Economics Marathon 2014 anyone??? (1 Viewer)

[enigma_1]

Okay just the first part then.
Explain two effects of rising inflation on the Australian economy (4 marks)

Since it's not specified what types of effects, I'll just do one positive and one negative.
Inflation is a sustained increase in the general price level in an economy over time. (Do we have to define terms like this in eco short answers? or is it a waste of time + space?)

1) POSITIVE EFFECT: Inflation results in rising asset prices such as in real estate and shares causing asset price inflation. During this time it is beneficial to sell financial or real assets due to the potentially higher gains as profits. (I legit don't know how to elaborate on this point )

2) NEGATIVE EFFECT: Infltion results in a loss in purchasing power of consumers due to the increase in price level meaning that they are able to buy less with the same value of money they had before. Furthermore, real incomes fall and the standard of living in the economy also falls. Also, inflation may result in a wage price inflation spiral where if workers deem that inflation will occur in future, they would demand increased wages which would lead to cost push inflation (due to an increase in the cost of production) where Aggregate supply is reduced due to higher wages, costing businesses more. The higher costs for business due to cost push inflation is passed onto consumers in the form of higher prices which again deteriorates living standards in the economy which is a disadvanatteg of inflation.

 

[enigma_1]

Ok here's a question:

Explain TWO policy options available to governments in achieving environmental sustainability (4 marks)

 

[mreditor16]

Since it's not specified what types of effects, I'll just do one positive and one negative.
Inflation is a sustained increase in the general price level in an economy over time. (Do we have to define terms like this in eco short answers? or is it a waste of time + space?)

1) POSITIVE EFFECT: Inflation results in rising asset prices such as in real estate and shares causing asset price inflation. During this time it is beneficial to sell financial or real assets due to the potentially higher gains as profits. (I legit don't know how to elaborate on this point )

2) NEGATIVE EFFECT: Infltion results in a loss in purchasing power of consumers due to the increase in price level meaning that they are able to buy less with the same value of money they had before. Furthermore, real incomes fall and the standard of living in the economy also falls. Also, inflation may result in a wage price inflation spiral where if workers deem that inflation will occur in future, they would demand increased wages which would lead to cost push inflation (due to an increase in the cost of production) where Aggregate supply is reduced due to higher wages, costing businesses more. The higher costs for business due to cost push inflation is passed onto consumers in the form of higher prices which again deteriorates living standards in the economy which is a disadvanatteg of inflation.

yay this thread is up and running again

btw, enigma, some feedback to help you out:

* since it is 4 marks and they are only asking for two impacts, it's good to give a definition of inflation in order to not leave any room for being docked a mark

* you're struggling to elaborate on your positive effect, and the reason why is that you have chosen quite an obscure/dodgy impact and hence it is hard to elaborate. and because of that, I don't think you would get the 2 allocated marks for the positive effect. so try talking about a different positive impact - but even better could be saying something like there are limited positive impacts of increasing inflation and then in your answer covering 2 or 3 negative impacts of rising inflation, to score you the 4 marks.

* as for your section on the negative effect, it would be good to properly flesh out the green part. also the bolded and the underlined part is expressed poorly and doesn't add much to your answer - so get rid off it, besides the sentence was getting quite long already. the rest is okay, try to link in more economic concepts and talk about a more wider range of impacts, it seems quite narrow - especially because both times you just bring it back to lower standard of living / quality of life.

hope that helps

 

[GOsie]

Since it's not specified what types of effects, I'll just do one positive and one negative.
Inflation is a sustained increase in the general price level in an economy over time. (Do we have to define terms like this in eco short answers? or is it a waste of time + space?)

1) POSITIVE EFFECT: Inflation results in rising asset prices such as in real estate and shares causing asset price inflation. During this time it is beneficial to sell financial or real assets due to the potentially higher gains as profits. (I legit don't know how to elaborate on this point )

2) NEGATIVE EFFECT: Infltion results in a loss in purchasing power of consumers due to the increase in price level meaning that they are able to buy less with the same value of money they had before. Furthermore, real incomes fall and the standard of living in the economy also falls. Also, inflation may result in a wage price inflation spiral where if workers deem that inflation will occur in future, they would demand increased wages which would lead to cost push inflation (due to an increase in the cost of production) where Aggregate supply is reduced due to higher wages, costing businesses more. The higher costs for business due to cost push inflation is passed onto consumers in the form of higher prices which again deteriorates living standards in the economy which is a disadvanatteg of inflation.

Nice answer, but probably a 3/4 at the moment. No you don't need to define the term in the short answer unless it specifically says to (my teacher is a current HSC marker and said this). The positive impact is a little weak but that's mostly because there are very few positive effects. When I wrote the question I meant two negative effects oh well. For your negative effects answer, you throw a lot of points in but don't really deconstruct them enough. Assuming this was one point, you describe a bunch of smaller points without answering the question too much which is about the impacts of rising inflation on the Australian economy.

