HSC 2015 Economics Marathon (5 Viewers)

[RecklessRick]

Re: 2015 HSC Economics Marathon

Explain the relationship between ToT and International competitiveness. 4 marks

Increase in ToT
- more imports can be bought with every level of exports
- implication is that export prices have risen, meaning less internationally competitive against producers whose prices have not changed, though this may not necessarily be the case if import prices have simply dropped faster than export prices.
- also leads to appreciated exchange rate because of increased demand for currency relative to supply
- appreciated exchange rate makes products more expensive for foreign buyers, meaning less internationally competitive.

Decrease in ToT vice versa

 

[anohana]

Re: 2015 HSC Economics Marathon

Increase in ToT
- more imports can be bought with every level of exports
- implication is that export prices have risen, meaning less internationally competitive against producers whose prices have not changed, though this may not necessarily be the case if import prices have simply dropped faster than export prices.
- also leads to appreciated exchange rate because of increased demand for currency relative to supply
- appreciated exchange rate makes products more expensive for foreign buyers, meaning less internationally competitive.

Decrease in ToT vice versa

If we were to respond to this question in the actual exam, can we use 'vise versa'? Especially if the omitted explanation is exactly the opposite of what has been addressed?

 

[Ekman]

Re: 2015 HSC Economics Marathon

Increase in ToT
- more imports can be bought with every level of exports
- implication is that export prices have risen, meaning less internationally competitive against producers whose prices have not changed, though this may not necessarily be the case if import prices have simply dropped faster than export prices.
- also leads to appreciated exchange rate because of increased demand for currency relative to supply
- appreciated exchange rate makes products more expensive for foreign buyers, meaning less internationally competitive.

Decrease in ToT vice versa

I also don't agree with this answer. Its true that if tot improved, then in the short run the currency will appreciate as export prices have increased, hence increased demand for AUD (you can also say BOGS will be in a surplus). However in the mid to long term, due to the A-Curve effect (Its just opposite to the J-Curve effect), there would be increased imports, because as you said, you can now buy more imports for the same amount of exports, so the currency will depreciate, as there would increased import spending. This will also cause a deficit in the BOGS as well. This has over effects such as inflation, constraint on eco growth, unemployment etc...

 

[RecklessRick]

Re: 2015 HSC Economics Marathon

I also don't agree with this answer. Its true that if tot improved, then in the short run the currency will appreciate as export prices have increased, hence increased demand for AUD (you can also say BOGS will be in a surplus). However in the mid to long term, due to the A-Curve effect (Its just opposite to the J-Curve effect), there would be increased imports, because as you said, you can now buy more imports for the same amount of exports, so the currency will depreciate, as there would increased import spending. This will also cause a deficit in the BOGS as well. This has over effects such as inflation, constraint on eco growth, unemployment etc...

lol. I don't see where you're pointing out any flaws in my answer. I will concede that in the medium-long term an appreciation will mean increased imports eventually seeing the currency depreciate, eventually leading to an improvement in international competitiveness. Indeed, it's probably worthwhile mentioning the long term in a 4 mark question. This is all quite long term though and the most direct relationship between the tot and international competitiveness is tot goes up, international competitiveness decreases and vice versa. Where is the question from? Is there an answer key?

Also where are you getting the term A curve from, I've only ever heard it referred to as an inverted J curve. It doesn't even look like an A.

If we were to respond to this question in the actual exam, can we use 'vise versa'? Especially if the omitted explanation is exactly the opposite of what has been addressed?

Yeah I didn't structure this particularly well. First sentence should be identifying what the relationship is and identifying what the impact on international competitiveness is from both a rise in the tot and the fall of the tot. It's a lot easier to then just do the rest of the question examining the impacts of say just a rise in the terms of trade and paying lip service along the way to a fall in the terms of trade and its impact.

 

[Ekman]

Re: 2015 HSC Economics Marathon

lol. I don't see where you're pointing out any flaws in my answer. I will concede that in the medium-long term an appreciation will mean increased imports eventually seeing the currency depreciate, eventually leading to an improvement in international competitiveness. Indeed, it's probably worthwhile mentioning the long term in a 4 mark question. This is all quite long term though and the most direct relationship between the tot and international competitiveness is tot goes up, international competitiveness decreases and vice versa. Where is the question from? Is there an answer key?

Also where are you getting the term A curve from, I've only ever heard it referred to as an inverted J curve. It doesn't even look like an A.

The reason why I disagreed with your answer was because it was incomplete.

The term A curve I got from my teacher, who said that it looked like an A without the middle line.

 

[RecklessRick]

Re: 2015 HSC Economics Marathon

The reason why I disagreed with your answer was because it was incomplete.

The term A curve I got from my teacher, who said that it looked like an A without the middle line.

Hmmmmm. I wonder what the marking guidelines suggest.

Yeah not too sure it's worth using acronyms markers might not recognize at HSC

 

[anohana]

Re: 2015 HSC Economics Marathon

Yeah I didn't structure this particularly well. First sentence should be identifying what the relationship is and identifying what the impact on international competitiveness is from both a rise in the tot and the fall of the tot. It's a lot easier to then just do the rest of the question examining the impacts of say just a rise in the terms of trade and paying lip service along the way to a fall in the terms of trade and its impact.

