Economics Marathon (1 Viewer)

[hup]

Explain ONE cost and ONE benefit of inflation.

 

[krnofdrg]

Explain ONE cost and ONE benefit of inflation.

Benefit

Rising prices on assets such as shares, property . If there is a speculative boom in these markets driven be excessive levels of confidence and demand, this can lead to asset price inflation. Speculators can gain from price inflation as they can sell at inflated prices before colla[se of the boom.

Cost.

Consumers suffer a loss in purchasing power and real income. Unless consumer income keeps pace with inflation, the cost living continues to rise, reducing real incomes and living standards. EG few months ago teachers went on strike remember since their wages were not keeping on track with inflation.

My Q.

Explain the relationship between unemployment, inflation and economic growth.

 

[hup]

unemployment is inversely proportional to inflation and growth

reduced unemployment
= more wages = inflation but also
= increased consumption = more production = growth

incr unemployment
= less wages = reduced inflationary pressures
and also
= less consumption = slower production and growth
+ more money spent on ss = less money for other areas of economy so constrains growth

 

[aphorae]

ye i'd probs mention phillips curve
maybe okun's law if it was worth 5-6 marks

also consider via economic growth lowering cyclical unemployment by stimulating derived demand for labour
also increased economic growth (demand-driven) = rising demand-pull inflation

Could someone do these?
a) Outline TWO factors that could contribute to an improvement in an economy’s terms of trade over time. (2 marks)
b) Describe how an increase in the terms of trade will impact on the current account deficit of an economy. (3 marks)
c) Explain the impact of an increase in net foreign debt on the domestic economic performance of an economy. (3 marks)

 

[hup]

ye i'd probs mention phillips curve
maybe okun's law if it was worth 5-6 marks

also consider via economic growth lowering cyclical unemployment by stimulating derived demand for labour
also increased economic growth (demand-driven) = rising demand-pull inflation

Could someone do these?
a) Outline TWO factors that could contribute to an improvement in an economy’s terms of trade over time. (2 marks)
b) Describe how an increase in the terms of trade will impact on the current account deficit of an economy. (3 marks)
c) Explain the impact of an increase in net foreign debt on the domestic economic performance of an economy. (3 marks)

a)
i - appreciation of domestic currency = exports rise in price imports reduce in price so TOT improves
ii - depreciation of foreign currency = import price falls so TOT improves
seems kind of dodgy but
b)

increase in TOT means export price > import price e
so sell less exports buy more imports etc etc = worse CAD

c)
net foreign debt incr = more servicing costs so worse cad
makes investment in australia less attractive as it has alot of debt to pay = less capital inflow = limits prospects for growth
i think thats enough for 3 marks

 

[krnofdrg]

a)
i - appreciation of domestic currency = exports rise in price imports reduce in price so TOT improves
ii - depreciation of foreign currency = import price falls so TOT improves
seems kind of dodgy but
b)

increase in TOT means export price > import price e
so sell less exports buy more imports etc etc = worse CAD

c)
net foreign debt incr = more servicing costs so worse cad
makes investment in australia less attractive as it has alot of debt to pay = less capital inflow = limits prospects for growth
i think thats enough for 3 marks

A. Appreciation!, structural change

b.) Also let me elaborate, we purchase more since our dollar is stronger which additionally worsens CAD! but i loved our strong dollar T.T my purchasing power was so strong when it was like 1.09 few months ago against us products!!!!!

c.) Also we have to increase i/r remember to pay back net foreign debt, I/R dampens AD -> lower eg i think argg i gotta revisit eco T.T.

 

[aphorae]

ohh nice work you can add another question after you answer one If not I'll keep asking lol

1. The purpose of the study of macroeconomics is to
(a) keep inflation low and reduce the unemployment rate
(b) promote stable economic growth and increase standard of living
(c) maintain efficient resource allocation and external balance
(d) develop and test theories about how the overall economy works

2. The economic groups that lose when Australia institutes trade restrictions include
(a) Australian consumers of imported goods, Australian producers who use imported intermediate goods and Australian exporters.
(b) Australian producers of goods that compete with imported goods only.
(c) Australian consumers of imported goods and Australian producers of goods that compete with imported goods.
(d) only Australian consumers of imported goods.

3. A multinational car manufacturer decides to install new and more effective anti-pollution technology in its vehicles following the commencement of a national emissions trading scheme. Which of the following outcomes would be a result of this action?
a) An increase in private costs and an increase in negative externalities
b) An increase in social costs and an increase in negative externalities
c) An increase in private costs and a reduction in negative externalities
d) An increase in social costs and a reduction in negative externalities

 

[mitchh81]

ohh nice work you can add another question after you answer one If not I'll keep asking lol

1. The purpose of the study of macroeconomics is to
(a) keep inflation low and reduce the unemployment rate
(b) promote stable economic growth and increase standard of living
(c) maintain efficient resource allocation and external balance
(d) develop and test theories about how the overall economy works

2. The economic groups that lose when Australia institutes trade restrictions include
(a) Australian consumers of imported goods, Australian producers who use imported intermediate goods and Australian exporters.
(b) Australian producers of goods that compete with imported goods only.
(c) Australian consumers of imported goods and Australian producers of goods that compete with imported goods.
(d) only Australian consumers of imported goods.