To get the rest of the marks, you could just elaborate a bit more...
"Rising inflation tends to lead to lower real incomes, and lower consumer and investor confidence, which may less expenditure and investment within the Australian economy. As aggregate demand is made up of C + I + G + X - M, this would lower the amount of money within the circular flow of income and lead to a contraction in the economy as a reverse multiplier effect may occur (you may draw diagrams in short answers too). This would lower Australia's already fragile economic growth which is currently at 3.1% of GDP, and could cause rising levels of cyclical unemployment."

Obviously this isn't perfect but it goes off one point about inflation and explains how it'll impact the Australian economy in particular, rather than listing a bunch of negative points about rising inflation.

TBH I can't really comment on the positive impacts part because I don't know myself.
Someone care to back me up?

Still, overall a strong response.

 

[enigma_1]

yay this thread is up and running again

btw, enigma, some feedback to help you out:

* since it is 4 marks and they are only asking for two impacts, it's good to give a definition of inflation in order to not leave any room for being docked a mark

* you're struggling to elaborate on your positive effect, and the reason why is that you have chosen quite an obscure/dodgy impact and hence it is hard to elaborate. and because of that, I don't think you would get the 2 allocated marks for the positive effect. so try talking about a different positive impact - but even better could be saying something like there are limited positive impacts of increasing inflation and then in your answer covering 2 or 3 negative impacts of rising inflation, to score you the 4 marks.

* as for your section on the negative effect, it would be good to properly flesh out the green part. also the bolded and the underlined part is expressed poorly and doesn't add much to your answer - so get rid off it, besides the sentence was getting quite long already. the rest is okay, try to link in more economic concepts and talk about a more wider range of impacts, it seems quite narrow - especially because both times you just bring it back to lower standard of living / quality of life.

hope that helps

Nice answer, but probably a 3/4 at the moment. No you don't need to define the term in the short answer unless it specifically says to (my teacher is a current HSC marker and said this). The positive impact is a little weak but that's mostly because there are very few positive effects. When I wrote the question I meant two negative effects oh well. For your negative effects answer, you throw a lot of points in but don't really deconstruct them enough. Assuming this was one point, you describe a bunch of smaller points without answering the question too much which is about the impacts of rising inflation on the Australian economy.

To get the rest of the marks, you could just elaborate a bit more...
"Rising inflation tends to lead to lower real incomes, and lower consumer and investor confidence, which may less expenditure and investment within the Australian economy. As aggregate demand is made up of C + I + G + X - M, this would lower the amount of money within the circular flow of income and lead to a contraction in the economy as a reverse multiplier effect may occur (you may draw diagrams in short answers too). This would lower Australia's already fragile economic growth which is currently at 3.1% of GDP, and could cause rising levels of cyclical unemployment."

Obviously this isn't perfect but it goes off one point about inflation and explains how it'll impact the Australian economy in particular, rather than listing a bunch of negative points about rising inflation.

TBH I can't really comment on the positive impacts part because I don't know myself.
Someone care to back me up?

Still, overall a strong response.

Omg thanks so much guys!! Very helpful!!!

Also, mreditor just to confirm something, you said "there are limited positive impacts of increasing inflation and then in your answer covering 2 or 3 negative impacts of rising inflation" - in regard to this, even if I don't properly flesh out the positive effect of inflation but just briefly state it, the 4 marks would still be attainable?

 

[GOsie]

Ok here's a question:

Explain TWO policy options available to governments in achieving environmental sustainability (4 marks)

When you say policy options, do you mean like 'market based' and 'direct control'? Or can I answer 'Tax' and 'ETS'?

 

[enigma_1]

When you say policy options, do you mean like 'market based' and 'direct control'? Or can I answer 'Tax' and 'ETS'?

Hmm you could talk about either/both I suppose

 

[GOsie]

Omg thanks so much guys!! Very helpful!!!

Also, mreditor just to confirm something, you said "there are limited positive impacts of increasing inflation and then in your answer covering 2 or 3 negative impacts of rising inflation" - in regard to this, even if I don't properly flesh out the positive effect of inflation but just briefly state it, the 4 marks would still be attainable?

I'm not mreditor, but I highly doubt they'd allocate two marks to explaining a positive impact of inflation in the HSC.

 

[enigma_1]

I'm not mreditor, but I highly doubt they'd allocate two marks to explaining a positive impact of inflation in the HSC.

I remember one year they actually did, I don't remember correctly the question but it definitely had 2 marks allocated for a positive of inflation and the sample answer didn't seem adequate. Let's hope they don't torture us with it this year!

 

[mreditor16]

I'm not mreditor, but I highly doubt they'd allocate two marks to explaining a positive impact of inflation in the HSC.

haha what I mean is that since Enigma answered the Q as if they were asking for one positive impact and one negative impact, and the question was out of four, then they would be looking to give 2 for the positive and 2 for the negative.

but for this question, they wouldn't be doing that, because it just says 2 impacts.

 

[mreditor16]

Omg thanks so much guys!! Very helpful!!!

