about the rising dollar question

[deltathebest]

This question is in relation to the one about the rising AUS TWI with the graph (i think question 1 part b)
for the two factors i put two things that are very similar. Do you think i will be able to get full marks for this part if i put:

1. high TOT
2. continued growth in China

because they are very similar.

cool thanks for any thoughts :]


and also, what did you guys put for the question on the 'economic rationale' for returning to surplus?

sweeet

[MaddehZ]

not sure...the high tot is basically because of the growth in china...dpends how you explained it

economic rationale? ensuring economy doesnt overheat by continuing stimulus, ensure there are funds available in the times of recession, decreasing crowding out by reduced need to borrow domestically and one other point i cant remember lol

[Tashi]

Possibly...

Anyway, I said for the surplus that the government aims to achieve fiscal consolidation, where there is no net call on national savings, enabling us to meet our international financial commitments and contribute to the long-term economic prosperity of Australia. Four marks was quite a bit for that question.

[Peter123742]

Possibly...

Anyway, I said for the surplus that the government aims to achieve fiscal consolidation, where there is no net call on national savings, enabling us to meet our international financial commitments and contribute to the long-term economic prosperity of Australia. Four marks was quite a bit for that question.

1) eases inflationary pressure
2) helps facilitate external stability
3) the theory of 'crowding out', the government pays off debt, eventually becomes a net lender putting downward pressure on interest rates leading to favorable investment conditions.

Just my two cents.

[Tashi]

There's a number of things that could have been said - I've heard people mention political gain too.

Btw... if the government is running a surplus... it's it crowding in? Crowding out is when a deficit is run and the government uses available funds and crowds private firms out of the market.

[Peter123742]

Yes, 'crowding in' occurs, that is acting upon the assumption that the RBA is implementing a restrictive cash rate though. I believe it is a clash in the compatibility.

[Hutchoo]

Lol, I don't know if it was 100% right or not, but for the rational question, I said that Australia doesn't want to have the risk of defaulting on its debt like the PIIGS (I actually screwed up and said PIGG's in the exam, but none the less, they should understand what I meant).

[leiza88]

I put:

1 - The increasing demand for our commodity exports such as iron ore in China and India

2 - Overseas trading partner's low interest rates (i.e. USA's), thus those investors would place their money in Australia where the interest rates where higher.

:S

[BigFunt]

I talked about

1. the interest rate differential between Australia and the rest of the world. This promotes capital inflow and all that jazz



2. overseas rates of economic growth (demand for exports --> demand for currency)

[Saur11]

Had exactly the same as ^

[MaddehZ]

Had exactly the same as ^

Samezz brah gjdm

[Tashi]

Sameee!! Capital inflow and strong growth in China.

[jm123]

I talked about

1. the interest rate differential between Australia and the rest of the world. This promotes capital inflow and all that jazz



2. overseas rates of economic growth (demand for exports --> demand for currency)

Yep, did that too. They are going to get so bored reading all these.