HSC 2015 Economics Marathon (5 Viewers)

[Ekman]

Re: 2015 HSC Economics Marathon

May someone tell me of the advantages and disadvantages of MERs (preferably 3 costs and 3 benefits, looking at eco growth, employment, external stability). Apologies if the question has been asked, just direct me to the page.

Might as well do it per topic:
Eco growth:
Adv: - Improves economic capacity to grow in the long run, hence furthering the potential economic growth
- Also allows for better technical and allocative efficiency.
- Better living standards
- Has low inflationary pressures
- It allows businesses to grow
Dis: - Has the potential to cause cost-push inflation, when economic growth is strong and there is zero cyclical unemployment. This will result in the labour demanding for higher wages, and hence the wage price spiral
- Also it kills off infant or import-competing industries, resulting in the structural unemployment

Unemployment/Income inequality:
Adv: - It encourages people to work more productive and attain new skills
- It causes more entrepreneurial risk taking.
Dis: - Causes structural unemployment.
- Causes a greater widening of the inequality gap
- This essentially causes constraints on the fiscal policy, as they have to provide retraining programs.

External stability:
Adv: - There is a greater access to cheaper and abundant funds
- It allows businesses to grow and become more competitive, resulting in specialisation and an increase in the exports, allowing the trade deficit to become a surplus.
Dis: - It causes economic volatility in the exchange rates.
- Also it causes structural problems such as the savings-investment gap, which results in a greater foreign loans, and a worsening of the primary income deficit in the CAD
-I guess that more volatility will put constraints on the monetary policy

Feel free to add more.

Came up with a few more in my exam today:
Environmental sustainability: -An increase in aggregate supply causes increased resource use. This deteriorates the ESD and intergenerational equity.
-However, this is combated by the implementation of market-based policies, and regulations on resource use. This evident in the regulations of water and fuel as well as the Renewable energy target.

 

[Gabriel Moussa]

Re: 2015 HSC Economics Marathon

Might as well do it per topic:
Eco growth:
Adv: - Improves economic capacity to grow in the long run, hence furthering the potential economic growth
- Also allows for better technical and allocative efficiency.
- Better living standards
- Has low inflationary pressures
- It allows businesses to grow
Dis: - Has the potential to cause cost-push inflation, when economic growth is strong and the labour force has the potential to ask for more bargaining power.
- Also it kills off infant or import-competing industries, resulting in the structural unemployment

Unemployment/Income inequality:
Adv: - It encourages people to work more productive and attain new skills
Dis: - Causes structural unemployment.
- Causes a greater widening of the inequality gap

External stability:
Adv: - There is a greater access to cheaper and abundant funds
- It allows businesses to grow and become more competitive, resulting in specialisation and an increase in the exports, allowing the trade deficit to become a surplus.
Dis: - It causes economic volatility in the exchange rates.
- Also it causes structural problems such as the savings-investment gap, which results in a greater foreign loans, and a worsening of the primary income deficit in the CAD

Feel free to add more.

Eco growth adv
- Will increase the sustainability of growth due to lower inflationary pressures
- higher potential increase in wages (if productivity increases) therefore increased utility
disadvantages
- structural unemployed have the potential to become long term unemployed detracting from productive capacity of economy

Unemployment
Advantage - decreased unemployment in the long run due to increased productivity and lower cost inflation to firms
Disadvantage - structural u/e --> long term

External stability:
Advantage - long term more competitive exports due to economies of scale as trade policy deregulation is also a factor
Disadvantage - short term decrease in BOGS in regard to trade lib worsening external stability

 

[rrulez]

Re: 2015 HSC Economics Marathon

Might as well do it per topic:
Eco growth:
Adv: - Improves economic capacity to grow in the long run, hence furthering the potential economic growth
- Also allows for better technical and allocative efficiency.
- Better living standards
- Has low inflationary pressures
- It allows businesses to grow
Dis: - Has the potential to cause cost-push inflation, when economic growth is strong and there is zero cyclical unemployment. This will result in the labour demanding for higher wages, and hence the wage price spiral
- Also it kills off infant or import-competing industries, resulting in the structural unemployment

Unemployment/Income inequality:
Adv: - It encourages people to work more productive and attain new skills
- It causes more entrepreneurial risk taking.
Dis: - Causes structural unemployment.
- Causes a greater widening of the inequality gap
- This essentially causes constraints on the fiscal policy, as they have to provide retraining programs.

