-pari-
Active Member
hi 
i was hoping someone could just "mark" these short answer questions for me. i just want to see how i fair, to kinda get an idea of how i'm going in relation to standards beyond my school....any feedback would also be awesome.
1) Discuss TWO factors that contribute to Australia's persistent current account deficit (4marks)
- cyclical factors: the CAD is vulnerable to changes in domestic growth as well as fluctuations in international business cycle. high economic growth tends to encourage import expenditure as has been the case in recent years with Australia's sustained economic growt. This can lead to deficits on the BOGS if not offset by complementary increase in export reciepts. in reverse, slow economic growth eg in early 1990s recession can improve CAD with a decrease in import expenditure.
- structural factors: high net income deficits reflects structural problems of low national savings. this leads to reliance on foreign savings with sale of equity/borrowing of debt (hence the CFA surplus) but in the long run needs to be financed leading to large outflows on net income deficit, this is a prominient factor for Aus's large CAD.
2) explain the relationship between foreign liabilities and the balance of payments. (4marks)
levels of foreign liabilities have long term implications for the the overall BOP - especially CA. increases in foreign liabilities to foreign investors occur as inflow on the CFA. (ie. Foreign ownership of domestic assets/domestic borrowing of foreign savings). Consequent surpluses on the CFA in the long run will lead to increase deficit on net on Current Account (CA) as all inflow on financial account need to be serviced with interest/profits which = outflow on CA = increase in CAD. Alternatively, liabilities of foreign eco's to Australia (ie Australian ownership of foreign assets) will earn inflow on net income of CA and will decrease CAD as well as decrease surplus on CFA.
i was hoping someone could just "mark" these short answer questions for me. i just want to see how i fair, to kinda get an idea of how i'm going in relation to standards beyond my school....any feedback would also be awesome. 1) Discuss TWO factors that contribute to Australia's persistent current account deficit (4marks)
- cyclical factors: the CAD is vulnerable to changes in domestic growth as well as fluctuations in international business cycle. high economic growth tends to encourage import expenditure as has been the case in recent years with Australia's sustained economic growt. This can lead to deficits on the BOGS if not offset by complementary increase in export reciepts. in reverse, slow economic growth eg in early 1990s recession can improve CAD with a decrease in import expenditure.
- structural factors: high net income deficits reflects structural problems of low national savings. this leads to reliance on foreign savings with sale of equity/borrowing of debt (hence the CFA surplus) but in the long run needs to be financed leading to large outflows on net income deficit, this is a prominient factor for Aus's large CAD.
2) explain the relationship between foreign liabilities and the balance of payments. (4marks)
levels of foreign liabilities have long term implications for the the overall BOP - especially CA. increases in foreign liabilities to foreign investors occur as inflow on the CFA. (ie. Foreign ownership of domestic assets/domestic borrowing of foreign savings). Consequent surpluses on the CFA in the long run will lead to increase deficit on net on Current Account (CA) as all inflow on financial account need to be serviced with interest/profits which = outflow on CA = increase in CAD. Alternatively, liabilities of foreign eco's to Australia (ie Australian ownership of foreign assets) will earn inflow on net income of CA and will decrease CAD as well as decrease surplus on CFA.
