Economics Questions Thread

[costa]

What is the effect of trade liberalisation on full employment?

[sam.utute]

Short-term: worsened due to business closures and therefore structural job losses.
Long-term: Improved as a result of increased international competitiveness, efficiency and productivity, which results in increased output and a greater demand for workers.

Sorry for the short response. Let me know if you want me to elaborate.

[chrisjb]

Okay,  I seem to remember someone asking this before and me reading the answer someone posted and going 'oh, that makes sense now!' BUT I can't remember where I read that... So, could someone help me with this multi:

Two commodities are complements in consumption. If due to a fall in production costs resulting from improvements in technology, the price of one commodity falls, which of the following is the most likely outcome for the other commodity?:

a) a reduced demand due to its lower price
b) a greater demand due to its higher price
c) a greater supply due to its lower price
d) a reduced supply due to its higher price

I answered 'b' on the basis that there should be an increase in demand due to the lower price of the complimentary product (but I understand that is the incorrect methodology for this question as it doesn't explain the second part of answer b)... And apparently 'b' is the correct answer, but to be honest I didn't think that any of them made much sense.

So, can someone explain it? THANKS GUYS, YOU'RE THE BEST!

[TrueTears]

lol yeah i dont think it makes much sense either, however i think what the answers are meant to imply is that a greater demand thus leading to a higher price for the complement commodity, the wording is strange, but yes i'd have picked b on the basis of what's provided. overall i just think its a bad worded question

[costa]

How does immigration affect the budget?

[chrisjb]

How does immigration affect the budget?

I can't remember directly studying this, but off the top of my head I can think of these points:

Increased skilled immigration can solve skills shortages, and increase productive capacity, both of which should result in stronger economic growth which might act through automatic stabilisers (business tax, for example and increased income tax from immigrants' wages) to change budgetary outcomes.

Greater immigration and hence, a greater population (to a limited extent) can put extra strain on public infrastructure and public goods, leading to increased provisions thereof. This might be seen in some areas more so than others (extra strain on whatever services are target at getting immigrants on their feet).

[Saur11]

Immigration policy affects budgetary policy via automatic stabilisers. If there is a greater population logically there will be more revenue collected through income, company, excise etc, although there may be increased outlays at the same time, a larger tax base from the whom the government collects revenue should naturally increase surpluses/ decrease deficits etc.

[chrisjb]

Hey guys, I did a practice exam that I don't have the answers for and I was hoping you tell me what you think the answers would be for these (the ones I'm not 100% certain of)

Over 2009, the government loosened monetary policy on a number of occasions. This means that:

a) The RBA increased liquidity in the cash market
b) The RBA reduced the interest rate on all loans
c) The RBA increased its purchase of Australian dollars to help slow the rate of decline in its value
d) The RBA lowered individual tax rates

I answered 'a'.

Which of the following is not a supply factor affecting the rate of inflation in Australia?
a) Slow growth experienced by Australia's trading partners
b) Higher productivity in the economy
c) A lower cash rate
d) Lower level for real wages

I said 'a', but I can see 'a' being justified as a supply side factor. Also, I was told only to talk about interest rates from the demand side, so I was a bit confused.

THANKS GUYS!

[Saur11]

The first one should be A (i think) more liquid would mean more cash in ESAs, meaning they have more cash to supply and can therefore charge a lower rate of interest and still maintain profits.
The second is also A (i think)- increase/decrease in pace of EA overseas - should be a demand factor although you could make supply side argument, but it is listed as a demand side factor in the text book so i think you're right

Pretty much just agreed with what you said so i don't think it will be much help, but i think you're right nonetheless

[sam.utute]

Interest rates can be both a demand an supply factor.
They will increase/decrease businesses interest expense, thereby affecting their profit levels, which in turn will affect their willingness to supply.

You should have explored this when looking at budgetary policy and its supply-side initiatives (national savings).

[chrisjb]

wooh! thanks guys, I was fairly sure I had them right, but wanted to check because I had no answer sheet

[the sean]

From last year's exam...

In a competitive market, explain one factor that might cause a change in relative prices.

Can someone please explain how to answer this? Like which factors are best to use ie. price of substitutes, preferences/tastes, or supply factors?

[chrisjb]

From last year's exam...

In a competitive market, explain one factor that might cause a change in relative prices.

Can someone please explain how to answer this? Like which factors are best to use ie. price of substitutes, preferences/tastes, or supply factors?

All of the above would be acceptable. Whenever something asks me to choose and explain a factor I just do the first one that comes to my head. There is no preference for supply side or demand side factors... That said, don't choose something really obscure like 'the positioning of items on shelves making products appear more attractive'. Choose one that everyone knows that you can explain in detail quickly.

[the sean]

Thanks man, I had asked my teacher about it a while back and he may have mis-interpreted my question but he said to only use demand factors, which made me quite confused.

[Hutchoo]

Thanks man, I had asked my teacher about it a while back and he may have mis-interpreted my question but he said to only use demand factors, which made me quite confused.

I think that's because students tend to find demand side factors a lot easier to remember.