Is Microeconomic policy used for internal balance? (1 Viewer)

[powersupply]

Hi all,

We had an eco stimulus essay assessment task today. Question was:
Analyse the government policies used to achieve economic internal balance. The stimulus given were the most recent statement on the conduct of monetary policy, a graph of the unemployment rate and the new tax table.

I understood 'government policies' to mean primarily monetary and supplmented by fiscal seeing as it was about internal balance. Apparently however, one of the teachers after the test (who will be marking the responses), stated that there needed to be a discussion on microeconomic policy.

Am I right in thinking this is ridiculous since microeconomic policy has no role (in my opinion) in achieving internal balance? Obviously a prices and income accord which is microeconomic can supplement macro policy and lead to lower inflation, but:
1. This is indirect and not the actual objective of micro policy.
2. Since the Howard government's 1996 Workchoices Act, we have no longer had an explicit prices and income policy.

So do I have a case to argue here if marks are deducted for not mentioning micro policy? Or did I just miss it completely?

Thanks in advance.

 

[JasonG123]

Micro policy is pretty significant in achieving internal balance but I suppose you could argue it was misleading because the stimulus guided you towards macro policy and I suppose most of the stuff is indirect (although it still is a long term goal). However, off the top of my head: 1) competition policy >>> Lower prices >>> Greater internal balance. 2) Labour market reforms >>> Reduce rigidities in the labour market >>> Greater productivity and lower prices (due to less cost push inflation) >>> Greater internal balance. 3) Removal of protection e.g. tariffs can lead to lower prices and less inflation.

So pretty significant all up, but I'd still definitely argue it.

 

[powersupply]

I can see where your coming from, but isn't the aim of micro policy to increase productivity, efficiency and international competitiveness in various product and factor markets? Sure, it leads to an increase in aggregate supply and subsequently increased output at lower prices without the increase in inflation, but isn't this more of an effect rather than its aim? Using the removal of protection of example, it promotes efficiency and provides an incentive for firms to compete with imports and sure it leads to lower inflation, but it isn't conducted with the aim of achieving internal balance or lowering inflation for that matter. Like take monetary policy for example, it influences the interest rate and therefore returns on australian assets --> capital inflow/outflow --> exchange rate appreciation/depreciation. The end result of changes in the exchange rate is one of the effects of monetary policy - not what it attempts to achieve. i.e. monetary policy is not used for exchange rate stabilisation but it can affect it. Also, would I be right in saying internal stability is more of a short/medium term objective - obviously they would want internal balance over the long run, but the policies that achieve it should be more short term i.e. fiscal and monetary, rather than long term i.e. micro

Still, point taken and thanks for your opinion. Just need to get it clarified through some more sources to ensure certainty should something similar come up in the externals.

 

[JasonG123]

Btw, I read the question as internal stability instead of internal balance, so my previous response didn't really include how microeconomic policy can influence full employment, but it should have.

Internal balance is both a short term and long term objective. Improving internal balance is both an aim and effect of microeconomic policy. For example, labour market reforms to ensure closer to a full employment of resources by reducing frictional, cyclical UE etc, these are very direct means of improving internal balance. Removing protection is a very direct means of lowering prices (if it's tariffs and not subsidies). I do believe that microeconomic policy is used directly for internal balance, what else is it directly used for?

I'm sure you'll be fine. Monetary policy is the main tool used for internal stability and fiscal is the main tool used for ensuring a better employment of resources, microeconomic reform is just there to supplement it, so I wouldn't have based the majority of my answer around it anyway. If he penalises you, then argue that the stimulus didn't include microeconomic reform, and that there has been a lack of microeconomic reform in Australia in recent years anyway (although there has been some e.g. labour market reforms, environment policies, protection).

 

[Hot potato]

Wow, that's an odd question you were given- very ambiguously worded. In the hsc i'm fairly sure they'd be much more specific to avoid mass confusion. I guess the fact that the question just says policies and not macroeconomic policies would suggest that a discussion of microeconomic policy wouldn't have been wrong to include. However, i think you should be fine, my understanding is that internal balance is mainly concerned with price stability and full employment, and so you're right in thinking that monetary is the primary policy to discuss, whilst fiscal is also important in influencing economic activity and allocation of resources and so will affect emplyment. Personally I'd argue the crap out of it if i was penalised, because the stimulus doesn't indicate to discuss micro policy, as well as the fact that in extended response questions there is generally a lot of time pressure and there is no way that you can adequately discuss fiscal, monetary and micro in enough detail in a short amount of time. Goodluck bro

 

[powersupply]

Wow, that's an odd question you were given- very ambiguously worded. In the hsc i'm fairly sure they'd be much more specific to avoid mass confusion. I guess the fact that the question just says policies and not macroeconomic policies would suggest that a discussion of microeconomic policy wouldn't have been wrong to include. However, i think you should be fine, my understanding is that internal balance is mainly concerned with price stability and full employment, and so you're right in thinking that monetary is the primary policy to discuss, whilst fiscal is also important in influencing economic activity and allocation of resources and so will affect emplyment. Personally I'd argue the crap out of it if i was penalised, because the stimulus doesn't indicate to discuss micro policy, as well as the fact that in extended response questions there is generally a lot of time pressure and there is no way that you can adequately discuss fiscal, monetary and micro in enough detail in a short amount of time. Goodluck bro

Yeah many thought the question was ridiculous. Past HSC papers have specfied monetary for internal balance (i.e. price stability and full employment), fiscal for distribution of income, resource allocation and economic activity, and micro for strutural change, productivity and efficiency. Also, we were given 40 minutes for the response, when I would usually spend 1 hour on each essay in a full exam.
Also, is it usual to be given 3 stimuli? All the past papers I have seen are usually quote + a RELATED graph. We were given three unrelated things, with the quote being a third of the page...
Another point, how are stimulus essays meant to be compared with 'normal' essays? For example if this same question had been given in the trial as a non-stimulus essay, I would have discussed micro. But seeing as the stimulus was all macro, they shaped my approach.
This has been raised with the teachers who have said, "We gave you a broad question so you could incorporate your media files." -- irrelevant?
Yeah, so a group of us have made an informal complaint without getting a straight answer thus far. Would you recommend keep complaining? Or wait until marks are back and lodge an official complaint?