External stability:
Adv: - There is a greater access to cheaper and abundant funds
- It allows businesses to grow and become more competitive, resulting in specialisation and an increase in the exports, allowing the trade deficit to become a surplus.
Dis: - It causes economic volatility in the exchange rates.
- Also it causes structural problems such as the savings-investment gap, which results in a greater foreign loans, and a worsening of the primary income deficit in the CAD
-I guess that more volatility will put constraints on the monetary policy

Feel free to add more.

Came up with a few more in my exam today:
Environmental sustainability: -An increase in aggregate supply causes increased resource use. This deteriorates the ESD and intergenerational equity.
-However, this is combated by the implementation of market-based policies, and regulations on resource use. This evident in the regulations of water and fuel as well as the Renewable energy target.

You can also talk about National Competition policy in increasing efficiency and lower prices for consumer. As well as the disadvantage of greater work intensity resulting in longer work hours and inequality due to increase in productivity.

 

[Ekman]

Re: 2015 HSC Economics Marathon

You can also talk about National Competition policy in increasing efficiency and lower prices for consumer. As well as the disadvantage of greater work intensity resulting in longer work hours and inequality due to increase in productivity.

I addressed that by saying "better living standards" and its in fact an economic benefit for people to work longer and harder. If you are talking about labour being forced to work longer due to the increase in supply, that is quite simply addressed in the benefit of reducing cyclical unemployment.

 

[CheekyWombat13]

Re: 2015 HSC Economics Marathon

In further questioning, does anyone have a say in the mining boom recently dissipating in the Australian economy and possibly the idea of radio active waste plants becoming Australia's main injection?

 

[Study_like_a_nerd]

Re: 2015 HSC Economics Marathon

In further questioning, does anyone have a say in the mining boom recently dissipating in the Australian economy and possibly the idea of radio active waste plants becoming Australia's main injection?

Australia hasn't reacted well to the decline in the mining boom, which I guess is reflection of our two speed economy. Our great dependence on China as our mining export purchasers has recently been reflected as the decline in growth in China and the recent devaluation of the Chinese remnimbi has slowed down growth in the Australian economy. I remember reading something about Australia's growth being the slowest in two years (GDP only grew by 0.2% in the last 3 months) So basically if Australia doesn't find another sector in which they have a comparative advantage in, GDP will most probably continue to fall. The reduction in our mining exports is also reflected in our falling dollar (0.69 last time I checked). But whose to say that this depreciation wont bring us advantages. I also read that due to our depreciating dollar, our manufacturing sector has finally begun to gain some international competitiveness. But yeah thats how I think the decline in mining boom is affecting us.
Also I have a question, why would the radio active wastes become Australia's main injection? I havent really heard that before.

 

[Ekman]

Re: 2015 HSC Economics Marathon

Nice bump!

 

[Study_like_a_nerd]

Re: 2015 HSC Economics Marathon

Is it correct to make the assumption that if the RBA uses monetary policy to increase the cash rate, thus leading to a rise in interest rates through the transmission effect, that the levels of investments into Australia would increase due to the rate of higher returns, and because of this economic growth will rise - as I component of AD= C+I+G+(X-M) would increase.

 

[Ekman]

Re: 2015 HSC Economics Marathon

Is it correct to make the assumption that if the RBA uses monetary policy to increase the cash rate, thus leading to a rise in interest rates through the transmission effect, that the levels of investments into Australia would increase due to the rate of higher returns, and because of this economic growth will rise - as I component of AD= C+I+G+(X-M) would increase.

Yes that's correct, in fact I used that point somewhere in my eco trials and I remember I got the marks for it.

 

[Study_like_a_nerd]

Re: 2015 HSC Economics Marathon

Anyone know how to answer this :/

Using TWO examples, discuss how market failure causes the misallocation of scarce resources in Australia. 4

 

[amberbambi]

Re: 2015 HSC Economics Marathon

How did everyone go for the economics competition?

 

[Ekman]

Re: 2015 HSC Economics Marathon

Anyone know how to answer this :/

Using TWO examples, discuss how market failure causes the misallocation of scarce resources in Australia. 4

This is such a weird question, anyone want to take a shot?

