HSC 2015 Economics Marathon (4 Viewers)

[Ekman]

Re: 2015 HSC Economics Marathon

Export competing firms will not benefits from domestic inflation as the prices of their goods and services will increase, leading to a reduction in international competitiveness and thus reducing X levels and X revenue overall. Import competing firms will benefit from inflation to some extent. This may be because due to inflation, individuals will demand for higher wages (wage spiral index) and thus the higher wages will allow individuals to purchase cheaper imports rather then spending on higher priced domestic goods due to domestic inflation.

That doesn't make sense. How will import competing firms benefit when their employees are asking for higher wages (causing increased costs), and their lack of international competitiveness due to their goods being priced higher than imports. If anything, it will be worse for import competing industries in comparison to export competing industries, as import competing industries have less total market share, when compared to export competing industries, and increasing prices further will cause their market share to decrease further.

 

[atargainz]

Re: 2015 HSC Economics Marathon

Would export competing or import competing industries benefit most during a domestic inflation? Explain why.

Technically neither of them will benefit.
Export competing firms: An increase in price will reduce their international competitiveness as their goods are now at higher prices, making it less attractive in comparison to other exports around the world.
Import competing firms: Increase in price will make domestic consumers more likely to buy overseas goods since it is cheaper for them to do so.

I can see where Ekman is coming from in relation to market shares, but i'm not too sure of an argument that can be made to say that one will infact benefit more than the other.

 

[Gabriel Moussa]

Re: 2015 HSC Economics Marathon

Technically neither of them will benefit.
Export competing firms: An increase in price will reduce their international competitiveness as their goods are now at higher prices, making it less attractive in comparison to other exports around the world.
Import competing firms: Increase in price will make domestic consumers more likely to buy overseas goods since it is cheaper for them to do so.

I can see where Ekman is coming from in relation to market shares, but i'm not too sure of an argument that can be made to say that one will infact benefit more than the other.

Silly question? Only advantages of inflation period are
- the increase in value of assets for HIE's and those with high ownership of the factors of production
- avoiding deflation (which is worse)

 

[Ekman]

Re: 2015 HSC Economics Marathon

Technically neither of them will benefit.
Export competing firms: An increase in price will reduce their international competitiveness as their goods are now at higher prices, making it less attractive in comparison to other exports around the world.
Import competing firms: Increase in price will make domestic consumers more likely to buy overseas goods since it is cheaper for them to do so.

I can see where Ekman is coming from in relation to market shares, but i'm not too sure of an argument that can be made to say that one will infact benefit more than the other.

I never said that one will benefit more than the other. I said that it has negative implications for both, but import competing industries will be worse off than export competing industries, as they already lack international competitiveness since they dont have a comparative advantage, thats what makes them import competing.

 

[Study_like_a_nerd]

Re: 2015 HSC Economics Marathon

That doesn't make sense. How will import competing firms benefit when their employees are asking for higher wages (causing increased costs), and their lack of international competitiveness due to their goods being priced higher than imports. If anything, it will be worse for import competing industries in comparison to export competing industries, as import competing industries have less total market share, when compared to export competing industries, and increasing prices further will cause their market share to decrease further.

What I meant is that the domestic firms (exporters) will have reduced costs as their workers will demand higher wages - this will be better for import competing firms...

 

[Study_like_a_nerd]

Re: 2015 HSC Economics Marathon

I never said that one will benefit more than the other. I said that it has negative implications for both, but import competing industries will be worse off than export competing industries, as they already lack international competitiveness since they dont have a comparative advantage, thats what makes them import competing.

Wouldnt export competing industries be worse of - their inflation is increasing making Ms cheaper and more internationally competitive... or have I mixed it around

 

[milkytea99]

Re: 2015 HSC Economics Marathon

Wouldnt export competing industries be worse of - their inflation is increasing making Ms cheaper and more internationally competitive... or have I mixed it around

^ agree. Export competing industries would lose out but import competing wouldn't

 

[Ekman]

Re: 2015 HSC Economics Marathon

What I meant is that the domestic firms (exporters) will have reduced costs as their workers will demand higher wages - this will be better for import competing firms...

Again this still incorrect because higher wages will increase costs not decrease them. This is otherwise known as the wage price spiral, as a result of high levels of inflation, causing labour to demand wage increases in order to compensate for inflation, causing further cost push inflation.

 

[Gabriel Moussa]

Re: 2015 HSC Economics Marathon

Alright everyone,
Just a request from me to everyone, and in the best interests of everyone - Keep the theory simple, consise, and clear. We're at the finish line so try not to confuse people we're all fucked up and in a bad way lol.
And if someone is wrong tell them briefly but gently, self confidence is important around now.
Gabriel Moussa signing off.

