Section I - Multiple Choice (3 Viewers)

[wantedfrozen]

7 is not D (raising AUD would make exports even less competitive), it should be B
12 is C, as the government has taken on an expansionary stance and would reduce income tax, increase welfare benfits
14 is B (valuation effect, worsens CAD, increasing net foreign liabilities)
I'm thinking 19 is C, as Domestic market is where CGS are traded

 

[wantedfrozen]

How do you know those are the answers???

Why isn't 10 - B ?

and how do you work out 13 ???

Cos investors demand AUD, they can't affect supply

13) MPC = 90/150 = 3/5
MPS = 2/5 = 40
Therfore, MPC = 60
Y = (200+60) + (100+40) = 400

 

[michaeljennings]

How do you know those are the answers???

Why isn't 10 - B ?

and how do you work out 13 ???

10 isnt b because an increase in foreign financial investment increases DEMAND and has nothing to do with supply

7 is not D (raising AUD would make exports even less competitive), it should be B
12 is C, as the government has taken on an expansionary stance and would reduce income tax, increase welfare benfits
14 is B (valuation effect, worsens CAD, increasing net foreign liabilities)
I'm thinking 19 is C, as Domestic market is where CGS are traded

For question 7 how would increasing income tax rates make exports more competitive... Its C..Think about export incentive programs for example
For question 12 read it properly it says what is the impact of economic expansion ON government revenues etc its not saying the government has made an expansionary stance
14 is B yes
19 is B because borrowing from the RBA is just printing money and if you know about Zimbabwe you will know that $1000000000 buys you a loaf of bread

 

[Swazz]

I posted the answers before, but it appears I (my teacher) got 17 wrong. She said it was C, but D looks correct. Look through the thread an you will find it.

7 is C, 14 is A though.

Why is 7 c ? The economic impacts of lower export prices are largely beneficial in the long run, but damaging in short run. High spending would fuel consumption (both domestic and imports) with a relatively large time lag right?
Intervening by RBA indicates influence through MP (short term) or dirtying float; appreciation ultimately improves ToT; short run improvement minimises the trade deficit incurred (less import volumes funded with same export income )

 

[kev-is-red]

Why is 7 c ? The economic impacts of lower export prices are largely beneficial in the long run, but damaging in short run. High spending would fuel consumption (both domestic and imports) with a relatively large time lag right?
Intervening by RBA indicates influence through MP (short term) or dirtying float; appreciation ultimately improves ToT; short run improvement minimises the trade deficit incurred (less import volumes funded with same export income )

14 is B, my bad, just a little tired.

I don't know why C is right, all I know is that the other options are all incorrect

 

[michaeljennings]

Why is 7 c ? The economic impacts of lower export prices are largely beneficial in the long run, but damaging in short run. High spending would fuel consumption (both domestic and imports) with a relatively large time lag right?
Intervening by RBA indicates influence through MP (short term) or dirtying float; appreciation ultimately improves ToT; short run improvement minimises the trade deficit incurred (less import volumes funded with same export income )

I assume you are saying the answer for 7 is D but how does INCREASING the value of the currency going to make exports more competitive, if it said that they were decreasing the value then it would be correct. The government can use export incentive programs ie increasing discretionary expenditure to improve the international competitiveness of exports

 

[ilk]

pretty sure 14 is B!! currency depreciation caused increase in liabilities (valuation effect)

anyways, can anyone explain 12? my answer was A
progressive tax increases government revenue, and increase in unemployment expenditure increases government expenditure!
(or am i just making a fool out of myself LOL)

 

[wantedfrozen]

Couldn't 7 be B then, cos discretionary spending to improve international competitiveness is long term compared to increasing interest rates, and the question is asking to reduce the impact of the change inToT between Yr1 and 2

 

[michaeljennings]

pretty sure 14 is B!! currency depreciation caused increase in liabilities (valuation effect)

anyways, can anyone explain 12? my answer was A
progressive tax increases government revenue, and increase in unemployment expenditure increases government expenditure!
(or am i just making a fool out of myself LOL)

In an economic expansion ie an upturn people move into higher tax brackets hence the government earns more and cyclical unemployment is being reduced therefore they dont have to pay out as much for UE benefits

 

[steven12345]

Yeah but the question says "the graph shows the DEMAND for and SUPPLY of AUD.