Okay that makes sense. thanks for your response

 

[exeternal]

Re: 2015 HSC Economics Marathon

Hmmmmm. I wonder what the marking guidelines suggest.

Yeah not too sure it's worth using acronyms markers might not recognize at HSC

soz i made the question up.

but i think this would be enough to get 4/4

• The terms of trade shows the relationship between the prices received for Australian exports and the prices paid for imports. If export prices increase relative to import prices, then Australia’s terms of trade will improve and vice-versa.
• An improvement in the terms of trade means that the same volume of exports can buy more imports as the selling price of exports rises relative to the buying price for imports.
• Unless there is a significant decrease in export volumes relative to import volumes, this would lead to an improvement on the BOGS (either a larger surplus or smaller deficit) and a consequent decrease in the CAD.
• The terms of trade was a major influence on the BOGS over the 2000s, mainly due to the boom in commodity prices which are Australia’s largest exports.
• Despite easing in 2009-10 due to the global recession, the fast recovery of economies like China saw a surge in Australia’s terms of trade in 2010-11 to their highest level in 140 years.
• Rising terms of trade may lead to appreciation of AUSD, weakening international competitiveness of Australia’s non-commodity exports in a phenomenon known as ‘Dutch Disease’ where growth in one export industry (mining) results in a higher exchange rate that causes other export industries to suffer.

tbh the trend isn't necessary, just putting it in there

 

[milkytea99]

Re: 2015 HSC Economics Marathon

Explain how fiscal policy could be used by a government to reduce a deficit on the current account 5 marks

 

[Study_like_a_nerd]

Re: 2015 HSC Economics Marathon

The reason why I disagreed with your answer was because it was incomplete.

The term A curve I got from my teacher, who said that it looked like an A without the middle line.

I have never heard of the A curve either and I tried searching it up and couldn't find anything... Any possible links?

 

[RecklessRick]

Re: 2015 HSC Economics Marathon

I have never heard of the A curve either and I tried searching it up and couldn't find anything... Any possible links?

He just means inverted J-curve, aka this

 

[Ekman]

Re: 2015 HSC Economics Marathon

Explain, using examples, how market failure can cause the misallocation of scarce environmental resources - 5 marks

 

[milkytea99]

Re: 2015 HSC Economics Marathon

Explain, using examples, how market failure can cause the misallocation of scarce environmental resources - 5 marks

Explain how fiscal policy could be used by a government to reduce a deficit on the current account 5 marks

Do you think this will be a possible short answer question this year?

 

[Study_like_a_nerd]

Re: 2015 HSC Economics Marathon

Explain, using examples, how market failure can cause the misallocation of scarce environmental resources - 5 marks

Market failure occurs when the price mechanism takes account for the private benefits of production but neglects the social costs that the production brings such as pollution and environmental damage. Thus due to market failure, natural resources such as fossil fuels continue to become depleted as the firms are not internalizing the negative externalities they produce. The reason why there will be a misallocation of natural resources is because the firms are not taking account for the social costs, and thus inefficient firms will continue to use the scarce resources for their production methods. The scarce resources will continue to get depleted and this will create long term production issues.

I'm not sure about this answer... anyone like to add? Not really a fan of environment questions

 

[Study_like_a_nerd]

Re: 2015 HSC Economics Marathon

He just means inverted J-curve, aka this

thx!

 

[Study_like_a_nerd]

Re: 2015 HSC Economics Marathon

Explain how fiscal policy could be used by a government to reduce a deficit on the current account 5 marks

Talk about how the contractionary fiscal stance (Taxation > Gov spending) and how that will lead to a budget surplus and how the gov can use the budget surplus to reduce the CAD. Also explain how the automatic stabilisers determine the contractionary stance (i.e. when there is high economic growth, taxation would increase and unemployments benefits would decrease - this is the contractionary stance)

Fiscal policy can also reduce the CAD through discretionary measures such as introducing new taxes (or raising other ones - I think theres talks about GST being raised)

 

[spatula232]

Re: 2015 HSC Economics Marathon

Explain to me the J-curve theory thingo. (As many marks as necessary for me to fully understand)

 

[simmyyy]

Re: 2015 HSC Economics Marathon

What kind of statistics are you guys memorising for all topics?

 

[rrulez]

Re: 2015 HSC Economics Marathon

Would export competing or import competing industries benefit most during a domestic inflation? Explain why.

 

[Study_like_a_nerd]

Re: 2015 HSC Economics Marathon

Would export competing or import competing industries benefit most during a domestic inflation? Explain why.

Export competing firms will not benefits from domestic inflation as the prices of their goods and services will increase, leading to a reduction in international competitiveness and thus reducing X levels and X revenue overall. Import competing firms will benefit from inflation to some extent. This may be because due to inflation, individuals will demand for higher wages (wage spiral index) and thus the higher wages will allow individuals to purchase cheaper imports rather then spending on higher priced domestic goods due to domestic inflation.