 

[atargainz]

Re: 2015 HSC Economics Marathon

I never said that one will benefit more than the other. I said that it has negative implications for both, but import competing industries will be worse off than export competing industries, as they already lack international competitiveness since they dont have a comparative advantage, thats what makes them import competing.

I never said that you said one will benefit more than the other, just saying that I can't think of a reason why one would be better than the other. Lets just say the answer is none lol

 

[ta26]

Re: 2015 HSC Economics Marathon

Is it bad if you hold a lot of reserve assets? If so why

 

[spatula232]

Re: 2015 HSC Economics Marathon

Is it bad if you hold a lot of reserve assets? If so why

Not necessarily. Holding reserve assets is just like the nation saving money (just not in their own currency). This is beneficial if a central bank is required to 'dirty the float' as they aren't able to purchase AUD with AUD for example, they'd require other reserve assets such as another currency, gold etc. Reserve assets are a necessity for a fixed exchange rate in order to maintain its level and devalue/revalue.

I wouldn't go as far as saying it's bad, more so that there is an opportunity cost with doing so. This is that if an economy has a sum of funds stored away in reserve assets, they'd be unable to use that to say, provide for new expenditure programs. If they were to do so, this would alter the exchange rate as they would be required to purchase that nation's currency.

I'd assume that nations only really have "a lot of reserve assets" if: 1. Fixed/managed exchange rate, or 2. Running Budget surpluses and thus have excess funds which can be used to hold in case of external shock.

 

[spatula232]

Re: 2015 HSC Economics Marathon

Silly question? Only advantages of inflation period are
- the increase in value of assets for HIE's and those with high ownership of the factors of production
- avoiding deflation (which is worse)

This is the main one

 

[milkytea99]

Re: 2015 HSC Economics Marathon

Don't make predictions they get you nowhere in life

Lol, at least they give me a safety net in preparing for the essays haha.

 

[milkytea99]

Re: 2015 HSC Economics Marathon

Btw, WHAT ARE THE STATS AND TRENDS I NEED TO KNOW ?
Esp for CAD, BOP, Exchange rates? Besides the property boom and AUD is now $0.78? Is this legit trend as an exampleas well: the decline in mining boom, and then the emergence of the property boom?
I know for fiscal policy, you can just source it from this year's budget.

 

[sy37]

Re: 2015 HSC Economics Marathon

Explain how the RBA can influence the cash rate through its operations (5 marker) <--- explain it like I'm five because this is for me (chuckle)

 

[atargainz]

Re: 2015 HSC Economics Marathon

Explain how the RBA can influence the cash rate through its operations (5 marker) <--- explain it like I'm five because this is for me (chuckle)

The RBA does this through monetary policy, which involves influencing the cost and availability of money in the economy. The RBA may change the general level of interest rates in the economy by determining the short run cash rate -- this is done through domestic market operations (DMO). The RBA influences the cash rate by affecting the money supply of the Exchange Settlement (ES) accounts, and there are two stances which they may approach this, tightening or loosening. In tightening the monetary stance, the RBA will sell government securities to banks thereby drawing money out of the ES accounts, lower money supply in the accounts will put upwards pressure on the overnight cash rate. On the other hand loosening monetary policy involves the RBA buying securities from a bank, thereby depositing money in the seller's ES account, causing a increase in money supply. This will put downwards pressure on the short run cash rate. Therefore the RBA may create a shortage or surplus in the short term money market by selling and buying government securities, thus affecting the cash rate of interest.

 

[turnerloos]

Re: 2015 HSC Economics Marathon

Explain the implications of new government securities in domestic market operations (4 marks)

 

[godofindolence]

Re: 2015 HSC Economics Marathon

Explain the implications of new government securities in domestic market operations (4 marks)

By introducing new government securities within the domestic market operations, the government reduces the amount of cash available in the Exchange Settlement Accounts for overnight loans, by trading the CGS for cash, thereby resulting in upward pressure on the cash rate. This constitutes a contractionary monetary policy, with the increase in cash rates being passed on to the consumers as increased interest rates. To this end, aggregate demand (C+I+G+(X-M)) will go down, leading to decreases in growth and a resulting decline in derived demand for labour and hence unemployment. This is because consumption and investment will go down due to the increased price of borrowing for consumers and businesses. Similarly, an increase in interest rates will lead to an appreciation in Australian dollar due to increase in demand from higher returns in investment, further hurting export volumes due to the reducing purchasing power of foreign currency, leading decreased domestic growth and increased unemployment.

/4 and did I go into enough details about the implications?

 

[milkytea99]

Re: 2015 HSC Economics Marathon

Explain to me the J-curve theory thingo. (As many marks as necessary for me to fully understand)

Look at riley textbook page 144-145 if you use the 2015 version