 

[Hot potato]

i thought it would be interesting to point out that it sounds like your teacher found a lot of "inspiration" for your question from the independent 2012 trial stimulus essay, which was very similar but a much more feasible question of - explain the role of macroeconomic activity in achieving full employment, price stability and economic growth, whilst the stimulus was a table of the budget and graph of cash rate. So it is possible that your teacher grabbed this question and thought "seems good, but i better change it slightly so i dont get pinged for copyright" and so they may in fact be using a similar marking table where micro is not needed to gain full marks. Not sure what media files (is this newspaper articles?) has to do with the essay response because the ability to say that "Jessica Irvine from the SMH on Sunday the 26/8/12 said that inflation was low", seems a bit unnecessary.

if you look over the hsc papers in the past 8 years or so, there's only ever been 2 stimulus, generally a quote and a graph. But i guess you can't rule out the possibility of 2012 being the year they choose to chuck in 3 stimulus. Look, tbh, as you said you were only given 40 minutes which is probably the minimum you'd be spending in the actual HSC, and therefore you had to be judicious in what to write about. As i understand, the main options you had would have been to talk about all 3 policies in what would have been a very superficial and unsophisticated level of analysis, or 2 policies in a deeper level with more reference to the stimulus. As I said before, I would have done the same as you and talked about just macro.

The only difference between the stimulus and non stimulus essay question is the fact that to obtain a band 6 response you MUST "synthesise own knowledge WITH THE INFORMATION PROVIDED to develop a sustained, logical response". Therefore you should make sure in your response that you give preferential treatment to the topics that are referenced in the stimulus before beginning talking about your own things which may or may not be relevant. Again, it appears that you have done that by talking about macro, fore example if some poor kid only talked about micro they would/should receive a hammering as their response hasn't used what was provided.
In regards to an official complaint - i'd probably avoid one unless this is an incredibly important assessment for you, as they generally don't lead anywhere and just piss off the teacher you made the complaint against. Rather i'd be making sure that the marking has been fair and consistent - surely the teacher will understand that its not possible to write about 3 policies and at least 2 objectives (possibly more depending on their own interpretation of internal balance) in the time. Hope this helps slightly

 

[powersupply]

i thought it would be interesting to point out that it sounds like your teacher found a lot of "inspiration" for your question from the independent 2012 trial stimulus essay, which was very similar but a much more feasible question of - explain the role of macroeconomic activity in achieving full employment, price stability and economic growth, whilst the stimulus was a table of the budget and graph of cash rate. So it is possible that your teacher grabbed this question and thought "seems good, but i better change it slightly so i dont get pinged for copyright" and so they may in fact be using a similar marking table where micro is not needed to gain full marks. Not sure what media files (is this newspaper articles?) has to do with the essay response because the ability to say that "Jessica Irvine from the SMH on Sunday the 26/8/12 said that inflation was low", seems a bit unnecessary.

if you look over the hsc papers in the past 8 years or so, there's only ever been 2 stimulus, generally a quote and a graph. But i guess you can't rule out the possibility of 2012 being the year they choose to chuck in 3 stimulus. Look, tbh, as you said you were only given 40 minutes which is probably the minimum you'd be spending in the actual HSC, and therefore you had to be judicious in what to write about. As i understand, the main options you had would have been to talk about all 3 policies in what would have been a very superficial and unsophisticated level of analysis, or 2 policies in a deeper level with more reference to the stimulus. As I said before, I would have done the same as you and talked about just macro.

The only difference between the stimulus and non stimulus essay question is the fact that to obtain a band 6 response you MUST "synthesise own knowledge WITH THE INFORMATION PROVIDED to develop a sustained, logical response". Therefore you should make sure in your response that you give preferential treatment to the topics that are referenced in the stimulus before beginning talking about your own things which may or may not be relevant. Again, it appears that you have done that by talking about macro, fore example if some poor kid only talked about micro they would/should receive a hammering as their response hasn't used what was provided.
In regards to an official complaint - i'd probably avoid one unless this is an incredibly important assessment for you, as they generally don't lead anywhere and just piss off the teacher you made the complaint against. Rather i'd be making sure that the marking has been fair and consistent - surely the teacher will understand that its not possible to write about 3 policies and at least 2 objectives (possibly more depending on their own interpretation of internal balance) in the time. Hope this helps slightly

Thanks for your input. A group of us spoke to the teacher again on Friday, so I will just have to wait and see what happens when marks get back.
The weighting is 15% and the ranks are fairly close, so I guess it is pretty important. The student who is rank 1 only discussed macro and was also amongst those making a complaint, so I guess it isn't just a case of bottom students stuffing up the question.
Also, we raised the fact that all three stimuli were macro, and were told "the tax table is micro reform'. Seeing as it came out with the 2012-13 budget, and isn't a 'reform' as such, (just manipulation of MTRs, thresholds), wouldn't it have been more correct to assume it as a fiscal/macro stimulus?