HSC 2015 Economics Marathon (3 Viewers)

[Ekman]

Re: 2015 HSC Economics Marathon

Explain the causes of inequality in the global economy - 5 marks

 

[exeternal]

Re: 2015 HSC Economics Marathon

Explain the causes of inequality in the global economy - 5 marks

I'm not sure which approach best answers the question but here are a few ideas/approach that i thought of.

1. Source of income
Firstly, the main type of inequality is income inequality, which correlates with wealth inequality. Income inequality refers to the degree to which income is unevenly distributed among people in the economy. The main sources of income is gained from wages, rent, investment earnings, business profit and transfer payments; thus any distortion that may disturb the source of income for individuals in the global economy may lead to decreased disposable income. For example, when the global economy experienced a downturn in 2009 (GFC), inequality has evidently worsened as the unemployment rate increased world wide, as a result, workers impacted received transfer payments instead of wages, thus less disposable income. This ultimately widens the gap between the wealth and poor.

2. Inequality of opportunity
Existing inequality in the distribution of income and wealth tends to perpetuate inequality of opportunity. For instance, historically higher income earners have better access to educational opportunities, making it more likely that they will gain admission to university courses, allowing them to take up higher paid occupations. In addition, people who acquire wealth through inheritance have a much greater opportunity to build up their wealth through investment, as opposed to those start with no wealth.

How would you approach it?

Can someone please explain the difference between Natural rate of unemployment and NAIRU again i'm still kind of confused after reading the response posted in the thread on page 3

 

[chboblie]

Re: 2015 HSC Economics Marathon

I'm not sure which approach best answers the question but here are a few ideas/approach that i thought of.

1. Source of income
Firstly, the main type of inequality is income inequality, which correlates with wealth inequality. Income inequality refers to the degree to which income is unevenly distributed among people in the economy. The main sources of income is gained from wages, rent, investment earnings, business profit and transfer payments; thus any distortion that may disturb the source of income for individuals in the global economy may lead to decreased disposable income. For example, when the global economy experienced a downturn in 2009 (GFC), inequality has evidently worsened as the unemployment rate increased world wide, as a result, workers impacted received transfer payments instead of wages, thus less disposable income. This ultimately widens the gap between the wealth and poor.

2. Inequality of opportunity
Existing inequality in the distribution of income and wealth tends to perpetuate inequality of opportunity. For instance, historically higher income earners have better access to educational opportunities, making it more likely that they will gain admission to university courses, allowing them to take up higher paid occupations. In addition, people who acquire wealth through inheritance have a much greater opportunity to build up their wealth through investment, as opposed to those start with no wealth.

How would you approach it?

Can someone please explain the difference between Natural rate of unemployment and NAIRU again i'm still kind of confused after reading the response posted in the thread on page 3

I interpreted as inequality between economies so I would talk about

- how developing economies are usually left out from FTAs and how advanced economies protect their agricultural industries which hinders the developing economies' growth.
-how financial flows and tax avoidance, and how developing economies are usually heavily in debt and aid they receive is 'phantom aid.'
-how technology usually flows away from developing economies which increases inequality due to the developing countries' lack of competitiveness due to the lack of capital

But there could also be 'institutional factors' such as corruption, the economies orientation (control/free market) and the resources the country has land/labour/capital.

 

[chboblie]

Re: 2015 HSC Economics Marathon

"Analyse how changes in the components of the Balance of Payments affects the value of the Australian Dollar

 

[Ekman]

Re: 2015 HSC Economics Marathon

"Analyse how changes in the components of the Balance of Payments affects the value of the Australian Dollar

CA:
Credits > Debits: There is more net money flowing into Australia, hence more AUD is demanded in the FOREX market, causing an appreciation.
Debits > Credits: There is more net money flowing out of Australia, causing an increase in supply of AUD in the FOREX market, causing a depreciation.

The same thing applies for the KAFA as well.