If theirs greater invesmnet in australia then their would be greater demand, and less supply, as a result supply curve shifts to the left as more AUD is being bought, and thus appreciation (less supply -> greater demand) So then B is 100% right. ???


and 13? madmad

 

[wantedfrozen]

Yeah but the question says "the graph shows the DEMAND for and SUPPLY of AUD.

If theirs greater invesmnet in australia then their would be greater demand, and less supply, as a result supply curve shifts to the left as more AUD is being bought, and thus appreciation (less supply -> greater demand) So then B is 100% right. ???


and 13? madmad

But how is there greater demand then - there is in fact a contraction in demand according to the graph. If the answer was B, the demand curve would've shifted to the right.

 

[michaeljennings]

Yeah but the question says "the graph shows the DEMAND for and SUPPLY of AUD.

If theirs greater invesmnet in australia then their would be greater demand, and less supply, as a result supply curve shifts to the left as more AUD is being bought, and thus appreciation (less supply -> greater demand) So then B is 100% right. ???


and 13? madmad

No silly billy =) Check your textbook and look at what constitutes DEMAND and SUPPLY of currency. Financial investment into Australia is purely DEMAND as people overseas are DEMANDing our currency. They dont increase or decrease the supply of currency. The answer is C because we are paying out less to foreign investors on the net income account

 

[michaeljennings]

But how is there greater demand then - there is in fact a contraction in demand according to the graph. If the answer was B, the demand curve would've shifted to the right.

+1

 

[funkygirl59]

Yeah but the question says "the graph shows the DEMAND for and SUPPLY of AUD.

If theirs greater invesmnet in australia then their would be greater demand, and less supply, as a result supply curve shifts to the left as more AUD is being bought, and thus appreciation (less supply -> greater demand) So then B is 100% right. ???


and 13? madmad

Ahhhh i really don't get why there is debate about question 10 at all. There is absolutely no way in the world it could have been B. The diagram plain and simple showed a movement in SUPPLY. B was the most clearly wrong answer in my opinion, because it referred to DEMAND for the dollar which has nothing to do with supply. It was clearly C. Can we stop debating this question? I think it's a closed case.

 

[y510920]

Ahhhh i really don't get why there is debate about question 10 at all. There is absolutely no way in the world it could have been B. The diagram plain and simple showed a movement in SUPPLY. B was the most clearly wrong answer in my opinion, because it referred to DEMAND for the dollar which has nothing to do with supply. It was clearly C. Can we stop debating this question? I think it's a closed case.

cause not everyone is as smart as you are....or they just don't get the idea.....

 

[weirdguy99]

No silly billy =) Check your textbook and look at what constitutes DEMAND and SUPPLY of currency. Financial investment into Australia is purely DEMAND as people overseas are DEMANDing our currency. They dont increase or decrease the supply of currency. The answer is C because a reduction in the net income deficit on the current account means that either we are buying less imports which effectively supplies currency because we need to swap it to foreign currency to buy imports or we are paying out less to foreign investors on the net income account

A reduction in the net income deficit means we're paying out less dividends, servicing less interest, etc. It is not buying less imports, that would be a reduction in the net goods component.

 

[funkygirl59]

Sorry i didn't mean to sound harsh, I just think that the point has been proven many times on the thread

 

[michaeljennings]

A reduction in the net income deficit means we're paying out less dividends, servicing less interest, etc. It is not buying less imports, that would be a reduction in the net goods component.

Oh yeah sorry misread the question its not the current account its just hte net income account Ill edit my post to fix that up, but the correct answer is C

 

[editav]

Last year there was a multiple choice that had 2 answers..

 

[Freddici]

10 isnt b because an increase in foreign financial investment increases DEMAND and has nothing to do with supply



For question 7 how would increasing income tax rates make exports more competitive... Its C..Think about export incentive programs for example

That wasn't the question for 7. It was trying to reduce the impact of less income from Tot. That's how i Read it... So it should be B.