Mark my response!! (1 Viewer)

[imoO]

Hi everybody,
I have a in-class response and I have already been given the question -

"Describe the role of the Reserve Bank of Australia in the operation of financial markets in Australia. Investigate the operation of a specific financial market in Australia. Be sure to include in your answer reference to the following current issues:
- the extent of competition among institutions operating in the market
- the adequacy on controls existing in the market
- the contribution of the market to economic welfare of individuals and firms"


Basically, 40 minutes, no notes, all in your head...etc etc...

I chose the ASX to be my specific financial market.

This is a rough draft of what I did..pages are in order of link appearance -

Page 1
http://img519.imageshack.us/img519/935/scan0003zc9.jpg

Page 2
http://img361.imageshack.us/img361/7321/scan0004fa3.jpg

Page 3
http://img151.imageshack.us/img151/8346/scan0005go1.jpg



Basically I want to know if there are any flaws. I've already gotten comments from family saying that I haven't really explained what the RBA has done in the operation of the financial markets, and my specific financial market, the ASX was not written to criteria but I can't see how ?

All comments are welcome, esp critisising because that means I will have a chance to satisfy even the most stingy markers.

Thanks in advanced,



imoO

 

[imoO]

Bump? Can anybody help?

I don't know where I stand at the moment.

imoO

 

[seano77]

In the intro you should really say that the RBA is independant of the Government- not owned by the Government. They make independant decisions based on what is best for the economy.

 

[imoO]

In the intro you should really say that the RBA is independant of the Government- not owned by the Government. They make independant decisions based on what is best for the economy.

Thanks.....

is there any other stuff you want to point out...I really don't mind at the moment....

I need all the help I can get

 

[munchiecrunchie]

Read your essay, just some general comments:


Page 1:
Its operation has an impact on individuals, firms and organizations – modify your statement a bit there
Perhaps an intro which covers everything you will say in your essay is better

Page 2:
It now may have to operate . . . ???
Why are high interest rates good for the economy? Provide an explanation for this.
The paragraph on adv and disadv is good, but you need to be clearer on why it is an efficient allocation of resources

Page 3:
Conclusion? Write one.

Overall a good essay but it needs polishing – it can be better. Be clearer with your explanation of eco concepts. Also, I can’t seem to find much on this bit of the assignment:
“the contribution of the market to economic welfare of individuals and firms"
perhaps a paragraph on it would meet the requirements.

Some tips to enhance your essay:
1. Signpost. Make it really explicit what part of the question you are answering.
2. Explain every concept – it is not good enough to just state things
3. use the words of the question, it will help keep you and the marker on track

good luck =]

 

[imoO]

I made a second attempt this morning. Here it is -

http://img134.imageshack.us/img134/1734/scan0001xu2.jpg

http://img91.imageshack.us/img91/3483/scan0002jj9.jpg

http://img224.imageshack.us/img224/2153/scan0003mj3.jpg

imoO

 

[gnrlies]

I made a second attempt this morning. Here it is -

http://img134.imageshack.us/img134/1734/scan0001xu2.jpg

http://img91.imageshack.us/img91/3483/scan0002jj9.jpg

http://img224.imageshack.us/img224/2153/scan0003mj3.jpg

imoO

A few critiques:

1 - the board doesn't take into consideration the supply and demand of funds to dertermine the cash rate. This is worked out daily in order to meet the cash rate, and is not dont by the board, but by to the footsoldiers within the bank. The monthly board meeting is to decide whether or not the cash rate is too high or too low. Based on the RBA's charter from the commonwealth government they are responsible for keeping inflation between 2 and 3% over the course of the economic cycle. This is what they make decisions on.

2 - There is a problem in something you are saying. You have said that more people are investing in America because of the appreciation of the australian dollar, and that this has caused interest rates to rise. Well not only is this incorrect (less people have invested in the US since sept of last year), but there is a causality issue. Firstly, the exchange rate has risen due to a rise in Australia's cash rate not the other way around (as well as a fall in the US funds rate). The increase in the interest rate differential between the USA and AUS has caused the rise in the AUD relative to the US dollar. Furthermore the higher interest rates has attracted investment in Australia and repelled investment to america.

