Section I - Multiple Choice (15 Viewers)

[Graham Arnold]

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.

If they were trying to reduce the impact of less income why would the government 'increase income tax rates'. That means that people would be losing more of their income. Nice try though

 

[Freddici]

If they were trying to reduce the impact of less income why would the government 'increase income tax rates'. That means that people would be losing more of their income. Nice try though

It depends on whether it's for the consumers on gov. Because if it was for the consumers the RBA to increase the currency value will make imports cheaper and that's also the same for C. Both C/D benefit the consumer. Which proves the vagueness of the questions.

 

[Graham Arnold]

It depends on whether it's for the consumers on gov. Because if it was for the consumers the RBA to increase the currency value will make imports cheaper and that's also the same for C. Both C/D benefit the consumer. Which proves the vagueness of the questions.

It says what would they do to reduce the economic impact, if they were to reduce the currency value this would be reinforcing the economic impact of an increase in imports. DO YOU EVEN PAY ATTENTION IN CLASS!

 

[steven12345]

12 is not c , it's d , because it's not 'income tax which is constantly changed and shit. It's d because as economicactivity increases, people are going to be working more, and as a result of working more, theirs going to be greater incomes, meaning that they are going to move up the tax brackets, meaning theirs going to be increase progressive taxation receipts, unemployment benefits will fall (as more people are working)

 

[steven12345]

Exactly !

 

[steven12345]

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.

You dont get it , if theirs an icrease in Foreign invesment , does that mean increase demand? which means theirs a decrease in supply as these investors are swapping their curencies for ours?

 

[michaeljennings]

You dont get it , if theirs an icrease in Foreign invesment , does that mean increase demand? which means theirs a decrease in supply as these investors are swapping their curencies for ours?

You could not be more wrong lol. An increase in investment has nothing to do with supply. Its simply foreign investors demanding more $A

 

[funkygirl59]

Since when did we ever learn that an increase in demand causes a proportional decrease in supply? It doesn't - supply stays the same, but because there is more demand, the price on that supply goes up, hence the increase in the exchange rate. Increased investment demand causes an immediate increase in demand, it's not a supply side thing. Remember three factors that cause a decrease in supply: less australian investment overseas etc... there's those 3 factors in the textbook. it was a simple theory question

 

[michaeljennings]

Since when did we ever learn that an increase in demand causes a proportional decrease in supply? It doesn't - supply stays the same, but because there is more demand, the price on that supply goes up, hence the increase in the exchange rate. Increased investment demand causes an immediate increase in demand, it's not a supply side thing. Remember three factors that cause a decrease in supply: less australian investment overseas etc... there's those 3 factors in the textbook. it was a simple theory question

+1

 

[trickgary']

Yea thats correct

 

[abc123yoyo]

You dont get it , if theirs an icrease in Foreign invesment , does that mean increase demand? which means theirs a decrease in supply as these investors are swapping their curencies for ours?

If only people got the right idea right haha the irony

 

[Aclipse]

in question 7

Year 1 ToT = 110
Year 2 ToT = 105

The table showed a worsening of the ToT, i.e. exports worth less and imports cost more

To counteract this, (To reduce the economic impact of the change in the nation's terms of trade)

The government or the RBA has to improve the ToT
i.e. make exports worth more and imports cost less
--> appreciation of the australian dollar?

A and B has the same contractionary effect on the economy. So it's wrong

A reduction in the ToT means that our exports become more competitive which would stimulate the economy. The government shouldn't stimulate the economy further by going with C

in D, the RBA increases the value of the currency, which directly improves the ToT

 

[stevey6404]

in question 7

Year 1 ToT = 110
Year 2 ToT = 105

The table showed a worsening of the ToT, i.e. exports worth less and imports cost more

To counteract this, (To reduce the economic impact of the change in the nation's terms of trade)

The government or the RBA has to improve the ToT
i.e. make exports worth more and imports cost less
--> appreciation of the australian dollar?

A and B has the same contractionary effect on the economy. So it's wrong

A reduction in the ToT means that our exports become more competitive which would stimulate the economy. The government shouldn't stimulate the economy further by going with C

in D, the RBA increases the value of the currency, which directly improves the ToT

+1
I like you cause you gave an explanation of what I put HAHA

 

[Stalker Ninja]

in question 7

Year 1 ToT = 110
Year 2 ToT = 105

The table showed a worsening of the ToT, i.e. exports worth less and imports cost more

To counteract this, (To reduce the economic impact of the change in the nation's terms of trade)

The government or the RBA has to improve the ToT
i.e. make exports worth more and imports cost less
--> appreciation of the australian dollar?

A and B has the same contractionary effect on the economy. So it's wrong

A reduction in the ToT means that our exports become more competitive which would stimulate the economy. The government shouldn't stimulate the economy further by going with C

in D, the RBA increases the value of the currency, which directly improves the ToT

Extract from a speech by Glenn Stevens

"But the general point is that high terms of trade, all other things equal, will raise living standards, while low terms of trade will reduce them."
http://www.rba.gov.au/speeches/2010/sp-gov-291110.html

Thus in 7 since the terms of trade has fallen, the gov't could increase discretionary expenditure (C) to stimulate the economy and mitigate the fall in living standards

A fall in the ToT means that we can buy a lower volume of imports with the same volume of exports

 

[friend177]

Edited it ask something lol

 

[sakatahahaha]

in question 7

Year 1 ToT = 110
Year 2 ToT = 105

The table showed a worsening of the ToT, i.e. exports worth less and imports cost more

To counteract this, (To reduce the economic impact of the change in the nation's terms of trade)

The government or the RBA has to improve the ToT
i.e. make exports worth more and imports cost less
--> appreciation of the australian dollar?

A and B has the same contractionary effect on the economy. So it's wrong

A reduction in the ToT means that our exports become more competitive which would stimulate the economy. The government shouldn't stimulate the economy further by going with C

in D, the RBA increases the value of the currency, which directly improves the ToT

I thought about this but concluded that an appretiation of our currency means our exports are less attractive on world markets since our exports are appreciated this would further worsen our cad ?

 

[kev-is-red]

in question 7

Year 1 ToT = 110
Year 2 ToT = 105

The table showed a worsening of the ToT, i.e. exports worth less and imports cost more

To counteract this, (To reduce the economic impact of the change in the nation's terms of trade)

The government or the RBA has to improve the ToT
i.e. make exports worth more and imports cost less
--> appreciation of the australian dollar?

A and B has the same contractionary effect on the economy. So it's wrong

A reduction in the ToT means that our exports become more competitive which would stimulate the economy. The government shouldn't stimulate the economy further by going with C

in D, the RBA increases the value of the currency, which directly improves the ToT

Appreciation of the $A will have a contractionary effect as Australian exports would lose international competitiveness. Moreover, increasing the cash rate would potentially increase the value of the $A anyway. It definitely isn't D, as it is too similar to A.

 

[Aclipse]

The ToT has nothing to do with international competitiveness...

or so what I was taught anyway

The fact that the appreciation of the $A will have a contractionary effect is irrelevant.

Because the table shows the ToT worsening. To counteract this effect the RBA need to improve the ToT


btw i thought determine or some other eco gun is going to put answers. What happened to that

 

[blackvegetable]

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

 

[michaeljennings]

The ToT has nothing to do with international competitiveness...

or so what I was taught anyway

The fact that the appreciation of the $A will have a contractionary effect is irrelevant.

Because the table shows the ToT worsening. To counteract this effect the RBA need to improve the ToT


btw i thought determine or some other eco gun is going to put answers. What happened to that

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