HSC Economics Question Thread

[angelahchan]

This is probably a dumb question but in this sentence:
"Monetary policy can also be used. Lowering the cash rate can affect the term structure of interest rates across the economy, reducing the cost of credit."

what does "term structure" and "cost of credit" mean?

Thanks in advance!

I don't know what the exact terms mean, but I think it's just a convoluted way of saying that lowering the cash rate affects (lowers) interest rates (via the transmission mechanism), resulting in a lower cost of borrowing (due to less interest needing to be repaid on loans)

[angelahchan]

Hey guys, anyone have any HSC question predictions?

art of smart has a list of hsc question predictions: https://www.artofsmart.com.au/hsc-economics-2017-trial-exam-questions/
I think there'll probably be something on  the case studies since it hasn't been an essay question for a while

[sophiegmaher]

art of smart has a list of hsc question predictions: https://www.artofsmart.com.au/hsc-economics-2017-trial-exam-questions/
I think there'll probably be something on  the case studies since it hasn't been an essay question for a while

Legend!

[ayylmaolad]

"Analyse the impact of changes in the global economy on Australia’s Balance of Payments. In
your response, you should refer to the economic information provided. "

Hello, so in questions where it asks for "changes in the global economy" what sort of things can we talk about, im confused and stumped because it is so broad

[isaacdelatorre]

Are reserve requirements set by the government or the RBA, or some other regulatory body? (maybe APRA?)

From my understanding reserve requirements are restrictions and guidelines that must be met for deposits and loans by financial institutions and consumers.

e.g. the decreasing maximum LVRs for home loans for particular suburbs in Sydney and Melbourne.

Thanks

Hey there,

sorry for the late response to your question. Reserve requirements isnt something that you really have to know for this course but APRA is the main regulatory body that used to impose heavy restrictions but have since started to decrease their regulation and involvement in the market. There are still regulations in place tho.

Good luck for the exam!!!
Isaac

Hi, does anyone have info on china and the international business cycle? I know they implemented a stimulus package as a response to the gfc, but idk where to find info  on  the effects of  the package

Hey there,

So in terms of China and the stimulus in the GFC - there isn't exactly hard stats on the specific outcomes of that policy. Mainly because there were many responses to the GFC and the effects of it can't just be attributed to that one stimulus (monetary policy e.g.). However if you were looking at that; I would use the stats on growth around 2008-2009 and say that it didnt go into negative growth like other countries due to these expansionary policies. In terms of the international business cycle - look at changes in GWP over time especially around the GFC if you want to link it to China.

Hope this helps; sorry I dont have a bank of statistics - I was too lazy when I did my HSC

Isaac

Hi, does anyone know whether fiscal or monetary policy have a shorter time lag? I think fiscal has a longer time lag for implementation, whereas monetary has a longer time lag for the effect after implementation to take place. but in 2014 q24 "explain the limitations of both fiscal and monetary policy in addressing economic slowdown", the sample answer seems to assume time lag means time lag for implementation... (so does time lag automatically mean time lag for implementation?)

Hey there,
so the answer actually makes the same distinction tha tyou made. If you look at the first paragraph on fiscal policy limitations it says that the 'implementation of fiscal policy is subject to time lags' meaning that it has an implementation lag due having to pass houses of parliament etc. Whereas monetary has a short implementation lag but a medium term impact lag (usually 6-8 months) as the suggested answer says. So you are both correct thanks Sophie for the input as well!!!!

Good luck !!
Isaac

This is probably a dumb question but in this sentence:
"Monetary policy can also be used. Lowering the cash rate can affect the term structure of interest rates across the economy, reducing the cost of credit."

what does "term structure" and "cost of credit" mean?

Thanks in advance!

Hi there,

so a term structure is just how long the loan lasts so for instance a 2 year loan with interest paid annually... or interest paid monthly - those are all parts of the term structure. The cost of credit on the other hand is the relative cost of borrowing money - this is directly correlated to the interest rate since you have to pay back interest when you borrow the money. So basically the sentence means that when you use expansionary monetary policy to lower the cash rate, you essentially you reduce the cost to consumers and businesses to borrow money (since less interest has to be paid) i.e. incentivisng borrowing to stimulate the economy

Hope this helps, good luck

Isaac

Can someone please answer this question

Assess the effectiveness of government policy in Australia in attempting to improve the BOGS in recent times?

Thanks!

Hey Cat,

What a question - so you would firstly look at the factors that affect BOGS and current issues with BOGS - so things like international competitiveness, narrow export base, exchange rates, things like that (not exhaustive list, just things off the top of my head) then in the same paragraph that you talk about how they affect BOGS, you would assess the impact of a policy to remedy that. So for example, international competitiveness - talk about how they affect inflation and the exchange rate through monetary policy in order to maintain competitiveness.

Alternatively you could look at it in terms of fiscal, monetary, microreform and say how those have all affected BOGS - this is a weird question and I'm sorry my knowledge of the syllabus has dwindled a bit but that's how I would go about it.

