multiple choice help (1 Viewer)

[osak23]

hi

need help on some questions from 2008 hsc


http://www.boardofstudies.nsw.edu.au/hsc_exams/hsc2008exams/pdf_doc/2008HSC-economics.pdf


12 How could the Australian government finance a budget deficit while maintaining external stability?
(A) By increasing domestic income tax rates
(B) By selling bonds to international investors
(C) By reducing the level of government expenditure
(D) By borrowing funds from the domestic private sector

the answer is D?
but borrowing from private sector effectively crowds out domestic investment, which leads to them sourcing capital from overseas, leading to increased interest rate debits , worsening cad which conflicts with external stability goals???????????????

and also need help on q11 with the income distibution ..no idea how to work it out

 

[deswa1]

The only two answers could be B or D. B will obviously lead to a direct increase in foreign debt so that's wrong. D just leads to an increase in government net debt but preserves external stability. You are overthinking the impact of the crowding out effect. Even if you take that line of argument though- the crowding out effect mainly argues that private sector investment will reduce not neccessarily go overseas to find funds.

Q11 is A- just read the y value when x=50%

 

[osak23]

thanks!