Hi!
I am freaking out about my economics exam next week. How would you answer this; "Using examples, discuss the main macroeconomic and microeconomic effects of protection on a national economy like Australia"
I discussed general advantages/disadvantages of protection and assorted them intro macro and micro but its worth 5 marks and the info I have doesn't seem sufficient.
Thanks!
meerae
Hey!
So basically when looking at the question you need to break it up into macro and micro. Macro essentially is looking at the whole of the Australian economy whereas, micro targets individual sectors of the economy such as employment, competition, agricultural assistance.
Some macro things I can think of off the top of my head:
* Decreases Australia's ability to trade with the rest of the world which causes a decrease in their GDP and ultimately decreases GWP
* Decreases Australia's access to a multitude of goods and service, in which they become scarce. As there is now a limited selection of goods and services, this drives the price up and contributes to an increase in cost-push inflation in the Australian economy
Some micro things I can think of off the top of my head:
* In the short term a decrease in protection causes an increase in structural unemployment for export competing businesses within the economy as their trade has now become restricted. However, in the long term this decrease in protection causes a decrease in unemployment due to increase labour productivity and technical efficiency occurring within the economy. These resources are reallocated to more efficient industries in the economy so they are able to operate at their full productive capacity.
* A decrease in protection increases the choice of goods and services available to customers. This therefore, increases competition within the economy and causes a decrease in price. Due to this decrease in price this stimulates demand within the economy, causing increased spending which overall contributes to increase in Australia's GDP and levels of economic growth.
There is definitely 100000 things that I have missed but I hope these few help