HSC 2015 Economics Marathon (1 Viewer)

[rrulez]

Re: 2015 HSC Economics Marathon

Explain how deflation can have a negative impact on a growing economy.

 

[matchalolz]

Re: 2015 HSC Economics Marathon

Explain how deflation can have a negative impact on a growing economy.

Deflation is the situation in which general price levels are falling. Sustained periods of deflation may lead to subdued economic activity and lower consumption as individuals feel discouraged to purchase goods and services because they are expecting that prices will fall further. This would lower aggregate demand in an economy, decreasing production level and unemployment levels, and potentially leading to lower real incomes (important for further economic development)/living standards.

idk man i haven't studied for eco yet but I also don't remember reading this in the textbook so I just whipped up an answer

 

[Study_like_a_nerd]

Re: 2015 HSC Economics Marathon

The global financial architecture talks about the inequality arising from financial structures, i dont really see how those points relate to the "floating of the dollar." Just out of curiousity, where was this question sourced from?

 

[Study_like_a_nerd]

Re: 2015 HSC Economics Marathon

"Outline how the changing global financial architecture has affected the floating currencies" - 4 marks

The global financial architecture talks about the inequality arising from financial structures, i dont really see how those points relate to the "floating of the dollar." Just out of curiousity, where was this question sourced from?

 

[Ekman]

Re: 2015 HSC Economics Marathon

The global financial architecture talks about the inequality arising from financial structures, i dont really see how those points relate to the "floating of the dollar." Just out of curiousity, where was this question sourced from?

You know where

 

[Study_like_a_nerd]

Re: 2015 HSC Economics Marathon

Explain how deflation can have a negative impact on a growing economy.

Deflation is basically the falling of prices.
- Deflation gives consumers an incentive to delay purchases, which can cause a fall in consumer spending and an economic downturn (reduction in consumption, C function in C+I+G+X-M decreases, hence eco growth declines)
- Deflation can also make borrowing money less attractive because the amount to be repaid is rising in real terms, not falling (basically you're borrowing more money because it may seem less expensive due to the adjustment against deflation, however this in reality the amount being borrowed may be expensive)
- High periods of deflation may lead to stagflation and periods of high unemployment. This is because deflation can discourage spending (link to the first point).
- Deflation can increase debt burdens, reducing the purchasing power of individuals. Individuals will have to pay a larger proportion of their disposable income to service their debts --> Leakages to the economy
REMEMBER: Deflation is only good when prices are falling but disposable income is rising.

 

[swagmeister]

Re: 2015 HSC Economics Marathon

Alright, for the "outline how the changing global financial architecture has affected floating currencies" I would say:

In the globalised world, the increased interdependence between nations has ultimately led to a significant increase in forex market transactions, leading to an appreciation of floating currencies. Furthermore, floating currencies are much more exposed to external shock, as seen during the GFC where problems with the financial architecture of overseas ultimately had a large affect on the Australian dollar. In addition, floating currencies overall have been much more volatile as they have conformed to the international business cycle.

Is there a textbook reference ekman? this question really got me. Won't chuck up another one until we get this one sorted out or it becomes a bit chaotic.

 

[swagmeister]

Re: 2015 HSC Economics Marathon

Alright, for the "outline how the changing global financial architecture has affected floating currencies" I would say:

In the globalised world, the increased interdependence between nations has ultimately led to a significant increase in forex market transactions, leading to an appreciation of floating currencies. Furthermore, floating currencies are much more exposed to external shock, as seen during the GFC where problems with the financial architecture of overseas ultimately had a large affect on the Australian dollar. In addition, floating currencies overall have been much more volatile as they have conformed to the international business cycle.

Is there a textbook reference ekman? this question really got me, probably would only get 3/4 for my response. Won't chuck up another one until we get this one sorted out or it becomes a bit chaotic.

 

[RecklessRick]

Re: 2015 HSC Economics Marathon

I remember consulting my teacher about this question after posting my response, and he provided me another perspective to question. The reason why he agreed to C was lowering the retirement age will most definitely lower unemployment, as those who are aged between 60 to 65 that are structurally unemployed (due to the constant improvements in technology) or long-term unemployed will just retire instead of looking for jobs, meaning that NAIRU would decrease. In terms of my response, what I was trying to say was that a lowering of the retirement age will most definitely increase job vacancies in about every industry. Thus those who a structurally unemployed due to a lack of job vacancies in a particular industry will no longer be structurally unemployed. Ill give an example to illustrate what I mean. If you were a engineer, and the only jobs available were for farming, there would be a mismatch of skills, resulting in you being structurally unemployed. However if the retirement age decreased, and all the older workers in the engineering industry retire, there are job vacancies for you in the engineering industry, resulting in a decrease in structural unemployment and the NAIRU.

