HELP! Weird HSC Question Economics URGENT! (1 Viewer)

[Momomanera]

Hi! First post so sorry if I do something wrong

I got an assessment task for year 12 Economics and there was a question that seems a bit strange, I disproved it in a way in the previous question

VERY URGENT, its due Monday, please help!

Question is as below:

The table (below) shows selected economic data for the Australian economy, which has a
floating exchange rate system.



a) Briefly explain why the exchange rate in terms of the US can go down from Aug 2011 to Aug 2012 but the Trade Weighted Index remain the same

My answer:

As the Trade Weighted Index remained steady from Aug. 2011 to Aug. 2012, it is fair to assume that the Australian Dollar did not appreciate nor depreciate significantly during this time as this signified it remained steady against every currency. However the Australian Dollar depreciated against the USD during this time, showing that the USD appreciated (as realistically the AUD never moved at all, shown by the TWI). The difference between the exchange rate and the Trade Weighted Index is that the exchange rate is set against one other currency, and therefor is influenced in shifts in either economy whereas the Trade Weighted Index is set against most currencies, and therefor is so steady that it can be assumed shifts in the local economy account for all changes in the TWI.

b) Explain the likely impact on Australia’s Balance of Payments of the decline in the $A exchange rate (in terms of $US) from Aug 2011 to Aug 2012.

Didnt I just disprove this in the previous question? Did I do a) wrong? The $A is depreciating in terms of $US, but its not actually depreciating, so it shouldnt affect the BoP, right??

Please help!!
Thanks

Michael

 

[Momomanera]

BUMP

 

[Momomanera]

BUMP, Please guys its due today and I've looked over it a million times and it still doesnt make sense!

 

[Macqncheese]

Your answer is wrong by the way. You've made several incorrect statements.

 

[Momomanera]

Could you please give me a couple pointers? Anything, ill have an hour to work on it today, just tell me what i got wrong and how to get it right? ty

 

[Macqncheese]

Firstly, you've made no reference to what influences the movement. The question is asking you to use demand and supply to illustrate how the $AUD can fall while the TWI remains unchanged (not steady).

The $AUD did depreciate, as it fell quite a lot. This could be due to any factor (just say one). This could be a simple as a fall in the cash rate (as the u.s is a trading partner).

However because the cash rate influences supply only, th demand (which determines TWI) won't change.


As long as you reference supply and demand. Your question will be marked correct.

 

[Macqncheese]

With b. the dollar did fall. So that is a very open question for BOP. Really it is free marks

 

[Momomanera]

Thanks so much bro

 

[Macqncheese]

Thanks so much bro

With those questions you should integrate supply and demand, and use it to prove the question. Soe of your answer is right, it would be mmore correct to use supply and demand to prove it though


Question B is piss easy. Free marks really.However usually you need to state the affect from part A. So what you use to prove in part a, needs to show a affect in part b