3. A multinational car manufacturer decides to install new and more effective anti-pollution technology in its vehicles following the commencement of a national emissions trading scheme. Which of the following outcomes would be a result of this action?
a) An increase in private costs and an increase in negative externalities
b) An increase in social costs and an increase in negative externalities
c) An increase in private costs and a reduction in negative externalities
d) An increase in social costs and a reduction in negative externalities

1. a ??
2.a
3. c

 

[Stalker Ninja]

1. a ??
2.a
3. c

Hmm i would say
1) b
2) same
3) same

 

[aphorae]

I don't have the answers but:

1) Pretty sure it's D -> macroeconomics is the study of how an economy works as a whole. Plus it says "1. The purpose of the study of macroeconomics is to..." vs. just the "purpose of macroeconomic policy". If it was the latter, it would probably be B (altho I'm hesitant about the 'standards of living' part)
2) C -> Australian exporters is pretty much irrelevant since trade restrictions wouldn't affect them (not directly at least, unless there was a retaliation effect or structural change -> but MC answers don't go through that many steps )
3) C

 

[aphorae]

New questions:

1. Suppose the government reduces its budget deficit at the same time that oil prices increase. According to the aggregate demand/aggregate supply model, which of the following is most likely to occur?
a) currency depreciation
b) the level of GDP will rise since less government spending will tend to cause an increase private investment
c) the level of GDP will fall since both events will tend to cause an economic contraction
d) the price level will rise, since higher oil prices will increase the rate of inflation

2. Consumers spending $120 from a salary increase of $200 implies
(a) an MPS of 0.8 and a multiplier of 5
(b) an MPS of 0.4 and a multiplier of 1.2
(c) an MPS of 0.6 and a multiplier of 2
(d) an MPS of 0.4 and a multiplier of 2.5

3. Which one of the following can be a consequence of cost push inflation?
(a) An improvement in the balance of payments on current account.
(b) A fall in government revenue unless the level of taxation in taxation is raised.
(c) An improvement in employment opportunities.
(d) A decline in Australia’s international competitiveness.

 

[NubMuncher]

Don't post questions if you don't have the answers lol will lead to epic debate xD

 

[aphorae]

Don't post questions if you don't have the answers lol will lead to epic debate xD

Well in the exam you won't have the answers with you Better to debate now. Can you debate against my answers though?

 

[NubMuncher]

Well in the exam you won't have the answers with you Better to debate now. Can you debate against my answers though?

Touche. Answer to question 1 doesn't seem right although iv'e never seen a question asking about why we study the Macro/micro lol

My answers to your new questions are b,d,d but again i'm quite shitty at eco xD

 

[aphorae]

Touche. Answer to question 1 doesn't seem right although iv'e never seen a question asking about why we study the Macro/micro lol

My answers to your new questions are b,d,d but again i'm quite shitty at eco xD

Yeah Q1 is a bit dodgy but just in case we got thrown something completely out there Look up the def of macroeconomics though if you're still unconvinced!

new answers
1) I'm inclined to say C? I think AD would shift to the left because of less G or more T, which would decrease prices and lower GDP, and AS would shift left because of the oil prices, which would increase prices but lower GDP even further. -> I would like confirmation from someone though if anyone reads this, but I'm 98% sure
2) D yep
3) D yeah

 

[aphorae]

New ones (feel free to just post your own whenever, feeling awkward posting by myself haha)

4. Government taxation has the same effect on the circular flow of income as
(a) investment
(b) consumption
(c) depreciation
(d) saving

5. Which of the following would assist the Australian government in maintaining equilibrium
in the level of income?
(a) when saving exceeds investment then the government should tax more than it spends
(b) when saving exceeds investment then the government should spend more than it taxes
(c) when saving exceeds consumption the government should tax more and spend less
(d) when saving and investment both exceed government spending then tax cuts are appropriate

6. Which of the following characteristics are commonly associated with a cyclical upswing?

(i) increasing incomes and employment opportunities
(ii) rising general level of prices
(iii) a contraction in new investment

(a) (i) & (ii) only
(b) (i) & (iii) only
(c) (ii) & (iii) only
(d) all of the above

 

[NubMuncher]

No your right its C i read the question wrong

 

[aphorae]

Okay cool ty just to make sure !

 

[abc123yoyo]

4. d (STM=IGX)
5. b (leakages > injection if S>I therefore increasing injection i.e. spending means leakages = injection?)
6. a (because booms can be due to new investment?)

Q.: What are the three indicators of external stability?

 

[aphorae]

4. d (STM=IGX)
5. b (leakages > injection if S>I therefore increasing injection i.e. spending means leakages = injection?)
6. a (because booms can be due to new investment?)

Q.: What are the three indicators of external stability?

yep

1. sustainable CAD
2. serviceable NFL
3. stable exchange rate