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Section I - Multiple Choice (1 Viewer)

christopher8827

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Christopher, Is there any reason you say that, despite the working posted above?
The supply curve was shifted to the right because a subsidy was paid to the domestic producers. This allows them to sell towels at lower price at $8 per towel. Therefore, a subsidy of $2 must be paid if the equilibrium price is $10. The question is asking "PER TOWEL" - you're unlikely to be asked to do much more.

Also, this means the size of the subsidy is the vertical distance as they are paid $2 to lower their price.

Source: https://www.google.com.au/search?q=subsidy+graph&hl=en&client=safari&bav=on.2,or.r_gc.r_pw.&bpcl=35440803&biw=1024&bih=672&um=1&ie=UTF-8&tbm=isch&source=og&sa=N&tab=wi&authuser=0&ei=PLh_ULfHKcGsiAfFuYDYDA
 

Jashua_Long

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The guys got the easiest multiple choice. So many easy calculation questions and easy logic questions.
 

irenefu

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Did anyone else put put A for question 3?

The question was - Which of the following is most likely to occur as a country becomes more economically developed?
a.education levels increase
b.labour productivity increases
c.reliance on foreign aids increases
d.agricultural production as a share of GDP increases

I see most people put b, but I interpreted the question as what happens when the government improves the amount of economic development in the economy which is defined as indicators of 'health, education and environmental quality' so that's why I chose A over B.

Did anyone else do this?=S Or did I overanalyse?
 

neha23

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Answers are as follows (99% sure)
1. B
2. A
3. B
4. A
5. A
6. C
7. B
8. D
9. D
10. C
11. C
12. D
13. D
14. B
15. A
16. A
17. C
18. A
19. C
20. D
how come 5 is A? didnt CPI increase? so shudnt it be contractionary monetary policy? i dnt know, i got C for question 5
 

freeeeee

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You forgot to read the "focused ONLY on employment outcomes" part of the Q, Answer is A
 

Rawf

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9 cood be both B and D, i think they will allow both
Why do you think it's B? Household savings wont rise.. according to the intertemporal substitution effect or whatever it's called they'll spend more and save less.
Furthermore, the fact that lower income earners are more likely to be the one's taking out loans... if the rates decrease, they have more disposable income and because they have high MPC's, they wont save that money, rather, they'd spend it.
Some aussies might even go, shit son these rates are frikken low! and go invest their money overseas.
So overall.. no I don't think it can be B, it's definitely D
 

ct12345

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Why do you think it's B? Household savings wont rise.. according to the intertemporal substitution effect or whatever it's called they'll spend more and save less.
Furthermore, the fact that lower income earners are more likely to be the one's taking out loans... if the rates decrease, they have more disposable income and because they have high MPC's, they wont save that money, rather, they'd spend it.
Some aussies might even go, shit son these rates are frikken low! and go invest their money overseas.
So overall.. no I don't think it can be B, it's definitely D

what you have said is is true, but all those who have loans (mortgages etc), will be paying less interest rates, monthly, therefore there will be less money withdrawn from their account on a monthly basis, thus leading to an increase in national savings.* All other things being equal, they don't necessarily increase spending since there has been no mention of an injection of funds into the economy by the government. But part of what your saying is true so there is a chance they could accept both answers.
 

Rawf

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what you have said is is true, but all those who have loans (mortgages etc), will be paying less interest rates, monthly, therefore there will be less money withdrawn from their account on a monthly basis, thus leading to an increase in national savings.* All other things being equal, they don't necessarily increase spending since there has been no mention of an injection of funds into the economy by the government. But part of what your saying is true so there is a chance they could accept both answers.
I think you're getting the two accounts mixed up...
Lets simplify the situation - there are both BORROWERS and SAVERS in the economy (of course you can be both but this is just to make it easier to understand)
Those who BORROW money have an account where they must repay reservicing costs every month/whenever paid WITH interest. These accounts are not SAVINGS accounts, rather, they are accounts that have an amount owing. So if the rates decreased... it will only decrease the amount owing (I don't think these accounts pay you interest lmao).
As these are not savings accounts.. by decreasing the amount owing, it will NOT increase national savings. (unless they decide to put it into a savings account.. but from all things being equal we can't assume that)
Money gained from savings accounts are used to by banks/other financial institutes to lend money to borrowers, and the interest + amount owing paid by borrowers are used to provide savers with interest.
If you look at it the other way around, if you decrease interest rates, this will decrease the amount owing, thus less money is added to savings accounts which will decrease the potential level of national savings.
 

ElizabethQ

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Checked my answers against the Answer Key provided on the BOS website. Got 19/20. Overall: 85
 

ElizabethQ

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how come 5 is A? didnt CPI increase? so shudnt it be contractionary monetary policy? i dnt know, i got C for question 5
I got C for question 5 too..That was my only mistake. Wish I could still ask my old Economics teacher about it!
 

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