HSC Economics Question Thread

[dantoun13]

Are market and non-market based policies to the environment (e.g. tax, subsidies, embargoes, targets, regulations) a part of fiscal policy or are they microeconomic policies?

[Natasha.97]

Are market and non-market based policies to the environment (e.g. tax, subsidies, embargoes, targets, regulations) a part of fiscal policy or are they microeconomic policies?

They're microeconomic policies

[dantoun13]

If the essay says “government policies” can we talk about monetary policy?

[FutureLawStudent]

Hi,

This question is really bugging me. I've attached it to my post. So essentially the TOT have decreased, and the exchange rate has increased. Exports are now less value in comparison to imports. Exports are less competitive and imports are cheaper. So how can you deduce what happened to the EPI and IPI?

Its logical based off of just the TOT that epi would have decreased and ipi increased, but its possible that both decreased or increased, just at a different rate.

[ericazzz]

Hey,

So for my case study, one of the questions was the 'Examine the impact of globalisation on the economic performance of the chosen country' (India)'. I was thinking of linking trade liberalisation as one of the drivers of economic growth. However, I'm struggling to link or find relevant stats to help back up that trade liberalisation has increased economic growth in India. Are there any suggestions of how to approach this question?

Thanks and much greatly appreciated 

[Brun]

Hey,

So for my case study, one of the questions was the 'Examine the impact of globalisation on the economic performance of the chosen country' (India)'. I was thinking of linking trade liberalisation as one of the drivers of economic growth. However, I'm struggling to link or find relevant stats to help back up that trade liberalisation has increased economic growth in India. Are there any suggestions of how to approach this question?

Thanks and much greatly appreciated 

Hi ericazz,

For globalisation essays it is always important to remember what globalisation refers to (i.e. the increased movement of trade, finance, investment, labour and technology between different economies, leading to the formation of a global and interconnected economy). While trade, is always a good start for talking about impacts of globalisation, don't think to also talk about other ones which are relevant such as increases in foreign investment in the Indian economy and increasing ease of finance in India. As for what stats you could have for trade, you could provide stats such as exports as % of GDP and show how that has grown over the years. Don't forget to give some real world examples of trade such as what the top Indian exports are and how that has shifted due to globalisation and changing demand patterns in the world economy. Also mention the free trade agreements and international organisations (WTO, BRICs) that India is part of to show how India has increasingly become more open to world trade due to the impacts of globalisation.

Hope I helped!  If you have any more questions, feel free to ask.

[emily_p]

Hello!

I was wondering if anyone could help me understand why CAD + KAFAS has to equal zero - or in other words why the amount made in the KAFA has to equal to the exact amount (give or take stat errors) in the CA? I understand that there are links between the two account and that a credit in say investment leads to a debit in the NPI section of the current account, but I’m not sure why one account must be exactly the negative of the other. For example, what if we made 10 billion in investments but lost only 7 billion in the NPI (including returns on investment, labour payouts etc), resulting in the CAD being maybe only -30 while the KAFAS is +60?

I’ve also seen these equations in many textbooks:
Supply of $A = Demand for $A
M + Y debits + K outflow = X + Y credits + K inflow
M - X + Y debits - Y credits = K inflow - K outflow

I’m not really sure what these mean or how these are derived. If anyone could explain my two very long (sorry!) questions I would be really grateful.

Thank you! 

[emilyygeorgexx]

Hello!

I was wondering if anyone could help me understand why CAD + KAFAS has to equal zero - or in other words why the amount made in the KAFA has to equal to the exact amount (give or take stat errors) in the CA? I understand that there are links between the two account and that a credit in say investment leads to a debit in the NPI section of the current account, but I’m not sure why one account must be exactly the negative of the other. For example, what if we made 10 billion in investments but lost only 7 billion in the NPI (including returns on investment, labour payouts etc), resulting in the CAD being maybe only -30 while the KAFAS is +60?

I’ve also seen these equations in many textbooks:
Supply of $A = Demand for $A
M + Y debits + K outflow = X + Y credits + K inflow
M - X + Y debits - Y credits = K inflow - K outflow

I’m not really sure what these mean or how these are derived. If anyone could explain my two very long (sorry!) questions I would be really grateful.

Thank you! 

Hi!

