HSC 2015 Economics Marathon (5 Viewers)

[swagmeister]

Re: 2015 HSC Economics Marathon

Gonna chuck this one out here because no one is responding to the thread I made, but it would make a pretty decent HSC question anyway, comes right from the syllabus and would be an awesome differentiator

"Explain why inflation does not accelerate above the NAIRU" 4 marks

The answer is that the elasticity of supply changes (the supply curve is non-linear), and thus when you have macro policy to lower unemployment but it still will be higher then the NAIRU, then you don't have demand pull inflation because supply will still be very elastic at that point, whereas when LRAS (potential output) is met then the supply curve is relatively inelastic as resource use is maximised, leading to demand pull inflation which workers may predict and demand higher wages and also resulting in firms competing for existing labour, increasing the price of labour and causes unemployment to remain at the same level while inflation increases.

"Explain of increased inflation may affect the distribution of income AND wealth in an economy" (4 marks)

 

[swagmeister]

Re: 2015 HSC Economics Marathon

typo haha should be "Explain how increased inflation may affect the distribution of income AND wealth in an economy" (4 marks)

 

[chboblie]

Re: 2015 HSC Economics Marathon

Increased inflation increases income inequality, as it would result in higher prices which would mean those on low incomes would have to spend more and therefore have less disposable income and less savings reducing wealth, whereas those with high incomes generally have many assets, which are likely to inflate as well maintaining their real income as well as their wealth. It would also cause interest rates to increase, which would result in even lower income for those with low income, as they are usually in dis-savings and the wealthy would become wealthier as they usually have excess savings and so would earn more interest.

 

[teridax]

Re: 2015 HSC Economics Marathon

Increased inflation increases income inequality, as it would result in higher prices which would mean those on low incomes would have to spend more and therefore have less disposable income and less savings reducing wealth, whereas those with high incomes generally have many assets, which are likely to inflate as well maintaining their real income as well as their wealth. It would also cause interest rates to increase, which would result in even lower income for those with low income, as they are usually in dis-savings and the wealthy would become wealthier as they usually have excess savings and so would earn more interest.

tbh, i didn't really understand your answer as the logical progression of ideas was hindered by your poor expression. also, yes increased inflation means the distribution of income is more uneven, particularly for low income earners but for inequality, you could have talked about the economic + social benefits and costs that is the subsequent effect of it

but really, most of the time you're repeating yourself and the phrasing is somewhat awkward

you'd be lucky to achieve 2/4 tbh

 

[chboblie]

Re: 2015 HSC Economics Marathon

Hey guys, was just reading over the Tim Riley's disadvantages on a fixed exchange rate system which stated:
A country (such as Australia) does not react to external structural changes, as the exchange rate does not respond quickly and directly to changes in market forces or external real or financial shocks.

could someone explain/clarify what he's trying to say because it was a bit confusing for me to understand

I think it means that if there is a reduction in demand or supply, or an increase in demand or supply of $AU, the dollar will not change instantaneously and will have lag. Also if there is a boom in many other countries, the $ would not depreciate resulting in lower export by firms

 

[Raymondo]

Re: 2015 HSC Economics Marathon

tbh, i didn't really understand your answer as the logical progression of ideas was hindered by your poor expression. also, yes increased inflation means the distribution of income is more uneven, particularly for low income earners but for inequality, you could have talked about the economic + social benefits and costs that is the subsequent effect of it

but really, most of the time you're repeating yourself and the phrasing is somewhat awkward

you'd be lucky to achieve 2/4 tbh

What's the point of talking about the economic and social costs and benefits of inequality. Read the question again. You could talk about more relevant and significant things such as actually answering the question .

 

[teridax]

Re: 2015 HSC Economics Marathon

What's the point of talking about the economic and social costs and benefits of inequality. Read the question again. You could talk about mor. Relevant and significant things such as actually answering the question .

well imo, he just repeated himself and didn't really expand. all he talked about were low and high income earners and savings, but that was it

there was nothing more to it tbh

 

[Ekman]

Re: 2015 HSC Economics Marathon

well imo, he just repeated himself and didn't really expand. all he talked about were low and high income earners and savings, but that was it

there was nothing more to it tbh

Well his points were all there, it was just his poor expression that was the problem.