Also, mreditor just to confirm something, you said "there are limited positive impacts of increasing inflation and then in your answer covering 2 or 3 negative impacts of rising inflation" - in regard to this, even if I don't properly flesh out the positive effect of inflation but just briefly state it, the 4 marks would still be attainable?

yes, as long as you properly cover the negative impacts to get you those 4 marks.

 

[enigma_1]

yes, as long as you properly cover the negative impacts to get you those 4 marks.

Oh ok, awesome!

GOsie are you gonna do the environment question?

 

[mreditor16]

you don't need to define the term in the short answer unless it specifically says to (my teacher is a current HSC marker and said this). .

In terms of giving a definition - In my eyes, better off to do it than take a chance and not do it. Besides, it shows you know your stuff. I personally recommend doing so, because it certainly doesn't detract from your answer and gets rid of one potential (very small chance) reason for not getting 4/4.

Obviously this isn't perfect but it goes off one point about inflation and explains how it'll impact the Australian economy in particular, rather than listing a bunch of negative points about rising inflation. .

yep that's a good way to approach the Q - one of many ways to answer the Q, but it works well

 

[GOsie]

Ok here's a question:

Explain TWO policy options available to governments in achieving environmental sustainability (4 marks)

When you say policy options, do you mean like 'market based' and 'direct control'? Or can I answer 'Tax' and 'ETS'?

Hmm you could talk about either/both I suppose

Tax Governments can use a tax on carbon emissions to try achieve environmental sustainability. In 2012 the Australian government imposed a 'carbon tax' on carbon emissions. The tax initially started at 23c/tonne and was due to raise by 5% each year until 2015 in which the tax would be replaced by a 'cap and trade' scheme. The tax was not imposed with the purpose of generating government revenue, but rather to encourage 'green investment' and structurally change the way we use energy, which is important as Australia currently uses the most energy per capita in the world. Since it was imposed, it generated over $7b in revenue for the government and a study shows that 2013 carbon emissions had decreased by 0.8% suggesting that the tax was successful. However the change of government in 2014 has seen that the carbon tax has been abolished to be replaced by a 'Direct Action Plan'

Cap and Trade The government also has the option to use a cap and trade scheme to achieve environmental sustainability. The Emissions Trading Scheme (ETS) that was suggested would have meant that governments allocate or sell permits to carbon emitters and they could trade them for money to allow for more emissions. The ETS would not have raised money for the government, but would have been an incentive for businesses to use 'greener' alternatives and invest in renewable energy projects. The ETS had criticisms including that the permits may be given in too high supply which causes a little cost for businesses to continue emitting carbon, a problem that has been seen in the European Union where an ETS was implemented. Another issue is that if the permits become too expensive, businesses would possibly move offshore and lead to no net change in carbon emissions.

If it was worth 5 or 6 marks, I'd have included a diagram for each.
Any feedback would be lovely

 

[Intrinsic]

TBH I can't really comment on the positive impacts part because I don't know myself.
Someone care to back me up?

Refer to the NAIRU model, highlighting the inverse relationship between inflation and unemployment. An increase in inflation will cause unemployment to decrease (draw a Phillips Curve if you like).

 

[GOsie]

Refer to the NAIRU model, highlighting the inverse relationship between inflation and unemployment. An increase in inflation will cause unemployment to decrease (draw a Phillips Curve if you like).

I thought that was an old theory that was disproved when stagflation hit in the 70s. I get the cyclical unemployment would decrease but Australia is already pretty much at the NAIRU so it wouldn't necessarily help unemployment

 

[Intrinsic]

I thought that was an old theory that was disproved when stagflation hit in the 70s. I get the cyclical unemployment would decrease but Australia is already pretty much at the NAIRU so it wouldn't necessarily help unemployment

Good point, but the NAIRU model is short-term, stagflation is long-term. And it's important to acknowledge that it is a theory; it would be difficult to apply the inverse relationship between the two in the contemporary world - not to mention that our unemployment/inflation rate has remained steady over the past couple of years.

 

[GOsie]

Good point, but the NAIRU model is short-term, stagflation is long-term. And it's important to acknowledge that it is a theory; it would be difficult to apply the inverse relationship between the two in the contemporary world - not to mention that our unemployment/inflation rate has remained steady over the past couple of years.

Thanks! I'll be sure to include that in my list then.

 

[Phaze]

I remember one year they actually did, I don't remember correctly the question but it definitely had 2 marks allocated for a positive of inflation and the sample answer didn't seem adequate. Let's hope they don't torture us with it this year!

When they say "list two" or "explain two" is it assumed we explain one positive and one negative or can we go with two negatives. Only when they specify do we need to go with positive and negatives?

 

[GOsie]

When they say "list two" or "explain two" is it assumed we explain one positive and one negative or can we go with two negatives. Only when they specify do we need to go with positive and negatives?

If it doesn't specify, go with what's easiest. In this case, inflation has lots and lots of negatives that can be easily elaborated on, whilst it lacks quite a lot in positives. If the question was worded explain two, just jump to the negatives. If it was worded compare two, then going one positive and one negative would probably be more suited to the question.