3 - I have no idea what you are talking about when you say there will be less demand for loans due to tax reform by the Rudd government and something else about loans over the phone???? This is nonesense. delete this paragraph as it makes no sense and IS made up (i say it is made up because I know you couldn't possibly have read it from anywhere).

4 - Figure 1.2 is also an annoying diagram. It is not instructive. What you want to do if anything is draw two diagrams side by side, although in the context you have drawn it, it is completely invalid (PM me if you want me to draw you something nice... I will simplify the IS-LM model so you can impress your teachers). You draw two totally different things on the same axis. Thats like me eating a steak and saying that it tastes like icecream - it just doesn't make sense. On my reading you are essentially saying that as the interest rate goes up, demand goes up. Is this true?

5 - Why is there not fair competition in the ASX? As a shareholder you are not forced to by the shares of a particular company are you? If not then what do you mean? do you mean that there is no alternative to the ASX? If you think this then you are wrong. There are plenty of alternatives. Furthermore, why is it that you assume it to be the governments responsibility to intervene?

6 - Your analysis of the sharemarket seems wrong. The ASX is not responsible for allocating funds. Shareholders can decide which stocks they want to buy. The ASX is just a facilitator of this exchange. Subsequently I dont know why you are talking abaout the 'economic problem' etc. Completely misguided. You are also writing that they are allocating our savings into efficient production? huh? who is doing the allocating and how is putting to efficient use a bad thing?

7 - What are you talking about when you say the government should provide competition? The government should fix this? should fix that? The government should play no such role. As for the ASX they are simply performing an agency role by raising capital for australia businesses. I dont know why your emphasis is on competition. It just seems as though you are writing these sentences because the question talks about competition. This does not make sense to me as an economically literate reader.

 

[imoO]

A few critiques:

1 - the board doesn't take into consideration the supply and demand of funds to dertermine the cash rate. This is worked out daily in order to meet the cash rate, and is not dont by the board, but by to the footsoldiers within the bank. The monthly board meeting is to decide whether or not the cash rate is too high or too low. Based on the RBA's charter from the commonwealth government they are responsible for keeping inflation between 2 and 3% over the course of the economic cycle. This is what they make decisions on.

2 - There is a problem in something you are saying. You have said that more people are investing in America because of the appreciation of the australian dollar, and that this has caused interest rates to rise. Well not only is this incorrect (less people have invested in the US since sept of last year), but there is a causality issue. Firstly, the exchange rate has risen due to a rise in Australia's cash rate not the other way around (as well as a fall in the US funds rate). The increase in the interest rate differential between the USA and AUS has caused the rise in the AUD relative to the US dollar. Furthermore the higher interest rates has attracted investment in Australia and repelled investment to america.

3 - I have no idea what you are talking about when you say there will be less demand for loans due to tax reform by the Rudd government and something else about loans over the phone???? This is nonesense. delete this paragraph as it makes no sense and IS made up (i say it is made up because I know you couldn't possibly have read it from anywhere).

4 - Figure 1.2 is also an annoying diagram. It is not instructive. What you want to do if anything is draw two diagrams side by side, although in the context you have drawn it, it is completely invalid (PM me if you want me to draw you something nice... I will simplify the IS-LM model so you can impress your teachers). You draw two totally different things on the same axis. Thats like me eating a steak and saying that it tastes like icecream - it just doesn't make sense. On my reading you are essentially saying that as the interest rate goes up, demand goes up. Is this true?

5 - Why is there not fair competition in the ASX? As a shareholder you are not forced to by the shares of a particular company are you? If not then what do you mean? do you mean that there is no alternative to the ASX? If you think this then you are wrong. There are plenty of alternatives. Furthermore, why is it that you assume it to be the governments responsibility to intervene?

