Short Answer
21 (a) Why can dumping be used as a justification for trade protection?
So for this question you would want to define what dumping is and how it decreases domestic producer's market share and thus can lead to unemployment within the economy. an adequate explanation of that would have got you 2 marks!
21 (b) Explain the difference between subsidies and local content rules in discouraging dumping
So for this one I would split it between subsidies and local content rules.
For subsidies you firstly define what it is then you would want to say how it decreases production costs for domestic businesses and allow them to decrease their price to consumers which would help them compete with foreign dumping. Drawing a diagram may have also elevated your answer here!
Then looking at local content rules; this places a minimum level of domestically produced products and thus can diminish the level of foreign dumped imports that can be sold in the market.
Any logical explanation that linked how subsidies and local content rules discouraged dumping would have gotten you 4 marks. (2 for each method)
21(c) Compare and contrast the roles of the IMF and the World Bank in international economic integration
So definitely look at what the IMF does in terms of international financial stability but also the question focuses on international economic integration. So you would want to say how it promotes globalisation one of the big things the IMF does to promote free trade is to encourage the deregulation of financial markets and reduce capital controls through giving out advice or lending with strict austerity measures to deregulate their markets. Another thing you could say is that it attempts stops financial financial crises from spreading globally through providing loans to countries facing crises.
In looking at the world bank, it mainly gives out loans to developing countries to fund infrastructure and promote economic development. This organisation is less orientated towards globalisation and more towards equality and economic development. To some extent, economic integration is encouraged through coordinating multilateral aid towards developing countries. Also the world bank does try to encourage globalisation through influencing developing countries to adopt policies that create conditions favourable for foreign investment and efficient markets to allow for economic growth and development. These include reduction of subsidies, trade liberalisation and removal of capital controls. Sometimes, aid is conditional on these structural adjustment recommendations.
So you needed to firstly identify what each organisation is and how it promotes globalisation; then you want to compare and contrast the two in how significant their approach to globalisation is.
22(a) A large agricultural property in Australia is sold to a foreign investor. Outline how this transaction can affect TWO component of Australia's balance of payments.
This question relies on a few assumptions that I made. Firstly that the property was used as a business and that the investor was investing in the business. Secondly I assumed that since it is a "large" property meaning that it was a large investment with a controlling interest.
Using these assumptions I would say that the investment was a credit in the financial account since it is money coming into Australia and on the financial account due to it being direct investment.
However when the business makes profits in the long term; these profits will be paid back to the foreign investor as dividends which are recorded as a debit on the primary income account.
22(b)Distinguish between direct investment and portfolio investment.
This one is pretty simple in that direct investment is when you gain a controlling interest in the company more than 10% whereas portfolio is anything less - usually speculative
22(c) Discuss the costs and benefits for Australia of foreign direct investment
for this one you could have talked about:
Costs- future profits being leaked out of the economy
- taxation incentives means that government receives very little taxation revenue
Benefits- increased investment can increase infrastructure and inject funds into establishment of companies
- increased employment and thus increased incomes which allow people to buy more goods and services (increased standards of living)
- increased technology flows and spillover which can increase efficiency nationally
Those are just a few you could have mentioned - let me know what you guys put down!!
23(a) Distinguish between income and wealth
Income is the amount of money a person earns each a year for owning, maintaining and managing productive resources of land, labour, capital and enterprise whereas Wealth is the monetary value of assets that are currently owned including savings of previous income.
23(b) Explain two ways in which taxation can be used to change the GINI coefficient from 0.5 to 0.2.
A decreased gini means that the economy is moving to a more equitable distribution. This can be achieved through increasing the marginal tax rates of higher income earners (more money will be taken from those who earn a lot) and then increasing the tax free threshold (those with lower incomes will keep their original income) and this will bridge the gap between the two.
Other answers could be things like decrease the GST since it is a regressive tax. If you explain how this tax would bridge the gap between high and low income earners effectively then this should get you 4 marks.
23(c) Explain how age and gender affect wealth inequality
so firstly for age - you would wanna say how they are quite young and thus dont have as much time to accumulate financial assets like shares/houses. You could also talk about the fact that employment available to them is usually low skilled (little work experience/qualifications) which is low paying thus their accumulated savings is likely to be low. You can also mention how they are young and have little knowledge of stock markets or ways to increase wealth.
In looking at gender, you would wanna talk about the gender pay gap and how there is an unconscious bias and discrimination that occurs in the workplace preventing women from entering higher paying managerial roles. This inability to accumulate income and savings will create wealth inequality. Thus, these two demographics are more likely to suffer higher levels of wealth inequality contributing to greater overall inequality in the economy,
24(a)Identify one type of unemployment that is present at full employment and one type that is not.
Present at full employment: You could put a few such as structural, frictional, seasonal, hardcore, long term
Not present at full employment: The main one here is cyclical unemployment.
24(b)Explain how unemployment affects economic growth in an economy.
Unemployment means that some resources are underutilised in the economy. When this occurs it means that some resources can't be used in production and thus limits the amount of goods and services that can be produced over a period of time. You can also look at structural and long term unemployed people start to lose their skills over a period of time when they aren't demanded meaning that if they enter the workforce the quality of labour decreases. This results in inefficiency and constrained economic growth.
You could also argue that unemployment creates inequality meaning that some people are incentivised to learn new skills and work harder which can contribute to improved economic growth in the long term.
24(c) Contrast the use of fiscal policy for an economy at the non-accelerating inflation rate of unemployment (NAIRU) with its use when the economy is above the NAIRU.
So fiscal policy for an economy at the NAIRU would mean that any expansionary stance to decrease unemployment would result in higher inflation.
When the economy is above the NAIRU it means that at the current level of unemployment there is a higher rate of inflation due to the fact that there is no cyclical unemployment in the economy and that structurally and frictionally unemployed people get sucked into employment due to a higher rate of demand. When this occurs firms attempt to attract the skilled labour by increasing wages. An economy at this point would want ot dampen economic activity through contractionary fiscal policy. Moreover they would want to use fiscal policy to undergo structural reform in order to reduce the level of structural and frictional unemployment and thus decrease the NAIRU - can be done by higher expenditure into retraining programs, job finding agencies etc.)
My interpretation of the question may be a bit wrong, sorry everyone, if the economy is above the NAIRU it can mean there is a little bit of cyclical unemployment - i interpreted the question on the graph as in we were above the NAIRU point. But in that were the case, the government would try to decrease cyclical unemployment by increasing growth using expansionary fiscal policy. Whilst simultaneously trying to reduce the NAIRU since they could be fast approaching it.
However I would also write in that it would depend on the government's objectives and targets for unemployment/inflation!
Home
Help
Search
Login
Topic: Economics Exam Discussion + Suggested Answers! (Read 15621 times)