 

[RecklessRick]

Re: 2015 HSC Economics Marathon

Which of the following is an indicator of increased integration of global labour markets?
A. Increased flow of unskilled workers from developed countries
B. Increased level of government restrictions on work visas
C. Increased level of production by transnational companies
D. Increased level of workers' income sent back home

Also, I'd like opinions on this question:

Which of the following policy options may reduce the Non Accelerating Inflation Rate of Unemployment (NAIRU)?
A. Reduce the minimum school leaving age
B. Encouraging those who receive welfare to re-enter the workforce
C. Reduce the retirement age from 65 to 60
D. Decreasing government expenditure on training and development

Marking guidelines gives me C, but I'd bet money that the guidelines are wrong and the real answer is B.

 

[Ekman]

Re: 2015 HSC Economics Marathon

Which of the following is an indicator of increased integration of global labour markets?
A. Increased flow of unskilled workers from developed countries
B. Increased level of government restrictions on work visas
C. Increased level of production by transnational companies
D. Increased level of workers' income sent back home

Also, I'd like opinions on this question:

Which of the following policy options may reduce the Non Accelerating Inflation Rate of Unemployment (NAIRU)?
A. Reduce the minimum school leaving age
B. Encouraging those who receive welfare to re-enter the workforce
C. Reduce the retirement age from 65 to 60
D. Decreasing government expenditure on training and development

Marking guidelines gives me C, but I'd bet money that the guidelines are wrong and the real answer is B.

For the first question I say D, because A doesn't make sense, B restricts the movement of labour, and C isn't correct because the increase production of TNC's doesn't require any movement of labour (since manufacturing can take place in one country (e.g. China), and these manufactured goods can be sold some place else, without any movement of labour). The reason why I support D is because if there is more income from workers overseas being sent home, there must be increased movements of labour.

For the next one, the reason why I support C rather than B is because a reduced retirement age will result in a burden on the government's budget, however the job vacancies will increase, resulting in an increase in the demand for labour. Of course this is arguable as cyclical unemployment will definitely decrease, but structural and long-term will not always decrease (as there may still be a mismatch of skills, and the long term unemployed are still undesirable). However the reason why I don't completely agree with B is because it will have no impact on structural unemployment, and it will have little effect on long-term unemployment because the reason why they are long-term is due to their lack of knowledge of the labour markets, and their loss of skills overtime, so just encouraging them to work will only decrease hidden unemployment, and wont have any effect on long-term or structural.

 

[pomsky]

Re: 2015 HSC Economics Marathon

In the Capital account , what is 'capital transfers from people migrating into/out of Australia'?
What's the difference between workers remittance (which is counted as net secondary income) and this? Can't find too much clarification on this

 

[Ekman]

Re: 2015 HSC Economics Marathon

In the Capital account , what is 'capital transfers from people migrating into/out of Australia'?
What's the difference between workers remittance (which is counted as net secondary income) and this? Can't find too much clarification on this

Im not sure where you got this from, because from my understanding, the capital account consists of conditional aid and purchases of non-tangible goods such as property rights and trademarks. I remember reading from the Dixon textbook that until 2009, migrant transfers were also taken into consideration, but I never learnt it from my teacher, nor did I see it important to invest energy into researching about it.

 

[pomsky]

Re: 2015 HSC Economics Marathon

Im not sure where you got this from, because from my understanding, the capital account consists of conditional aid and purchases of non-tangible goods such as property rights and trademarks. I remember reading from the Dixon textbook that until 2009, migrant transfers were also taken into consideration, but I never learnt it from my teacher, nor did I see it important to invest energy into researching about it.

From the 2015 Riley textbook.

Was just looking for more info because sometimes one of the question in the MC presents something about overseas migrants and ask you to slot in where they'll fit in the BOP.

 

[Ekman]

Re: 2015 HSC Economics Marathon

From the 2015 Riley textbook.

Was just looking for more info because sometimes one of the question in the MC presents something about overseas migrants and ask you to slot in where they'll fit in the BOP.

Is this in past HSC papers?

 

[pomsky]

Re: 2015 HSC Economics Marathon

Is this in past HSC papers?

Either past HSC or school past papers, can't remember haha.

How does "the demand for foreign assets such as shares, real estate, government bonds and currency by Australian residents" affect the supply of AUD? I get demand and supply mixed up a lot.

Is it : demand for foreign asset >> australian dollars being swapped for other currencies >> decrease in the domestic supply of AUD ?

