Section I - Multiple Choice (1 Viewer)

[Stalker Ninja]

I put answer as B for question 7

As if income tax rates increase, then consumer spending on imports reduces as consumers have less money to spend, this will cause export prices to increase over import prices(less import spending), thus stimulating the terms of trade and reversing the trend

A and D are not right, the fist hint is that they are too similar as they have the same affect - appreciation, And an appreciation will worsen the the terms of trade as international competitiveness declines, So an appreciation will make Exports less attractive, more expensive reducing demand, and making imports cheaper, so more money will be spent on imports. both ways this worsens the tots. A and D are completely wrong. period

And the Tot has everything to do with international competetiveness

How does lower import spending impact on import prices? Lower spending = lower volume of imports, which has nothing to do with ToT

 

[kev-is-red]

Yeah i can see where youre coming from but remember the question shows that Australia exporters are now receiving less income for their exports hence appreciating the dollar wont help them gain more income

Exactly.

 

[Aclipse]

well i hope all of yous are wrong lol

apparently my timestable says that I still got 2 more exams left

so i'm going off economics and won't came back ever

 

[blackvegetable]

Tot - export price index over import price index

Export Prices aren't just the average price for each good or service we receive, they are the total amount of prices/dollars we receive for all our exports. so if there is less spending on imports, or volume, that means there are less dollars/prices spent on imports. Thus an appreciation will result in a lower terms of trade

Proof 1;Leading edge states- the exports price index shows the proportional change in the level of export prices. ie volume counts(level)
proof 2; During the GFC the dollar depreciated to around 60, but we experience record levels of tots. This is because our compettiveness increased as our export prices were lower, and imports were more expensive, But according you the depreciation would have worsened the tot, as export prices were lower, and import prices were higher

therefore depreciation = better terms of trade. I hope i explained that clearly

 

[Stalker Ninja]

Tot - export price index over import price index

Export Prices aren't just the average price for each good or service we receive, they are the total amount of prices/dollars we receive for all our exports. so if there is less spending on imports, or volume, that means there are less dollars/prices spent on imports. Thus an appreciation will result in a lower terms of trade

Proof 1;Leading edge states- the exports price index shows the proportional change in the level of export prices. ie volume counts(level)
proof 2; During the GFC the dollar depreciated to around 60, but we experience record levels of tots. This is because our compettiveness increased as our export prices were lower, and imports were more expensive, But according you the depreciation would have worsened the tot, as export prices were lower, and import prices were higher

therefore depreciation = better terms of trade. I hope i explained that clearly

But during the GFC our ToT slumped .. http://www.rba.gov.au/chart-pack/commodity-prices.html .. It fell from 110 to 90
And the depreciation of the $A made imports more expensive

 

[Freddici]

An appreciation of the dollar would make exports more expensive which reduces the IC. Does that directly reduce the impact of the economy??

If tax rates increase, that would make consumers less willingly to spend.

If the government increases expenditure that would that affect the CAD??

I think it lies in whether the trying to reduce the impact is for immediate or future effects.

 

[blackvegetable]

The terms of trade fell proportionally less than the exchange rate, the only reason the tot dropped was a fall in demand for commodities due to the impact of the GFC on confidence and spending. If we had a high dollar during those times, terms of trade would have been dramatically worse.

And the depreciation of the $A made imports more expensive- thats what i said, and that decreases the demand for imports which will reduce the overall level of prices, thus reducing tot

 

[blackvegetable]

This graph supports my point, look at it closely

http://7economy.com/archives/4807

around 2007-2009, when the dollar is low, the tot is high , when the dollar is high, the tot is low

in 2010 it just gets retarded so ignore that( due to insane commodity demand)

 

[friend177]

Tot - export price index over import price index

Export Prices aren't just the average price for each good or service we receive, they are the total amount of prices/dollars we receive for all our exports. so if there is less spending on imports, or volume, that means there are less dollars/prices spent on imports. Thus an appreciation will result in a lower terms of trade

Proof 1;Leading edge states- the exports price index shows the proportional change in the level of export prices. ie volume counts(level)
proof 2; During the GFC the dollar depreciated to around 60, but we experience record levels of tots. This is because our compettiveness increased as our export prices were lower, and imports were more expensive, But according you the depreciation would have worsened the tot, as export prices were lower, and import prices were higher

therefore depreciation = better terms of trade. I hope i explained that clearly

Terms of trade is export price index/import price index. IF there is an appreciation in the AUD, export price goes up, thus increasing the terms of trade. The appreciation will worsen the CAD, but will improve the TOT

 

[blackvegetable]

The level of demand counts as well as the prices. The graph above in the link supports my cause, The tot is high due to the high demand for commidities, however the aprreciation is reducing demand as our exports are less expensive. If our dollar was low, we would be smashing records in the bogs

 

[Graham Arnold]

The level of demand counts as well as the prices. The graph above in the link supports my cause, The tot is high due to the high demand for commidities, however the aprreciation is reducing demand as our exports are less expensive. If our dollar was low, we would be smashing records in the bogs

you are right and friend177 is wrong

 

[blackvegetable]

thanks, finally someone sees my point

 

[kev-is-red]

Terms of trade is export price index/import price index. IF there is an appreciation in the AUD, export price goes up, thus increasing the terms of trade. The appreciation will worsen the CAD, but will improve the TOT

Terms of Trade influences the exchange rate. The value of $A does not influence the TOT as far as I am aware. If TOT improves, $A appreciates. If TOT deteriorates, $A depreciates.

Still, you could use this to argue that D is the answer I guess.

 

[Stalker Ninja]

This graph supports my point, look at it closely

http://7economy.com/archives/4807

around 2007-2009, when the dollar is low, the tot is high , when the dollar is high, the tot is low

in 2010 it just gets retarded so ignore that( due to insane commodity demand)

The article says:

-Australia’s real exchange rate has risen sharply in the
last few years
-This phenomenon is normal for commodity currencies
during terms of trade shocks

Does not that mean rising ToT = rising $A?

 

[Graham Arnold]

For fucks sake it was a simple theory question why the hell are you guys going into this much detail...

 

[friend177]

Terms of Trade influences the exchange rate. The value of $A does not influence the TOT as far as I am aware. If TOT improves, $A appreciates. If TOT deteriorates, $A depreciates.

Still, you could use this to argue that D is the answer I guess.

my answer was C for Q7?

 

[blackvegetable]

The reason why the dollar has appreciated is due to high demand for exports, meaning higher demand for australian dollars.
However with an aprreciation, our exports are more expensive thus less attractive

so in theory the tot should be low as demand reduces, however due to china and india, tot remains high despite high dollar as they seem to be addicted by our resources

 

[kev-is-red]

The article says:

-Australia’s real exchange rate has risen sharply in the
last few years
-This phenomenon is normal for commodity currencies
during terms of trade shocks

Does not that mean rising ToT = rising $A?

I quote my textbook:

"Changes in commodity prices and in the ToT tend to have an immediate effect on the $A. A rise in commodity prices and an improvement in the ToT are generally associated with an increase in Australian exports. Financial markets will often respond to these changes by increasing the value of the $A with an expectation that exports will increase over the medium-short term."

Demand for commodities tends to be relatively inelastic, which is almost important to note.

 

[blackvegetable]

then what did you get graham arnold?

 

[Graham Arnold]

then what did you get graham arnold?

Government increasing discretionary spending