In terms of the word "encouraging", I feel like it directly relates to hidden unemployment, as they are unemployed people who are discouraged. Hence if you encourage the discouraged people, you decrease the hidden unemployment. However, according to my teacher, this will also have some impact on the NAIRU as well, as NAIRU also consists of hidden structural unemployed, but in terms of the question itself, C is the better answer.

Yeah that was my mistake; gg, conflated NAIRU with market clearing rate of inflation. I agree that hidden unemployment might decrease a little bit (however the larger impact would definitely be on cyclical unemployment. What I think I was trying to say is that though hidden unemployment is decreasing, the detriment of the policy to the quality of labour would be such that inflation at every level would increase (which I'd guess would be represented by a phillips curve shift) meaning that though the NAIRU may have reduced a little bit, the market clearing rate of unemployment is still higher. However, the NAIRU is just where inflation isn't accelerating, not the market clearing inflation rate. So yes, I'd agree with C then.

 

[Ekman]

Re: 2015 HSC Economics Marathon

Alright, for the "outline how the changing global financial architecture has affected floating currencies" I would say:

In the globalised world, the increased interdependence between nations has ultimately led to a significant increase in forex market transactions, leading to an appreciation of floating currencies. Furthermore, floating currencies are much more exposed to external shock, as seen during the GFC where problems with the financial architecture of overseas ultimately had a large affect on the Australian dollar. In addition, floating currencies overall have been much more volatile as they have conformed to the international business cycle.

Is there a textbook reference ekman? this question really got me, probably would only get 3/4 for my response. Won't chuck up another one until we get this one sorted out or it becomes a bit chaotic.

Refer to page 58 in the Dixon textbook for the 4/4 response to the question

 

[rrulez]

Re: 2015 HSC Economics Marathon

Explain TWO demand side factors that could have caused an increase in inflation.

 

[Ekman]

Re: 2015 HSC Economics Marathon

Explain TWO demand side factors that could have caused an increase in inflation.

-Booms in the economic growth of the economy, resulting in an increased trend in consumption
-Increase in wage/income levels, with a relatively high MPC and APC
-Consumer preferences
-A depreciation, which diverts consumption from imports to domestic businesses
-Expansionary fiscal or monetary policy stances

That's all that comes to my mind, anybody else feel free to add or criticise

 

[Study_like_a_nerd]

Re: 2015 HSC Economics Marathon

I think these points weren't mentioned above
1) Limited supply of the good - when demand cannot be met by supply, the price for the limited good would increase --> thus inflation
2) Low interest rates (loose monetary stance)

 

[Study_like_a_nerd]

Re: 2015 HSC Economics Marathon

Lol, low interest rates is by defintion expansionary monetary policy - dunno what you're on about m8 - pretty sure ekman mentioned that above your post [emoji14]

Loose monetary policy and expansionary monetary policy is the same thing... -.-

 

[Ekman]

Re: 2015 HSC Economics Marathon

I think these points weren't mentioned above
1) Limited supply of the good - when demand cannot be met by supply, the price for the limited good would increase --> thus inflation
2) Low interest rates (loose monetary stance)

Plus limited supply feels like you are mentioning supply side factors that impact inflation. I get that you are trying to define demand pull inflation but the question just asked about demand side factors.

 

[Ekman]

Re: 2015 HSC Economics Marathon

Also forgot to mention one thing that just popped into my mind. Reduction in free trade, via protection policies such as tariffs. Tariffs increases the world price allowing more domestic consumption, and this 'increased' price also counts as inflation (but it being demand sided is debatable).

 

[Ekman]

Re: 2015 HSC Economics Marathon

Loose monetary policy and expansionary monetary policy is the same thing... -.-

Your point is?

As hawkie said, I mentioned it in my previous post

 

[Study_like_a_nerd]

Re: 2015 HSC Economics Marathon

You said monetary stance I elaborated and said loose monetary stance for clarification
Sorry for clearing myself up -__-

 

[teridax]

Re: 2015 HSC Economics Marathon

You said monetary stance I elaborated and said loose monetary stance for clarification
Sorry for clearing myself up -__-

no, he said expansionary monetary stance which already assumes it's a loose monetary stance lol - the elaboration you made was meaningless

i'm not hatin', just check yourself before you rek yourself

 

[rrulez]

Re: 2015 HSC Economics Marathon

You said monetary stance I elaborated and said loose monetary stance for clarification
Sorry for clearing myself up -__-

Let us not get so inflated....