lastly, not 100% on this question but I would say that it is a export-competing market because the supplier revenue without free trade (e.g. Australia) is the same as the supplier revenue with free trade (e.g. Japan). Thus, because each supplier is gaining the same amount of revenue, neither of them is out competing the other, so it is an export-competing market.

Hope this helps!!!

[AdmiralVictor]

Hey guys just a silly question just to be sure..

In regards to essay questions that require 'explain the impacts of x on y' I'm certain we have to detail the causes first before delving into the impacts? (hence the explain directive) --> e.g. explain the effects of fluctuations in the exchange rate on the Australian economy - I would first have to detail the causes of an appreciation and depreciation before going into the impacts? And would it be fine to divide these type of essays into causes first then effects by paragraph?

And does the same apply for 'explain the causes of x on y' where we should also go into the effects? - e.g. explain the causes of AU's persistent CAD
 

[steviemay2000]

Hi, could someone please help me differentiate between foreign aid which goes into the capital and financial account and foreign aid which goes into the net secondary account of the current account - I have heard so many explanations but they all seem to contradict each other and I keep getting multiple choice questions wrong.. thank you!

[studyily]

Hi! Just came across a past HSC question (2015 Q15):

Which of the following could lead to a deterioration in the structural component of Australia's current account deficit?
a) An increase in net foreign liabilities
b) A decrease in portfolio investment by foreign firms
c) A decrease in export volumes due to a weakening global economy
d) An increase in imports resulting from an improvement in the terms of trade

I'm not too sure how to answer this question. What does it mean by 'deterioration in the structural component of Australia's CAD'? Thank you!

[fahdabdul]

Hi, could someone please help me differentiate between foreign aid which goes into the capital and financial account and foreign aid which goes into the net secondary account of the current account - I have heard so many explanations but they all seem to contradict each other and I keep getting multiple choice questions wrong.. thank you!

Foreign aid which goes into the net secondary income account is not for a specific thing. You could say its general foreign aid. Foreign aid in the capital account occurs when it is for a specific purpose such as the development of schools in Zimbabwe or something like that.