I probably won't be able to give you a perfect answer as I am still learning about the BOP as well. I think it's because we have an floating exchange rate so therefore BOP should always balance to 0. Any deficit that is experienced on the Current Account must be offset by an equal inflow (surplus) of funds on the Capital Account. When it doesn't equal to 0, the net errors and omissions ensures it does.

Not sure if that was even very helpful! Hopefully someone could explain it to you better

[mae_an]

Is there more foreign and business confidence in an economy that has a current account deficit or surplus?

[Lumenoria]

Is there more foreign and business confidence in an economy that has a current account deficit or surplus?

Well, it depends on the circumstances. The CAD can lead to depreciation in an economy that runs on a floating exchange rate (ie. Australia) by placing downward pressure on the currency, which makes foreign buyers more inclined to invest in that economy due to their increased purchasing power. This will lead to increase of demand for that economy's goods and hence an influx of capital inflow, therefore helping reduce the CAD and the disequilibrium. A current account surplus is not necessarily a good thing, for example Spain's transition from a large CAD to a surplus has mainly been fuelled by a sharp drop in domestic demand, which ultimately caused high rates of unemployment and a recession. A deficit often occurs due to strong levels of growth and strong consumer spending - rather than uncompetitiveness. I think the CAD is usually a good thing as long it is maintained by long term capital investment and not unsustainable levels of borrowing (eg. by government).

[emilyygeorgexx]

Hey!

Does anyone know where I can find some Half Yearly practice papers. The topics I have covered so far are 'The Global Economy' and 'Australia's Place in The Global Economy". Any questions relating to these two topics would also be great.

Thanks!!

[Claudiaa]

Hiii!!
Could someone please help me understanding what this question is asking of me? "Analyse the influence of different factors on Australia’s trade and financial flows"

 i.e. one of the suggested answers include "composition of Australian trade" so would i talk about how the composition has changed (dutch disease? etc) but then how would I go about analysing the influence of different factors on Aus' trade and financial flows? (Essentially I don't understand what the question is)

[Lumenoria]

Hiii!!
Could someone please help me understanding what this question is asking of me? "Analyse the influence of different factors on Australia’s trade and financial flows"

 i.e. one of the suggested answers include "composition of Australian trade" so would i talk about how the composition has changed (dutch disease? etc) but then how would I go about analysing the influence of different factors on Aus' trade and financial flows? (Essentially I don't understand what the question is)

I think the question is just asking you to discuss what impacts the patterns of trade and financial flows. So if I were you, I'd probably address fluctuations in exchange rate and how this affects the CAD - depending on which avenue you pursue, this could either discourage or encourage foreign investment in the economy.  For example, you could say financial inflows will continue rising if foreigners expect the currency to continue appreciating as they will benefit from higher return in terms of the foreign currency. Maybe you could even make a link to the resources boom. And yes, you could definitely discuss dutch disease, as long as you make relevant links back to the question. Also, the shift of economies from developing to emerging - particularly in the Asian region - has increased the amount of imports into our country as they are able to produce goods at a price lower than what is available to consumers domestically. In China for example, the shift from a socialist economy to a market economy has enabled rapid economic growth, which has not only benefitted the country itself, but also Australia. In addition, there has been more and more trade liberalisation in these countries due to closer economic and political ties which has thus increased trade flows into Australia - so essentially, globalisation. I think this is much more pertinent to the topic of trade compositions, so ensure this is mentioned somewhere in your response. I could literally think of an infinitude of ways you could go about addressing this question. You could also mention Australia's status as a net capital importer and how this has allowed to become dependent on foreign capital to supplement our shortage in domestic savings, which in short, increases both direct and portfolio investment blablablah.. HAHA this was just lowkey a braindump, but hope it helped somewhat AHH

[headsup]

hey eco ppl,

need help with this question:
Explain why the sum of the two accounts (capital account & financial account) total zero under a system of floating exchange rates.

Thanks heaps 

[kristieevans]

Hey,

So I'm in year 12 and I've just been given an assessment task on Australia's current account position.

Our essay question is:
Analyse the impact each of these causes has had on Australia's CAD.  ("these causes" is referring to a list of structural and cyclical causes.)

I'm kinda confused about how the whole CAD thing links together. I understand terms of trade and exchange rate and all that, but I don't really understand what the CAD is.

Also, any suggestions for how to structure an essay response to this kind of question??

Thanks : )