 

[matchalolz]

Re: 2015 HSC Economics Marathon

Does anyone have any notes/explanations on the "possible limits to the effectiveness of fiscal policy - low commodity prices, increasing public debt and an implementation lag" dotpoint?

I sort of get the increasing public debt part but don't know anything about how low commodity prices would affect fiscal policy
And is implementation lag basically like stuff that the government proposes may not necessarily pass the senate and takes time to enforce?

 

[Ekman]

Re: 2015 HSC Economics Marathon

Does anyone have any notes/explanations on the "possible limits to the effectiveness of fiscal policy - low commodity prices, increasing public debt and an implementation lag" dotpoint?

I sort of get the increasing public debt part but don't know anything about how low commodity prices would affect fiscal policy
And is implementation lag basically like stuff that the government proposes may not necessarily pass the senate and takes time to enforce?

-Time lags. Despite fiscal policy's small implementation lag, changes in the fiscal policy occur annually, hence changes in the budget needs to account for every successive financial year.
Also changes in the monetary policy occur monthly, however there is a time lag of these chnagrd actually having an impact on economic growth.
Thus time lags greatly constraints the effectiveness of macroeconomic policies as changes in economic growth are very volatile.

-Objective conflicts. For monetary policy it is economic growth vs inflation or employment vs inflation. For fiscal policy it is economic growth vs maintaining a budget surplus or economic growth vs environmental sustainability.

-Political constraints. There generally is little to none political constraints for monetary policy as the general public does not vote Glenn Stevens out of his position in the RBA, so the monetary policy operates with little to no regard to politics.
However the fiscal policy on the other hand has a lot of political constraints as the PM generally makes economic conditions favorable for people in order to be re-elected. However this doesnt reduce its effectiveness in addressing economic slowdown but it does contribute to the conflict between macroeconomic objectives.

Above I have addressed public debt (the conflicting objectives part) and the time lag of fiscal policy.

In terms of commodities prices, I guess the only links that I can make to it that might be a problem for the government is that a decrease in commodities prices, will result in reduced profits, hence reduced company tax revenue for the government. Also this might seem a little abstract but this reduced profits will result in higher costs relative to profits which may either cause cyclical unemployment (businesses decide to let go employees in order to maintain profit margins) or cost-push inflation (businesses decide to raise prices due to the lack of profits).

 

[matchalolz]

Re: 2015 HSC Economics Marathon

@hawkrider, I swear you posted but I can't seem to find it now.
You asked where it was in the syllabus, and now that I look myself I can't seem to find it actually, I think I may have made a mistake and maybe confused it with something my teacher asked me... I just had it as a heading in my notes but I had nothing written underneath it so i thought it was a syllabus point.

Also, I deactivated fb coz too distracting (sorry for the mild derail)

 

[Ekman]

Re: 2015 HSC Economics Marathon

@hawkrider, I swear you posted but I can't seem to find it now.
You asked where it was in the syllabus, and now that I look myself I can't seem to find it actually, I think I may have made a mistake and maybe confused it with something my teacher asked me... I just had it as a heading in my notes but I had nothing written underneath it so i thought it was a syllabus point.

Also, I deactivated fb coz too distracting (sorry for the mild derail)

Well low commodities prices can also mean some good things for the government as it can work in reverse, where there is increased international competitiveness, allowing these businesses to grow and reach economies of scale over time, resulting in more profits and more taxation revenue. Also lower prices = lower inflation levels
It seemed pretty strange at first but I highly doubt you would mention low commodity prices as a limitation of the fiscal policy.

 

[matchalolz]

Re: 2015 HSC Economics Marathon

Above I have addressed public debt (the conflicting objectives part) and the time lag of fiscal policy.

In terms of commodities prices, I guess the only links that I can make to it that might be a problem for the government is that a decrease in commodities prices, will result in reduced profits, hence reduced company tax revenue for the government. Also this might seem a little abstract but this reduced profits will result in higher costs relative to profits which may either cause cyclical unemployment (businesses decide to let go employees in order to maintain profit margins) or cost-push inflation (businesses decide to raise prices due to the lack of profits).

