HSC Economics Question Thread

[isaacdelatorre]

High Inflation:
-Distort consumers' decisions to spend or save disposable income -> More likely not to spend therefore lower growth
-Employees seeks higher wages as propensity to spend decreases -> Wage price inflationary spiral (Higher wages tend to stay high -> higher prices and never ending cycle)
-Distribution of income -> Lower income will see their propensity to spend decrease at a more rapid rate than those with higher wages (More affected)
-Unemployment -> Direct link with NAIRU
-Increased price of our exports -> uncompetitive therefore less aggregate demand 
-High inflation can cause exchange rates short term appreciation of $AU- speculation that RBA will raise cash rate in contraction of monetary policy leading to increased financial flows
(However in long term, sustained low inflation leads to greater confidence in Aus economy strengthening the dollar in the long term)

Then low inflation impacts are pretty much the opposite that of higher inflation

Hope this helps Sorry about staggering your questions I had a lot on my plate in the last 2 hours so I couldn't address all aspects of your question in one go.

Hey there, thank you soo much for answering my questions; don't worry about the staggering, not fussed at all. Altho what exactly are the benefits of inflation - most of those effects were negative,.

Also what are the causes of underemployment especially now since it is increasing???

Thank you

[onepunchboy]

Hey guys!

Does anyone know if for the essay Q for your case study, if they can ask for all 3 components ; economic growth, environmental sustainability and economic development?

[Giraffes are tall]

Could someone have a look at HSC Economics 2009 21a and explain how the table works.

Thanks!

[hermansia12]

Hey there, thank you soo much for answering my questions; don't worry about the staggering, not fussed at all. Altho what exactly are the benefits of inflation - most of those effects were negative,.

Also what are the causes of underemployment especially now since it is increasing???

Thank you

Underemployment is those workers who wish to work more hours but are unable to do so. This increase is reflective of the growing casualisation of the workforce as more employers are preferring to hire more part time and casual workers than full time.

Inflation is necessary in the economy as it shows that the economy is growing: inflation needs to be in target band of 2-3% for sustainable growth to occur.

It also prevents deflation which can slow down economic growth as consumers speculate that prices will fall further therefore will spend less.

Overall - inflation needs to be within target band for it to be positive. There aren't too many positives with regards to inflation generally but economic growth will generally Trump any negatives associated

[hermansia12]

Hey guys!

Does anyone know if for the essay Q for your case study, if they can ask for all 3 components ; economic growth, environmental sustainability and economic development?

I have never seen all 3 at once specifically but in any case I would still link them together anyway.  Economic development affects the economy's long term growth and the environment -> the environment will impact the ability for the economy to grow ( relationship with its resources impacting productivity) etc.

[hermansia12]

Could someone have a look at HSC Economics 2009 21a and explain how the table works.

Thanks!

The table is pretty straight forward -
It is just the weighting of each good towards inflation in the economy.

e.g food will count 15% towards overall CPI , housing 20% towards overall CPI and Health 5%. Therefore the group that contributed most would be food.

[Bedelle]

May I ask why the answer to this question (HSC 2011 Paper - Question 17) is $2000? Thank you!

[hermansia12]

May I ask why the answer to this question (HSC 2011 Paper - Question 17) is $2000? Thank you!

Foreign producers earn at the world price - $10.

When the price increases to $15 due to the tariff,  the quantity supplied has increased by 100 and the demand has decreased by 100. This means that there is 100+100=200 units of the good that could've been met at the world price. (but is lost due to the tariff)

This means that the total revenue decreased = 200*10=$2000

[onepunchboy]

HEYYY

can anyone explain what happens to the australian dollar when you buy/sell foreign currency?? THANKSSS

[nancy_cc]

HEYYY

can anyone explain what happens to the australian dollar when you buy/sell foreign currency?? THANKSSS

Hey, when you sell foreign currency that means you convert the foreign currency into AUD. That means there is a lower supply of AUD in the market which can lead to an appreciation of the AUD. (law of supply and demand) Buying foreign currency is essentially the opposite, when you buy a foreign currency you supply AUD to the FOREX market and hence there is now greater supply and can lead to a depreciation of the AUD.

[hermansia12]

HEYYY

can anyone explain what happens to the australian dollar when you buy/sell foreign currency?? THANKSSS

Think about foreign currency and $AU as goods. If you sell foreign currency you receive $AU in return. This means that there is less $AU floating around but more foreign currency in the economy now. Since there is less supply of $AU in the economy- then it will appreciate the dollar (increasing the price as supply of the dollar is shifted to the left)

Hope this helps

[isaacdelatorre]

Hey,

Can someone please explain to me how micro economic reform creates dynamic efficiency?

thank you

[hermansia12]

Hey,

Can someone please explain to me how micro economic reform creates dynamic efficiency?

thank you

Dynamic efficiency is generally the productivity of the firm overtime.

Now in macroeconomic reform we are interested in making our industries more competitive and efficient to develop comparative advantage. Therefore by making our industries more efficient and productive through infrastructure upgrades (technology) and improving processing methods,  firms will be more efficient in the long term. (IE dynamic efficiency)

[hermansia12]

Adding on from that- infrastructure takes time to upgrade and involves lots of capital. This means that the gov. Is limited in its spending in other areas as well as increase amount needed in repayment of debt (cumulation of interest and increased need for foreign borrowing/investment). This addresses the theory of dynamic  efficiency where the previous generation is worse off than in the long term

[isaacdelatorre]

Dynamic efficiency is generally the productivity of the firm overtime.

Now in macroeconomic reform we are interested in making our industries more competitive and efficient to develop comparative advantage. Therefore by making our industries more efficient and productive through infrastructure upgrades (technology) and improving processing methods,  firms will be more efficient in the long term. (IE dynamic efficiency)

Wait, I thought dynamic efficiency was the ability of an economy to adjust to changing economic circumstances and changing levels of demand.
Isn't technical efficiency the productivity and efficiency of the firm to maximise it's output with given level of input?