General
How many days are left to your economics exam?
21 days from 10th October
Define opportunity cost
Value of the second best alternative foregone when a choice is made
Draw the business cycle against the value of GDP
upward sloping wavy curve to demonstrate peaks and troughs
I want to exchange USD$100, how much AUD do I need to sell if the exchange rate is USD1: AUD0.67?
$148.65
Which efficiency is an environmental policy trying to address?
intertemporal efficiency
If you turn 18 this year, when did you start primary prep?
2011
Create a Production Possibilities Diagram with 2 goods/services of your choice with specific units plotted from A to F.
Point A is on the left, at the top and F is on the right, at the bottom
Draw the 5 sector circular flow model
Needs all flows, 5 sectors, leakages and injections all labelled
List the 4 components of the current account in the BoP
BOMT, Net services, Net primary income, Net secondary income
Explain how one unconventional monetary policy has worked to slow inflation.
Forward guidance is providing certainty about future direction of interest rate which is aligned to domestic macroeconomic goals to adjust the level of spending, savings and investment in the economy.
What's the latest economic growth rate?
1%
Which type of market is highly competitive, has minimal government intervention and achieves allocative efficiency?
Perfectly competitive market
Explain how the depreciation of the AUD affects AD and illustrate this with the AD curve.
Boost value of Australian exports against value of imports leading to less imports and increased demand for exports as exports become cheaper for foreigners. However, demand dampens for imports as the purchasing power of Australian households has reduced. This encourages Australian households to replace these imports with import-competing goods/services produced in Australia which leads to increased AD and higher levels of economic activity, shifting AD curve to the right.
Provide two reasons for Australia's Current Account deficit in the past.
Heavily dependent on overseas borrowers & overseas capital to finance investment
Australia's national savings-investment gap with low savings and high investments by firms and the government needs external funding.
Explain the difference between loosening & expansionary monetary policy.
An expansionary monetary policy meant adjusting the cash rate lower below the neutral rate whereas loosening meant lowering the cash rate which can happen at any rate.
Which year did your Economics teacher start teaching at this school?
2021 or 2023
What are the four factors affecting the price elasticity of demand? Explain each factor.
Type of item: Degree of necessity
Product substitutability: Degree of replaceability
Time period: Long vs short term
Proportionate of cost: Percentage of income needed for purchase
Draw, plot and explain the horizontal, upward sloping and vertical part of the AS curve.
Horizontal portion represents an economy that has too much spare capacity, has high unemployment and low inflation.
Upward sloping part represents limited excess capacity near productive capacity, increasing rates of inflation and less unemployment.
Vertical part represents no excess capacity as economy is at productive capacity and cannot increase any output, full employment and no excess capacity.
Explain the effect of a deterioration of terms of trade on the current account balance.
The CAD will increase or the CAS will decrease as Australia will be receiving less for exports relative to imports likely due to weaker demand for Australian goods which would lead to a fall in export income leading to less credits and increased debits in the BOGS. This contributes to a fall in the current account balance resulting in an increase in CAD or fall in CAS.
Explain how either a specific discretionary or automatic stabiliser can stabilise the business cycle.
Automatic stabiliser:
•Expansionary effect: Decisions increase AD and stimulate economic growth, in turn reducing cyclical unemployment and put upward pressure on demand inflation. Increase government spending (increase G1 or G2), increasing injections in the economy. Increase transfer payments to increase disposable income of households and increase consumption. Decrease taxation, reducing leakages and increasing disposable income available for consumption. These decisions make the trough/recession less severe to help lift AD & economic activity
Discretionary stabiliser: Expansionary effect: Automatically, the value of tax receipts fall & welfare outlays rise to push budget towards an expansionary budget deficit to help lift AD & economic activity. Firms pay fewer dollars in company tax, provisioning more funds for investment. Individuals pay less personal income tax, reducing leakages and increasing disposable income available for consumption. Excise & sales tax revenue decreases due to reduced consumption. Consumption decreases less than it would have otherwise (flattening the business cycle peak).
How old is NHS?
98 years old in 2024
Can you define the four types of market failure, provide an example of each and link them to how efficient they are in resource allocation?
Public goods i.e. police, defense, due to underallocation of resources
Positive externalities i.e. vaccines, education, due to underallocation of resources
Negative externalities i.e. polluting industries, due to overallocation of resources, which compromises intertemporal efficiency
Common access resources i.e. lakes, rivers or seas that can be used for fishing, due to overallocation of resources which compromises intertemporal efficiency
Asymmetric information i.e. insurance, secondhand car sales, resulting in misallocation of resources to inefficient markets
Describe the 4 consequences of not achieving full employment.
Above NAIRU: Loss of GDP & Loss of tax revenue
Below NAIRU: Inflation & Increased income equality
Explain how the 5 sectors that affect international competitiveness impact on the price/quality of exports that influences Australia's international competitiveness.
Productivity: price of exports
Cost of production: price of exports
Availability of natural resources: quality & price of exports
Exchange rate: price of exports
Relative inflation rate: price of exports
Explain how an environmental-based policy affects intertemporal efficiency in the short- and long-term.
It will not be able to achieve short-term inter-temporal efficiency as factors of production is too expensive to reallocate and takes time for planning. This makes it hard to achieve in the short term.
In the long-term, produces are disincentivised by the carbon tax and will reallocate resources to mitigate it, reducing future costs to the environment by innovating or using less polluting factors of production. The future generation will thus have better access to resources they will need, achieving intertemporal efficiency.