Economics Questions Thread

[Water]

Aggregate Wealth = Total Amount of Assets

Disposable Income = Income received - direct tax.

[Hutchoo]

Yeah, I figured that out shortly after (H)
I had my second SAC today on chapter 2 of Economics Down Under, only 1 more chapter left until unit 3 is complete.

[Jdog]

I've been doing some work on inflation and have come across a couple of things I don't quite understand.
In the book it says that increases in overseas rates of growth place upward pressures on inflation since they increase the export component of AD. I understand what they are saying and understand that it increases AD but I don't understand why an increase in exports would necessarily contribute to an increase in the general price level of goods and services here.

The book also makes mention of the fact that increases in the I component of AD contributes to inflation. Although it makes sense if we look at the graph and observe AD increasing, wouldn't increases in investment serve to increase productivity and hence decrease costs of production, placing downward pressures on inflation? and by increasing investment in capital wouldn't that mean productive capacity is increased therefore demand inflation wouldn't occur?

[Jdog]

anyone ^?

[Hutchoo]

I have no idea how to answer your question Jdog

I have some questions, they're quite basic.. but here they are:

If the CPI for a country in 2009-10 was 90 index points, while in 2010-11 it was 120 points, the annual inflation rate measure by the CPI would be:
A) 40 per cent.
B) 30 per cent.
C) 20 per cent.
D) None of the above percentages.

What are index points?
How would you work out this question?

Also, what is meant by "real terms"? For example: "Rise by about 3-4 per cent annually in real terms".
Thanks in advanced.

[Water]

Hutcho, is the answer B.



Real terms - is used to remove any inflation from the previous period. This is used to indicate the level of production that has actually been made in a country.

JDog.

a) As export increase, this can cause inflation in our domestic country as the products supplied to our country will decrease, as it is sold overseas. This will therefore mean, as supplies decrease, relative scarcity comes into play.

b) Investment, in its initial stages will cause a rise in inflation however in the long term will not. This is because, as investments are made, they do not increase productivity however come at a cost to the firm. To tackle this, inflations may rise to subsidize the initial costing of investments.

[Hutchoo]

Hutcho, is the answer B.



Real terms - is used to remove any inflation from the previous period. This is used to indicate the level of production that has actually been made in a country.

My book says that the answer is D?
You didn't explain what index points are

[Water]

Hutcho, is the answer B.



Real terms - is used to remove any inflation from the previous period. This is used to indicate the level of production that has actually been made in a country.

My book says that the answer is D?
You didn't explain what index points are

Okay, I just did a quick read up on this chapter, because I thought it'd be easy but I underestimated it.

Anyways, the index points for CPI is used as a measure of a inflation indication.

100 = no inflation.


>100 = inflation percentage


<100 = deflation percentage.



The reason you cannot calculate the annual rate of inflation is because you require two quarters of one present and past. Say March 1953 and March 1952. As you do not have two quarters, you cannot calculate the annual rate of inflation in this question.

[Hutchoo]

Thankkkkk youuuuuuuuuu.

[Spectral]

Hi, could I get some help on these questions
1)Discuss how production classifications as Consumption or Investment can depend on how it is used in the economy.

2)Define the terms ‘jobless growth’
 
3)Explain how a reduction in interest rates adds to inflationary pressure over time

4)Outline two reasons why changes in real GDP may not accurately reflect changes in economic living standards

Could this be GDP fails to distinguish between monetary transactions that actually improve welfare and those that detract from welfare such as money spent on tobacco.
Thanks.

[TrueTears]

Hi, could I get some help on these questions
1)Discuss how production classifications as Consumption or Investment can depend on how it is used in the economy.

2)Define the terms ‘jobless growth’
 
3)Explain how a reduction in interest rates adds to inflationary pressure over time

4)Outline two reasons why changes in real GDP may not accurately reflect changes in economic living standards

Could this be GDP fails to distinguish between monetary transactions that actually improve welfare and those that detract from welfare such as money spent on tobacco.
Thanks.

2. Jobless growth is where a macroeconomy experiences growth while maintaining or decreasing its level of employment.

3. The Fisher equation states that

Where is the real interest rate, r is the nominal interest rate, P is the prices of goods (current) and is the expected price.

If we assume decreases, then this is either because of r decrease, P decrease or increase. If we assume r and P don't change then as required.

[Hutchoo]

Sexy ^

[Hutchoo]

Question:
Discuss the impact on Australia's economic growth if our trading partners were experiencing recession.

I talked about how our imports would be higher, meaning that we'd have high CAD repayments which leads to an economic slowdown and unemployment.

Is that the right answer? 

[schmalex]

I think the most obvious link is that our exports would be lower. Also, we don't have CAD "repayments" as such. We have repayments on debt. The CAD is just the difference between how much we spend and how much we earn.

[Hutchoo]

Thanks for that mang.

Uhm

I have another few questions T_T
Questions:
Explain what the balance of payments represents.

Distinguish between the allocation of resources and efficient allocation of resources.


Thanks.