EDIT: Reading someone's notes and they've concluded that investment opportunities overseas increases supply, not decreases. Dunno why though

 

[Ekman]

Re: 2015 HSC Economics Marathon

Either past HSC or school past papers, can't remember haha.

How does "the demand for foreign assets such as shares, real estate, government bonds and currency by Australian residents" affect the supply of AUD? I get demand and supply mixed up a lot.

Is it : demand for foreign asset >> australian dollars being swapped for other currencies >> decrease in the domestic supply of AUD ?

Well if domestic demand for foreign assets increase, then more Australians are investing on a global level, and more AUD is being exchanged into foreign currency in order to make the investments, resulting in an INCREASE in supply of AUD, and a depreciation.

 

[pomsky]

Re: 2015 HSC Economics Marathon

Another dilemma (to do with interest rates)

I know there's a cause and effect with interest rates and inflation, i.e: When interest rates are lowered, the rate of borrowing is lowered allowing more people to borrow money and spend. This increases inflation as aggregate demand increases.

However, is the same true for the reverse? i.e: if inflation rises, does this have an effect on interest rates? (with the exception of the monetary policy acting to forcefully pull it down to sustainable levels)

 

[teridax]

Re: 2015 HSC Economics Marathon

Another dilemma (to do with interest rates)

I know there's a cause and effect with interest rates and inflation, i.e: When interest rates are lowered, the rate of borrowing is lowered allowing more people to borrow money and spend. This increases inflation as aggregate demand increases.

However, is the same true for the reverse? i.e: if inflation rises, does this have an effect on interest rates? (with the exception of the monetary policy acting to forcefully pull it down to sustainable levels)

You basically answered your own Q haha.

But yes, if there were increases in the sustained general prices of goods and services (high inflation), then the RBA in response would implement a tightening of monetary policy (selling gov securities and raising the cash rate) to prevent said inflation from rising any further.

 

[pomsky]

Re: 2015 HSC Economics Marathon

Well if domestic demand for foreign assets increase, then more Australians are investing on a global level, and more AUD is being exchanged into foreign currency in order to make the investments, resulting in an INCREASE in supply of AUD, and a depreciation.

By an increase in supply do you mean in the domestic market or the international financial market?

And if more Australians are investing on a global level>> why does it increase supply? Do they inject more AUD into the system?

Can you refer me to the relevant chapter in the textbook lol. I think I'm very confused.

 

[pomsky]

Re: 2015 HSC Economics Marathon

You basically answered your own Q haha.

But yes, if there were increases in the sustained prices of goods and services (high inflation), then the RBA would implement a tightening of monetary policy (selling gov securities and raising the cash rate).

I was referring to the immediate effects lol. As in- imagine the RBA wasn't there. Will there still be a correlation?

 

[teridax]

Re: 2015 HSC Economics Marathon

I was referring to the immediate effects lol. As in- imagine the RBA wasn't there. Will there still be a correlation?

Well, if you're talking about immediate effects, which to me implies a short time lag, then I'd say so for fiscal policy.

Idk, I just go by my motto that everything in Eco is interconnected (or correlated in your terminology).

 

[pomsky]

Re: 2015 HSC Economics Marathon

@ the supply of AUD question. Found a paragraph in Riley's textbook but don't understand why it works the way it does:
"The supply of the AUD is derived from the demand by Australians for foreign goods and services and the purchase of foreign assets."

Why is it derived from the demand by Australians for foreign G+S? And how does this affect the supply?

 

[Ekman]

Re: 2015 HSC Economics Marathon

Another dilemma (to do with interest rates)

I know there's a cause and effect with interest rates and inflation, i.e: When interest rates are lowered, the rate of borrowing is lowered allowing more people to borrow money and spend. This increases inflation as aggregate demand increases.

However, is the same true for the reverse? i.e: if inflation rises, does this have an effect on interest rates? (with the exception of the monetary policy acting to forcefully pull it down to sustainable levels)

I guess on a consumer level, if there is high levels of inflation, consumers would rather spend than save, because if they save, their saved money gets devalued. This then reduces the overall level of domestic savings, causing an increase in the interest rates without any intervention from the RBA. However the RBA makes sure that inflation is at a sustainable level, and moderates the level of interest rates.