Sorry!!! Me again.....
Just two more questions! If someone could help be MUCHLY appreciated...
1) Explain how fiscal policy might be applied to improve a country’s external stability. (5 marks)
2) Discuss the effectiveness of fiscal policy at increasing the level of economic growth during a recession? (5 marks)
Thanks again!!!!
1. So for this question you can think about external stability as measured by the CAD, foreign debt, terms of trade, exchange rate, and/or international competitiveness. How does FP affect all of these measures?
An expansionary stance on the budget would inc economic growth, potentially worsening the CAD and putting us in greater foreign debt (to fund investment), but it may also improve our terms of trade (if demand for our exports grow) and cause an AUD depreciation (which means we're more internationally competitive. And vice versa for a contractionary stance.
You could also mention how low budget deficits/surpluses are seen as a greater sign of external stability by investors, which is why we're currently trying to bring the budget into surplus.
2. Ooh, now this question gets into a discussion of the strengths and weaknesses of FP. So economic growth can be measured by AD = C + I + G + X - M, meaning the government can directly impact the level of AD by changing G. And one of the big features of FP is that it has a short impact time lag-- so it'll get ya out of the recession fast.
The downside? We only change the budget once a year. So if the recession happens a month after the budget is released, we're kinda stuck with our current expenditure/taxation for another 11 months (in theory at least, in practice we have a Mid Year Economic and Fiscal Outlook around December to make revisions).
But hey, we've also got automatic stabilisers, which adjust the level of expenditure and taxation according to economic conditions. So while these stabilisers alone aren't very helpful in fixing a recession, they'll help slow the impact.
Hope this helps!
Hi,
So I'm doing the Financial markets topic of the prelim year and am struggling to memorise the features of the terms e.g. ASIC, APRA, RBA, credit unions, investment banks etc., as there is a lot of theory. I find the other topics so far more logical rather than memory-based e.g. supply and demand.
How do i tackle this?
Thanks
Hey wlam! Welcome to ATARNotes!
And yeah, Economics definitely has its sections where it's pure memorisation. For these sections, I rely heavily on things like flashcards and read-writing (name in progress, but basically reading a page of your notes and then trying to write down as much of it as you can-- rinse, repeat, until you get all the information). If you can remember what the abbreviations stand for, you can sometimes figure out what they do from the name.
Good luck in your studying!