Definitely not abstract, it certainly shows that you have a clear understanding of implications and how fiscal policy may be ineffective in ruining the achievement of policy objectives.

Wow you really know your shit thanks so much

 

[teridax]

Re: 2015 HSC Economics Marathon

Definitely not abstract, it certainly shows that you have a clear understanding of implications and how fiscal policy may be ineffective in ruining the achievement of policy objectives.

Wow you really know your shit thanks so much

wait, idg how tho lol

 

[hawkrider]

Re: 2015 HSC Economics Marathon

wait, idg how tho lol

This is just info extracted from my prepared macro essay plan

Essentially, it is ineffective because it does not target the long-term goals in the Australian economy, e.g. lack of international competitiveness, low productivity growth, low level of domestic savings, or the need to reduce carbon emissions. This is because by definition, the role of fiscal policy as part of macroeconomics is only effective in the short term of stimulating or dampening the economy. That's why you have your policy mix, whereby both macro (demand side of economics) and micro (supply side of economics) work together to ensure the objectives are achieved.

 

[swagmeister]

Re: 2015 HSC Economics Marathon

tbh, i didn't really understand your answer as the logical progression of ideas was hindered by your poor expression. also, yes increased inflation means the distribution of income is more uneven, particularly for low income earners but for inequality, you could have talked about the economic + social benefits and costs that is the subsequent effect of it

but really, most of the time you're repeating yourself and the phrasing is somewhat awkward

you'd be lucky to achieve 2/4 tbh

I disagree, thought this answer nailed how inflation affects the distribution of income and wealth. Logical explanations + showing direct and indirect effects. Anyone else have any thoughts?

 

[swagmeister]

Re: 2015 HSC Economics Marathon

This is just info extracted from my prepared macro essay plan

Essentially, it is ineffective because it does not target the long-term goals in the Australian economy, e.g. lack of international competitiveness, low productivity growth, low level of domestic savings, or the need to reduce carbon emissions. This is because by definition, the role of fiscal policy as part of macroeconomics is only effective in the short term of stimulating or dampening the economy. That's why you have your policy mix, whereby both macro (demand side of economics) and micro (supply side of economics) work together to ensure the objectives are achieved.

Yeah this is where having that fundamental knowledge of the AD/SRAS/LRAS is so crucial because you can see that macro policy can only really ensure that potential GDP is met, while increasing LRAS through macro reform can be really useful more in the long run. I mean macro policies just minimise the output gap.

 

[swagmeister]

Re: 2015 HSC Economics Marathon

anyway, next question "Suggest reasons why developing countries may not benefit as much from globalisation as advanced economies" 4 marks

 

[chboblie]

Re: 2015 HSC Economics Marathon

Developing countries are usually left out from the benefits of globalisation as they are not part of many or any ftas due to their inability to produce goods other than agricultural goods, which advanced economies usually heavily protect e.g. US. They are also exploited by tncs as the tncs usually avoid tax through tax havens in other countries while exploiting the lower environmental and labour standards developing countries usually have. They are also excluded from financial flows as they are usually heavily in debt and the aid they recieve from other countries is usually in the form of 'phantom' aid, which does not aid economic growth. They are also hindered by intellectual property rights for pharmaceuticals and new technologies in advanced economies which do not allow these products to go to these developing countries hindering both economic growth and development as developing countries cannot afford these goods.

Is my expression better? Cause I have the same problem in english

 

[ta26]

Re: 2015 HSC Economics Marathon

Your response is good, however it can be improved by using a greater amount of economic terminology;
for example rather than saying inability to produce goods other than agricultural say their narrow export base and lack of international competitiveness makes it difficult for these nations to compete, since advanced economies and trading blocs such as NAFTA and EU artificially protect their agricultural sector. Additionally,their less stringent government regulations and low costs of labour make such nations appealing for investments (however this point kinda talks about being economically converged cause an increase in investment leads to greater growth and integration). Hope this helped