Good luck!!
Isaac

"Analyse the impact of changes in the global economy on Australia’s Balance of Payments. In
your response, you should refer to the economic information provided. "

Hello, so in questions where it asks for "changes in the global economy" what sort of things can we talk about, im confused and stumped because it is so broad

Hey so in terms of changes in the global economy; I would look at things like the GFC, commodity boom, China's industrialisation, global downturns (Euro crisis) --> choose a few of these and then say how this affects BOGS + PYA + NSY + KFA etc. so like how global economic activity affects our exports --> give an example like china's industrialisation and high growth which increased demand for our iron ore exports resulting in a surplus on BOGS etc.

It's incredibly broad - i think i read a practice essay on this that was over 1500 words - so choose really important global shifts and say how they would affect accounts on BOP.

GOod luck!!!!

[Noorijaz]

hi
can someone please do this question
i dont get it

thanks

[lcamilleri.53]

So the MPC for this question is 50/100 = 0.5
Therefore k = 1/(1-0.5) = 2
Since consumption has increased by 100m from year 3 to 4
National income increases by 200m, meaning new national income is now 800m (D)
In retrospect you can actually rule out A definitely and B to an extent without doing the question, because it is asking for the new national income not the increase in national income

[hinakamishiro]

Hey guys! Can someone please explain why the economy's international competitiveness had decreased in this Q? Because shouldn't a deteriorated ToT mean that the eco's imports are cheaper to buy and thus more competitive?

Thanks!

[toasted]

Hey guys! Can someone please explain why the economy's international competitiveness had decreased in this Q? Because shouldn't a deteriorated ToT mean that the eco's imports are cheaper to buy and thus more competitive?

Thanks!

Hey!

Thats a valid point if the ToT decrease has been derived from a decrease in export price index, however in this case the export price index has remained constant (100) while import price index has increased. Now we look at the TWI, which is an indicator of the relative exchange rates between Australia and major trading partners, and we see that it has increased. Therefore, in a foreign economy, a country will be able to purchase less from Australia for each unit of foreign currency, reducing demand and ultimately reducing the international competitiveness of Australia

Hope that makes sense!

Edit: How would i go about structuring a response to the essay question "Analyse effects of domestic and global free trade and protection on the Australian economy" (2013 HSC)

[angelahchan]

Hi, can someone please explain the difference between product and factor markets, as well as which microeconomic reforms correspond to which markets? Also  could I please have some help with this question? thanks!

[angelahchan]

Edit: How would i go about structuring a response to the essay question "Analyse effects of domestic and global free trade and protection on the Australian economy" (2013 HSC)

If you have time, I would definitely suggest looking at the productivity commission report, it's all on the effects of global and free trade protection on the Australian economy: https://www.pc.gov.au/research/completed/rising-protectionism/rising-protectionism.pdf
(you can pretty much copy what's being said there for anything to do with protection)
As for effects on domestic, you can talk about Australia's reduction in protectionism/ increase in free trade (e.g. closing of car manufacturing sector), or you can talk about what could potentially happen if Australia increases protectionism as a response to the global increase in protectionism (this is mentioned in the productivity commission report as well).
For structure, I'd suggest maybe 2 paragraphs on global, with one para on free trade and one on protectionism, and 2 paragraphs on domestic similarly structured

[hinakamishiro]

Hey guys can someone please explain why C is the correct answer in both? It doesn't make any sense to me.
Thanks!

[EEEEEEP]

Hey guys can someone please explain why C is the correct answer? It doesn't make any sense to me.
Thanks!

Globalisation is the increasing interaction of people through the growth of the international flow of money, ideas and culture.

A) No, it helps globalisation as people can move around
B) No, it helps glob. as people can exchange ideas and do business more easily.
C) Yes. Oil allows people to move, it powers trains, it powers planes. THUS an increase in the oil price would affect the whole world drastically Economically and socially. (it is the more correct answer)
D) This may slow one trade.. but C)

[toasted]

Hi, can someone please explain the difference between product and factor markets, as well as which microeconomic reforms correspond to which markets? Also  could I please have some help with this question? thanks!
(Image removed from quote.)

Hey thanks for the help on my question

Product market refers to the market in which PRODUCTS are sold, so essentially the market in which goods and services are sold

Factor market refers to the market in which FACTORS OF PRODUCTION are sold, so essentially the inputs required by business eg. land/labour/enterprise/capital.

Microeconomic reform largely deals with both of these markets for example labour market policies are directed at the factor market, while privatisation was to improve competiton within the product market.

As for the question, i think you assume that y=c+s+i (i think this is the three sector model of the flow of income) so mps=change in saving/change in income which would be 100/200 and therefore k multiplier = 1/(1/2) = 2 (D)

Hope that helps! 

[BradMate]

The answer here is D. I understand why it is correct, but why is it MORE correct than A?

I get that employers are less likely to higher a youth cos they have to get paid more, and more likely to pay an adult if they are paid relatively less but couldn't you look at it from the perspective of adults being more willing to get a job (more incentivised to get a job, more productive, willing to work more hours etc.) as they are getting paid relatively more - from A?

So given more adults are willing to work, they take more jobs, and increase unemployment of youth?