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econ110 compulsory questions (2 Viewers)

flamin'

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Originally posted by -=?MČŇhﴊ?=-
ye i agree with isaac. its an expectation, so it hasnt happened yet. so u try to speculate and get in b4 it actually happens.

foreign exchange and capital in/outflows are dominated by speculation.
Actuarial Rule of 3:

If 3 Actuaries agree on something it must be right LOL =P
 

RIZAL

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haha well I'm still going to employ the 'Actuarial Rule of Riley/Wei':

If you are still unsure of the answer, ask REILLY or WEI. :)

i'm still not 100% sure on that question.

As flamin' was saying, the actions of investors will increase capital inflow into australia (because the yields on their bonds will increase), but the actions of speculators will decrease capital inflow into australia (because the value of their bonds will decrease).

i think this question is a bee atch.
 

-=«MÄLÅÇhïtÊ»=-

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i like it...
it means lots of ppl who prolly know their stuff gonna interpret the ques wrong and get powned. n folks like us who r too busy cramming for non econ110 stuff wont get r@ped as bad.
 

dwh2427

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dude, i'd be pretty careful what you write. All that is wrong and you've just convinced people to write exactly the same.
 

zxl

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dude, when you throw a line like this, at least try to back it up with somethin...
as far as my logic goes, my vote goes to Issaq
 

RIZAL

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well I never said that I was completely sure of my answer, and I'm not trying to convince people to write what I wrote, because, as i said, it could be wrong.

if dwh could extrapolate on his/her own interpretation of the question, that would be great. Otherwise, thanks for the useless post.

As -=?MČŇhﴊ?=- was saying, the forex markets are DOMINATED by speculation. That's why I think the speculation effects will dominate the investment effects. I'm still not 100% sure though, even after talking to Reilly.


we should compare m/c answers too:

2003 Mid year:

1. b
2. a
3. c
4. d
5. b
6. d
7. a
8. c
9. d
10. a
11. b
12. b
13. c
14. c
15. a
16. b
17. d
18. b
19. a
20. a
21. c
22. c
23. a
24. ? (haven't studied it yet)
 

Mein

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the examples in the text book concern current interest rates and not expected interest rates, which is very different.
Sorry Isaaq ur totally wrong. Ask your tutor. The results of expected interest rate and current interest rate changes are the same.
 

dwh2427

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The only part, from what I know, which has actually something to do with bonds is the change from an expected fall in interest rates and the actual fall.
In Europe, As people expect IR to fall people change to bonds (bond prices rise with lower IR) which then causes IR to fall. Expectations become reality.
Then the relative interest rate differential improves for Australia, attracting funds to Australia and reducing Australian's movement of funds overseas.
This is what I believe is correct.
 

Mein

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Oh btw I just realised my ask ur tutor advice isnt very helpful. All I can say is I know someone who asked their tutor about the difference in expected interest rate movements and actual interest rate movements (this was ages ago before the questions were even released, so don't panick about an unfair advantage), and their tutor told them that the same happens with both.
 

RIZAL

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"The only part, from what I know, which has actually something to do with bonds is the change from an expected fall in interest rates and the actual fall.
In Europe, As people expect IR to fall people change to bonds (bond prices rise with lower IR) which then causes IR to fall. Expectations become reality.
Then the relative interest rate differential improves for Australia, attracting funds to Australia and reducing Australian's movement of funds overseas.
This is what I believe is correct."

This is, in part, correct.

1. In Europe, people expect interest rates to fall. This increases the demand for Euro bonds from capital gains seekers and the demand for money falls. Because it was a NON INTEREST RATE change in money demand, it causes a fall in autonomous money demand.

2. This causes actual interest rates to fall in Europe (self fulfilling prophecy).

3. Australia's real interest rate improves relative to Europes, therefore increasing the demand for the Australian dollar and decreasing the supply of the Australian dollar.

which would result in the exact opposite conclusion of my original argument.

I think that it would be quite possible to get full marks using this argument at the 1st year level of analysis. But the above argument ignores what happens to the demand and supply of Australian dollars BEFORE our real interest rate improves relative to Europes.

It would probably take up too much time to do a proper analysis in 35 minutes, so yeah, I'm probably going to write what dwh argues, even though it is flawed.
 

flowin'

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Originally posted in WebCT
THERE IS NO STATISTICAL OR PREDETERMINED FAILURE RATE IN ECON 110. THE FAILURE RATE VARIES FROM YEAR TO YEAR, AND USUALLY LIES BETWEEN 15% TO 25%. THOSE WHO FAIL ARE TYPICALLY THOSE WHO (1) DON'T DO ANY WORK, OR (2) DON'T ASK ANY QUESTIONS
For those wondering bout failure rates in Econ110.

(Note also that this year there are twice as many Actuarial Studies students taking Econ110 due to a change in the Actuarial Studies syllabus which started this year.)
 

Mein

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Perhaps I misinterpreted your post, but i certainly wasn't offended enough to then go make another account to insult you. These boards being anonymous means I could have just insulted you through this account.

That said though, I probably took your post out of context. I still believe I'm correct about expected rates though, but I'll now further verify my answer with other classmates.

So far the 5 or 6 people I've spoken to about this question have all agreed with my answer though.

Either way ECON110 is bloody confusing, no matter what course your doing! Especially since I never did Economics at school.
 

zxl

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Originally posted by Mein
Are you serious? I suggest you read page 258-60 to find out what 'expected' means in an economic sense.
as for page 258 - 260 of the econ textbook belongs to money market, well before external sector is mentioned, so it is assumed to be domestic with no foreign speculations, or at least doesnt mention at all what will happen to the Kinflow and Koutflow of another country in response to this. so i guess the 'read-the-textbook-you-dumb-actuary' attitude doesnt really work here, at least the answer isnt as clear as you think it is...

and referring to the question scenario, with Euro R expected to drop (Pb expected to increase), i think it is reasonable to argue that foreigners(aus) will be tempted to buy Euro bonds to capture capital gain, so aus Koutflow increase like Isaac was talking abt...

but again in exam situation what Mein said is prolly what i'll go for as well since the question is unclear...

something fcuked abt econ is that there's no absolute correct answers, to illustrate this, try ask a monetarist to mark keynesian's paper...
 
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flamin'

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Originally posted by Mein
Perhaps I misinterpreted your post, but i certainly wasn't offended enough to then go make another account to insult you. These boards being anonymous means I could have just insulted you through this account.

That said though, I probably took your post out of context. I still believe I'm correct about expected rates though, but I'll now further verify my answer with other classmates.

So far the 5 or 6 people I've spoken to about this question have all agreed with my answer though.

Either way ECON110 is bloody confusing, no matter what course your doing! Especially since I never did Economics at school.
I never did ECON at school either...

BUT I also verified with class mates... and basically 2 of the smartest guys in 2nd year ACST said the same thing as Isaaq... And for the 2 years that I've known them, they haven't been wrong bout too much, if anything at all...

And btw, I wasn't referring to you who made up the obes account... Probably some law student or someone who's a regular and just wanted to make a long-winded argument with big words
 

Mein

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Ah k fair enough.

I think I'll stick to my interpretation though, but like zxl said, there are so many different interpretations that its hard to know what to use.

Perhaps Isaaq and your 2nd year actuary friends are going into too much depth? I dunno.
 

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