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Economics Trial exam Questions and results

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costargh:
This thread is for all questions that you find on your trial exams that are challenging etc and you want explained by other students. You can also put your results for exams in here.

Neap 2008- Hard exam in my opinion
82/90
I think my teacher marks easier than some other schools like marbs' school.

marbs:
Some results;

81% on the Neap Exam
88% on Leading Edge.


A difficult question I came across for you all'

Explain why the current account deficit has not reduced even though savings have increased. (6 marks)


(I'll put the answer up later, and add some other questions that you may or not find challenging).

costargh:
Lol umm ok ill have a go but its just some guessing...

-savings did not increase substantially enough to divert borrowings from overseas back to Australia
-the current loans abroad still have to be repaid, thus the interest on those loans abroad are still adding to the current account deficit
-While the level of credit in australia may have increased, the interest rates offered by financial institutions may represent a poor offer compared to overseas lenders.
-there are other components of the current account that may have increased. Eg. Imports relative to exports may have increased, canceling out any possible reduction in the cad.

im not sure if all of these are real reasons... they are just off the top of my head, hopefully at least one is right lol

ReVeL:

--- Quote from: marbs on October 14, 2008, 05:49:48 pm ---Explain why the current account deficit has not reduced even though savings have increased. (6 marks)

--- End quote ---

Would the main reason be that even though savings has increased and borrowing from O/S has likely decreased, the net incomes section of the Current Account ivolves Australia paying large amounts of interest on borrowed money, hence the Current Account Deficit is likely to remain the same or continue to grow?

Seeing as it's a six mark question theres probably more that should be included. What did the answer say?

AppleXY:
CAD =! savings.

As revel said, the financial account takes into consideration of borrowings/savings etc of the balance of payments system. Even though there has been an increase in savings, Net Income has most likely remained the same or increased thus resulting in a high CAD albeit high savings.

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