6 - Your analysis of the sharemarket seems wrong. The ASX is not responsible for allocating funds. Shareholders can decide which stocks they want to buy. The ASX is just a facilitator of this exchange. Subsequently I dont know why you are talking abaout the 'economic problem' etc. Completely misguided. You are also writing that they are allocating our savings into efficient production? huh? who is doing the allocating and how is putting to efficient use a bad thing?

7 - What are you talking about when you say the government should provide competition? The government should fix this? should fix that? The government should play no such role. As for the ASX they are simply performing an agency role by raising capital for australia businesses. I dont know why your emphasis is on competition. It just seems as though you are writing these sentences because the question talks about competition. This does not make sense to me as an economically literate reader.

@1 & 2 - I may be wrong in doing so, I tend to change words a bit in context, and this can change the entire meaning of the sentences I am writing.

@3 - Can you provide me with some current issues that will affect the way the RBA's role in the economy is? I wasn't too sure about this one either, but I got it off a stack of papers a teacher provided me. I'm willing to scan and send them to you if you want

@4 - Yes...PLEASE SHOW ME THE DIAGRAM MORE MARKS!!!

@5 - The question asks whether the financial market faces any competition at all. In this case we are saying whether the ASX has any competition at all, not the share sold on the ASX. For example in USA we have NASDAQ, Amex, NYSE etc....

The ASX truely has no valid and active competition.

@6 - I am not saying the ASX is allocating funds. I am saying that their contribution to the economic prosperity and welfare of the people is by promoting economic acticity. This is done when people's savings are taken up, put into a company, and moved or taken out if the sharemarket is unproductive. This sort of relates to efficient use of resources doesn't it?

and the economic problem is that "matching Society's demands with the scarce amount of resources we have".

@7 - I am talking about government intervention. We know that if overseas companies we're providing Australia with a cheaper product than what we could make here, the government would most probably be providing subsidaries to these Australian companies and charging tariffs on the overseas companies.....

See what I'm getting at now?

imoO

 

[gnrlies]

@1 & 2 - I may be wrong in doing so, I tend to change words a bit in context, and this can change the entire meaning of the sentences I am writing.

Yes we'll just make sure that this is clarified


@3 - Can you provide me with some current issues that will affect the way the RBA's role in the economy is? I wasn't too sure about this one either, but I got it off a stack of papers a teacher provided me. I'm willing to scan and send them to you if you want

yes ok, up to you, but the paragraph as is not a good one

@4 - Yes...PLEASE SHOW ME THE DIAGRAM MORE MARKS!!!

I just pm'd you

@5 - The question asks whether the financial market faces any competition at all. In this case we are saying whether the ASX has any competition at all, not the share sold on the ASX. For example in USA we have NASDAQ, Amex, NYSE etc....

The ASX truely has no valid and active competition.

Are you sure about that? the ASX is just an amalgamation of the various stock exchanges around Australia. It is done for efficiency purposes, not to obtain market power. What makes you think there is no competition? Australian firms can list overseas if they want to can't they? furthermore a stock exchange is not the only way to obtain equity, let alone finance for business operaion. NASDAQ is an index not a securities exchange

@6 - I am not saying the ASX is allocating funds. I am saying that their contribution to the economic prosperity and welfare of the people is by promoting economic acticity. This is done when people's savings are taken up, put into a company, and moved or taken out if the sharemarket is unproductive. This sort of relates to efficient use of resources doesn't it?

and the economic problem is that "matching Society's demands with the scarce amount of resources we have".

The ASX doesn't promote economic activity. They simply faciltiate financial market transactions. Their role if anything is to minimise transaction costs.

@7 - I am talking about government intervention. We know that if overseas companies we're providing Australia with a cheaper product than what we could make here, the government would most probably be providing subsidaries to these Australian companies and charging tariffs on the overseas companies.....

See what I'm getting at now?

No i dont. It doesn't make sense and is not relevant to the stock market