 

[Gabriel Moussa]

Re: 2015 HSC Economics Marathon

Anyone know how to answer this :/

Using TWO examples, discuss how market failure causes the misallocation of scarce resources in Australia. 4

Market failure = price mechanism fails to take into account social cost in addition to the private cost of the G/S
One way was that In the case of scarce resources this will result in inefficient firms purchasing them due to the lower cost causing a misallocation of resources toward less efficient firms.

Examples:
Inefficient electricity producers who produce less electricity per tonne of coal burnt can take advantage of low coal prices? This is due to the market failing to include the social cost in addition to the private cost of coal which would have caused the inefficient electricity producers to be unable to afford the coal.
+any other scarce resource based production methods which market failure causes to be misallocated toward inefficient producers

 

[spatula232]

Re: 2015 HSC Economics Marathon

Anyone know how to answer this :/

Using TWO examples, discuss how market failure causes the misallocation of scarce resources in Australia. 4

I'd include discussion of externalities. Negative you could include the likes of pollution in overproduction of electricity compared to positive externalities such as health care or any good that is underproduced since it has a higher private cost without including social benefits. Both positive and negative externalities are market failures as they fail to account for social cost (as said by Gabriel Moussa). Also can include supply and demand diagrams of each

 

[swagmeister]

Re: 2015 HSC Economics Marathon

Seeing as how nobody has posted another question,

"In terms of both monetary and fiscal policy, explain if the form of policy is more effective in slowing down an economy or speeding up an economy" 6 marks

got me stumped!

 

[Ekman]

Re: 2015 HSC Economics Marathon

I'd include discussion of externalities. Negative you could include the likes of pollution in overproduction of electricity compared to positive externalities such as health care or any good that is underproduced since it has a higher private cost without including social benefits. Both positive and negative externalities are market failures as they fail to account for social cost (as said by Gabriel Moussa). Also can include supply and demand diagrams of each

Don't deviate from what the question is asking. Remember its asking about misallocation of resources not externalities.

 

[Ekman]

Re: 2015 HSC Economics Marathon

Seeing as how nobody has posted another question,

"In terms of both monetary and fiscal policy, explain if the form of policy is more effective in slowing down an economy or speeding up an economy" 6 marks

got me stumped!

I know that monetary policy is better at slowing down the economy rather than speeding it up (its because of its ability to control inflation). However im not too sure about fiscal policy. I personally think it also is more effective slowing down an economy rather than speeding up (reason being is because if it adopted an expansionary stance, there would be time lags for the consumers to realise they have more money, whereas if it adopted a contractionary stance, consumers would automatically know they have less money due to increased tax).

 

[Study_like_a_nerd]

Re: 2015 HSC Economics Marathon

Why is the post-tax Gini Coefficient a better indicator of income distribution in Australia than the pre-tax Gini Coefficient? 3

I've never heard of the post tax Gini Coefficient and the pre tax Gini Coefficient but in the marking criteria it said that the post tax Gini Coefficient determines income distribution after the progressive income tax system alters gross income or pre tax income --> better indicator of income inequality because itis based upon levels of disposable income.

Can someone explain that?

 

[Raymondo]

Re: 2015 HSC Economics Marathon

Why is the post-tax Gini Coefficient a better indicator of income distribution in Australia than the pre-tax Gini Coefficient? 3

I've never heard of the post tax Gini Coefficient and the pre tax Gini Coefficient but in the marking criteria it said that the post tax Gini Coefficient determines income distribution after the progressive income tax system alters gross income or pre tax income --> better indicator of income inequality because itis based upon levels of disposable income.


Can someone explain that?

Person 1 Earns $100,000
Person 2 Earns $500,000

Since the progressive tax system places greater tax burden on individuals who earn more $$ let's assume that Person 1's POST-TAX income is $75,000 and that Person 2's POST-TAX income is $350,000

Since the PAYG tax system has eased the burden between the higher income earner (Person 2) and the lower income earner (Person 1) we can assume that the POST-TAX Gini Coefficient is a better indicator of income distribution in comparison to its PRE-TAX Gini coefficient counterpart

 

[rrulez]

Re: 2015 HSC Economics Marathon

What is the equilibrium level of national income if S=-40 + 0.2Y and I =200 ?