How did everyone go?

[spizaa #5]

i totally agree with silva..very predictable short answer and with the compare question i just weaved in current examples with the theory itself like $42 billion stimulus package (quick and targeted) but for monetary policy, interest rates affect everyone so it isnt as targeted, decreased consumer and business confidence (psychological constraints), monetary policy = no political influence hence act in best interest of economy (4.5% decline in interest rates from sept 08 to april 09), but budgetary policy = at whim of the voters, meaning they have to incorporate things to please voters etc.
but fucked up some multis like the GDP one and the balanced budget one along with, most likely, several others
ah well its eco, 5th

[silva]

oi spizz what was the budget balance answer? ive heard two different answers

[ryanb]

the balance budget was that they would have to charge higher taxes and spend less. carn't remember whether it was a,b,c or d though.

spizaa if u got the GDP one wrong ... do u know what the answer was?

[silva]

why isnt the budget balance qs lower taxes and spend less? just curious cos i cant remember what my anser was but they both seemed correct
i think i chose D

[jena101]

yeh i said lower taxes and spend less too, since i thought they balance the budget over a number of years, i.e deficits in economic downturns and surplusses in upturns...is this wrong?? and the gdp question i also said d as i thought they do include that. i hope i did alirght. i was really happy with the short answer, just not so happy with mc.

[spizaa #5]

yeah silva i got the same as you for that
D - lower taxes and spending.
i remember tossing up between A and D for the GDP one, but ended up putting D (something about rent) which i wasnt confident about because i hadnt studied much of those little things that are common in multis
but moshi in a downturn, unemployment increases, meaning that people would struggle to cope with an increase in taxes given the increase that would be seen in underemployment and people receiving welfare benefits instead of their normal income. the govt would lose support of the voters (in reality) if they raised taxes in a downturn

[billz1508]

im pretty sure i picked D for that question aswell

[spizaa #5]

yeah true that. i reckon it will be a question vcaa accepts two answers for, just like in the chem midyear, because it is open for interpretation and the wording wasnt specific enough

[Craxe]

It was plenty specific. It said if the government policy was to run a balanced budget - what would they do in a recession?
It is, essentially, a question of automatic stabilisers.

Well, tax receipts would fall - so to keep revenue stable, they would have to increase taxes.
They would have to spend more on social welfare- more people will become unemployed - so, to keep expenditure stable, they would have to decrease spending.

Achieve both of these, and a balanced budget would result.

If you decrease taxes, you bring in less revenue - and even if this is partially offset by less spending, it will not achieve a balanced budget position. Raise taxes, lower spendng = solution

[silva]

It was plenty specific. It said if the government policy was to run a balanced budget - what would they do in a recession?
It is, essentially, a question of automatic stabilisers.

Well, tax receipts would fall - so to keep revenue stable, they would have to increase taxes.
They would have to spend more on social welfare- more people will become unemployed - so, to keep expenditure stable, they would have to decrease spending.

Achieve both of these, and a balanced budget would result.

If you decrease taxes, you bring in less revenue - and even if this is partially offset by less spending, it will not achieve a balanced budget position. Raise taxes, lower spendng = solution

yeh i understand where you're coming from, but the majority of the Govts spending in a downturn is on the discretionary side (this downturn has been something like 60-40 of discretionry compared to automatic) so i dont see why increasing discretionary spending isnt at legitament aswell which would be offset by reductions in taxes =S

[Craxe]

Why would they increase spending? The objective is explicitly stated to balance the budget. Not to come out of a downturn, not to stimulate demand, but to balance the budget. To balance the budget, they would increase taxes and decrease spending. Any other option does not enable the objective to be achieved, and thus must be considered incorrect.

[silva]

mmm yeh must have misinterpreted the qs, for some reason i thought it wanted to balance it in each year fuck

[Bronzey]

I had the same as Craxe. I think people misinterpreted the question and made something very complicated out of what was a simple question

[christianeldred]

Is anyone able to post a scanned version of the exam?

[rlobo1]

It was plenty specific. It said if the government policy was to run a balanced budget - what would they do in a recession?
It is, essentially, a question of automatic stabilisers.

Well, tax receipts would fall - so to keep revenue stable, they would have to increase taxes.
They would have to spend more on social welfare- more people will become unemployed - so, to keep expenditure stable, they would have to decrease spending.

Achieve both of these, and a balanced budget would result.

If you decrease taxes, you bring in less revenue - and even if this is partially offset by less spending, it will not achieve a balanced budget position. Raise taxes, lower spendng = solution

mate a balanced budget refers to achieve fiscal consolidation over the business cycle as the Howard Government and now the Rudd Government endeavours to do so. Fiscal Consolidation refers to acheive a balance by running deficits during a recession (counter cyclical fiscal policy) and surpluses during booms (also counter cyclical fiscal policies). Therefore they do not increase taxes as this does not encourage spending in the economy, the automatic stabilizer refers to the long term fiscal balance i.e. during a recession tax revenues will decrease, spending on cash transfers increase but during a boom tax revenue increases and cash transfer payments decrease thus balancing each other out reducing the dip into the national pool of savings or foreign debt