HSC 2015 Economics Marathon (5 Viewers)

[atargainz]

Re: 2015 HSC Economics Marathon

Let's get it, eco is next for me:
Explain the limitations of both fiscal policy and monetary policy in addressing an economic slowdown (6 marks)

 

[aanthnnyyy]

Re: 2015 HSC Economics Marathon

Let's get it, eco is next for me:
Explain the limitations of both fiscal policy and monetary policy in addressing an economic slowdown (6 marks)

Monetary policy is considerably effective in addressing an economic downturn. Through the manipulation of the cash rate, the RBA can help recover from an economic slowdown through open market operations; by purchasing CGSs and repos to increase the supply of cash in overnight markets (surplus of funds in exchange settlement accounts). This loosening of monetary policy tends to spread on to the financial market influencing the level of interest rates; attracting borrowers. However monetary policy operates with an autonomous consumption/expenditure constraint as it takes time for the real economy to experience changes.
(Possibly could add monetary more effective in controlling price stability opposed to other goals such as unemployment and economic growth as reflected through current conditions?)


Fiscal policy on the other hand addresses an economic slowdown through discretionary and non discretionary policy changes to the economy. In terms of the structural factor, there are fiscal policy restraints due to policy formation lags (short term) and is especially the case when the majority is not in the senate..

Thus... Monetary policy is quicker to implement, but takes longer to impact the real economy while fiscal policy vice versa

 

[Ekman]

Re: 2015 HSC Economics Marathon

Monetary policy is considerably effective in addressing an economic downturn. Through the manipulation of the cash rate, the RBA can help recover from an economic slowdown through open market operations; by purchasing CGSs and repos to increase the supply of cash in overnight markets (surplus of funds in exchange settlement accounts). This loosening of monetary policy tends to spread on to the financial market influencing the level of interest rates; attracting borrowers. However monetary policy operates with an autonomous consumption/expenditure constraint as it takes time for the real economy to experience changes.
(Possibly could add monetary more effective in controlling price stability opposed to other goals such as unemployment and economic growth as reflected through current conditions?)


Fiscal policy on the other hand addresses an economic slowdown through discretionary and non discretionary policy changes to the economy. In terms of the structural factor, there are fiscal policy restraints due to policy formation lags (short term) and is especially the case when the majority is not in the senate..

Thus... Monetary policy is quicker to implement, but takes longer to impact the real economy while fiscal policy vice versa

Actually, monetary policy is better at dampening eco growth rather than stimulating it. Hence this is also a limitation as well.

Also the limitations to the fiscal policy is the constraint on trying to maintain or achieve a budget surplus whilst stimulating the economy at the same time. Also fiscal policy has a few political constraints as well.

 

[RecklessRick]

Re: 2015 HSC Economics Marathon

Actually, monetary policy is better at dampening eco growth rather than stimulating it. Hence this is also a limitation as well.

Also the limitations to the fiscal policy is the constraint on trying to maintain or achieve a budget surplus whilst stimulating the economy at the same time. Also fiscal policy has a few political constraints as well.

As per syllabus for any limitations question you're best off going with implementation lag (short for monetary, long for fiscal), time lag for actual effect (long for monetary, short for fiscal), global influences on monetary policy + fiscal policy, political influences on fiscal policy. If you're a hardcore mofo you can go zlb for monetary but you can pull 6 without that, likely.

 

[atargainz]

Re: 2015 HSC Economics Marathon

Monetary policy is considerably effective in addressing an economic downturn. Through the manipulation of the cash rate, the RBA can help recover from an economic slowdown through open market operations; by purchasing CGSs and repos to increase the supply of cash in overnight markets (surplus of funds in exchange settlement accounts). This loosening of monetary policy tends to spread on to the financial market influencing the level of interest rates; attracting borrowers. However monetary policy operates with an autonomous consumption/expenditure constraint as it takes time for the real economy to experience changes.
(Possibly could add monetary more effective in controlling price stability opposed to other goals such as unemployment and economic growth as reflected through current conditions?)


Fiscal policy on the other hand addresses an economic slowdown through discretionary and non discretionary policy changes to the economy. In terms of the structural factor, there are fiscal policy restraints due to policy formation lags (short term) and is especially the case when the majority is not in the senate..

Thus... Monetary policy is quicker to implement, but takes longer to impact the real economy while fiscal policy vice versa

I think you've used quite a bit of words on explaining how the policies work rather than the limitations, your points on the limitations are good and valid but don't think it would be enough for a full 6 marks. I think it is necessary to talk about both implementation as well as impact lags (specifying the reasons why, such as the annual budget or how monetary policy is dependant on consumer and business spending patterns), political constraints (which you've mentioned, maybe touch on the political cycle being a long term policy constraint and even special interest groups), global influences (international organisations, international business cycle and the flow one effects of macro policy such as its effects on the exchange rate etc).

another question please

 

[aanthnnyyy]

Re: 2015 HSC Economics Marathon

Identify one cause of an increase in the labour force participation rate and briefly explain two economic effects of this increase (3)

 

[Ekman]

Re: 2015 HSC Economics Marathon

As per syllabus for any limitations question you're best off going with implementation lag (short for monetary, long for fiscal), time lag for actual effect (long for monetary, short for fiscal), global influences on monetary policy + fiscal policy, political influences on fiscal policy. If you're a hardcore mofo you can go zlb for monetary but you can pull 6 without that, likely.

Don't forget about conflicting objectives. That is also a limitation. For example eco growth vs inflation etc

Also monetary and fiscal policy will sometimes go against one another. But in the context of the question, it seems like it is asking about the constraints in increasing eco growth, so one can assume both policies will be adopting expansionary stances

 

[RecklessRick]

Re: 2015 HSC Economics Marathon

Don't forget about conflicting objectives. That is also a limitation. For example eco growth vs inflation etc

Also monetary and fiscal policy will sometimes go against one another. But in the context of the question, it seems like it is asking about the constraints in increasing eco growth, so one can assume both policies will be adopting expansionary stances

You're correct, but those are the syllabus points so I'd assume they would get you to 6.

 

[atargainz]

Re: 2015 HSC Economics Marathon

Identify one cause of an increase in the labour force participation rate and briefly explain two economic effects of this increase (3)

An increase in the labour force participation rate may be attributed to the implementation of the Fair Work Act 2009 which introduced minimum wages, awards and wage flexibility. These improved working conditions drew discouraged workers back into the labour force and attracted school leavers into the workforce, thereby increasing the labour participation rate. By having an increased and more diverse range of labour supply, firms are able choose specific workers and therefore increase their overall productive capacity. This increase in productive capacity will lend itself to heightened levels of international competitiveness and therefore overall economic growth.
Can also talk about:
- Economic growth
- Lower school retentions rates
- Government policy

Question: Explain why Australia is consistently a net importer of capital (4 marks)

 

[rrulez]

Re: 2015 HSC Economics Marathon

I'm confused.Is quotas a limitation on the quantity supplied? If so,then shouldn't a increase in quota allow for less foreign competition as you are increasing the restriction and vice versa for a decrease?

 

[Zlatman]

Re: 2015 HSC Economics Marathon

I'm confused.Is quotas a limitation on the quantity supplied? If so,then shouldn't a increase in quota allow for less foreign competition as you are increasing the restriction and vice versa for a decrease?

Quota refers to the quantity of a good/service allowed to be imported into a country. Therefore, increasing the quota of meat (as an example) means increasing the quantity of meat allowed to be imported into the country; hence, increasing foreign competition. On the other hand, reducing a quota means restricting/decreasing the quantity of meat allowed to be imported into the country; hence, reducing foreign competition.

EDIT: Ekman describes it in more depth below!

 

[Ekman]

Re: 2015 HSC Economics Marathon

I'm confused.Is quotas a limitation on the quantity supplied? If so,then shouldn't a increase in quota allow for less foreign competition as you are increasing the restriction and vice versa for a decrease?

Quotas are a bit confusing. Quotas are known as quantity restrictions on the amount of G&S supplied internationally. So if the government decides to set a quota for imported cars to 100 units, it means that the country can only import 100 units of cars. This drives the price up, allowing domestic businesses to have a greater share in the market for cars. If the quota was to increase from 100 to 200, more cars can be imported. This allows the foreign businesses to sell the cars at a cheaper price, and hence cause less market share for domestic businesses, as more cars can be imported. Hence by increasing imports via increasing quotas, you are reducing the protection as you allow a greater quantity of goods to be imported.

Edit: Looks like zlatman answered it first lol

 

[rrulez]

Re: 2015 HSC Economics Marathon

Explain the natural rate of unemployment and ways to increase or decrease it.

 

[atargainz]

Re: 2015 HSC Economics Marathon

Explain the natural rate of unemployment and ways to increase or decrease it.

Leading Edge Textbook: "Even at full employment there will always be some positive level of unemployment comprised of frictional, seasonal, structural and hard-core unemployment. This is sometimes called the natural rate of unemployment". So we increase it or decrease it by affecting those types of unemployment.

 

[dathat]

Re: 2015 HSC Economics Marathon

Explain how market failure causes the misallocation of resources in Australia (3m)

 

[Ekman]

Re: 2015 HSC Economics Marathon

Explain the natural rate of unemployment and ways to increase or decrease it.

Natural rate of unemployment is the minimum level of unemployment that can be sustained without any inflationary pressures. It is also known as when there is no cyclical unemployment. It consists of structural, frictional, long term, and a bit of hidden (its from a uni term known as structural hidden). Ways to decrease NAIRU is to:
-Increase the amount of retraining programs
-Increase the efficiency of job searching services
-Decrease retirement age

Ways to increase NAIRU is to:
-Microeconomic reform
-Liberalisation of trade (its a part of micro reform, but it also causes major structural unemployment)
-Increase retirement age.

 

[aanthnnyyy]

2015 HSC Economics Marathon

Explain how market failure causes the misallocation of resources in Australia (3m)

Market failure occurs when the price mechanism does not take in to account the social costs of production. Hence due to this marginal social cost attached, resources are not allocated efficiently with output increasing and prices falling.

Edit: such as the absence of environmental goods to a social cost and system of property rights

 

[RecklessRick]

Re: 2015 HSC Economics Marathon

Natural rate of unemployment is the minimum level of unemployment that can be sustained without any inflationary pressures. It is also known as when there is no cyclical unemployment. It consists of structural, frictional, long term, and a bit of hidden (its from a uni term known as structural hidden). Ways to decrease NAIRU is to:
-Increase the amount of retraining programs
-Increase the efficiency of job searching services
-Decrease retirement age

Ways to increase NAIRU is to:
-Microeconomic reform
-Liberalisation of trade (its a part of micro reform, but it also causes major structural unemployment)
-Increase retirement age.

Won't a decrease in the retirement rate increase the NAIRU and an increase in the retirement rate decrease the NAIRU?

 

[Ekman]

Re: 2015 HSC Economics Marathon

Won't a decrease in the retirement rate increase the NAIRU and an increase in the retirement rate decrease the NAIRU?

Retirement rate or retirement age? I haven't heard of retirement rate.

 

[RecklessRick]

Re: 2015 HSC Economics Marathon

Retirement rate or retirement age? I haven't heard of retirement rate.

Oops, meant retirement age, bad typo.