Question Question Questions (1 Viewer)

[Haku]

please bear with me and please help me with this many questions.

1. Could some define microeconomic reform? its a two mark question. i can only find def for micro policy

2. Explain the relationship b/w the current account balance and the net foreign debt (2marks)

3. What are the negetive impacts of a subsidy on the economy and why governments use subsidies instead of tariffs (3 and 4 marks)

4. Why does Market failure occur, what is market failue? (3marks)

5. Kyoto protocols impact on eco growth and environment in aust (4)

6. for the attached the answer says $4, but from what i see it is $3, the answer is official from CSSA.

thanks for help...i tried to find the precise info in the book but with no luck so please do help out

 

[unfold]

please bear with me and please help me with this many questions.

1. Could some define microeconomic reform? its a two mark question. i can only find def for micro policy

2. Explain the relationship b/w the current account balance and the net foreign debt (2marks)

3. What are the negetive impacts of a subsidy on the economy and why governments use subsidies instead of tariffs (3 and 4 marks)

4. Why does Market failure occur, what is market failue? (3marks)

5. Kyoto protocols impact on eco growth and environment in aust (4)

6. for the attached the answer says $4, but from what i see it is $3, the answer is official from CSSA.

thanks for help...i tried to find the precise info in the book but with no luck so please do help out

1. micro reform is basically the same as micro policy. what i do in essays is define micro policy..and maybe use micro reform later when referring to specific reforms.

2. High foreign debt worsens the CAD under net income deficit because of high servicing cost involved in repaying this debt. If CAD gets too big (usu 5-6%) , then economy might fall into the debt trap, where they require more borrowing, meaning more servicing cost, hence more debt..and it goes on like this forever

3. subsidy is a form of protection so by giving cash payments to local producers results in a reallocation of resource from efficient to inefficient firms. THis leads to lower productivity and efficiency rates. Also, local producer's market share increase (take over many of the imports), which lowers living standard to domestic consumers for they have less choice to the goods they access. Similarly, foreign importers suffer because they become less competitive.

I'm not sure about the 2nd part of the Q; i reckon its because tariff distorts price --> imports more expensive --> lowers living standard. Subsidy would just keep many importers out of the domestic market, but wont necessarily impact price.

4. Market failure occurs because price mechanism takes into account the private benefits/costs but not the social costs imposed on society/environment through private action. e.g. the environment because it has no property rights. It occurs because ppl fail to recognise its 'intergenerational value' and hence exploit them, leading to eventual resource depletion (this is like straight out of the txt book)

5. kyotol protocol is an agreement which gets countries to plant trees in developing countries. this is good, but govt will require to spend heaps where instead they could use the money for e.g. budget to boost economy. so by going with the protocol, therez the opportunity cost of econ growth.

and i cant be bothered with the attachment

 

[azza_3761]

For the attachment - the answer is $4 because there is a price decrease from $13 to $9. The subsidy only results in a lower production cost for the producers resulting in a lower price. The producer will therefore be able to produce more and therefore supply more. however tis doesn't mean that demand is also going to increase just because supply has.

 

[Cityboy]

At the present time the Kyoto protocol has had no impact on the Australian economy as we have yet to ratify the agreement. BTW the Kyoto protocol is not an agreement that gets countires to plant trees in developing nations, the kyoto protocol is an agreement to limit the emission of greenhouse gases. If it was ratified its impacts would include having to reduce overall growth in the economy and increase investment in green technology in order to meet with UN standards for emission increase reductions.

As for the second part of question three govts tend to use subsidies over tariffs these days as if tariffs are used it tends to result in revenge tariffs by other nations in retaliation for making their producers less competive in that market.

 

[Haku]

i c, thanks guys.

 

[sunjet]

that subsidy question always tricks some people, just remember biggest - lowest

3. they prefer subsidy over tariff as it can easily be reviewed (and changed if necessary) as it is expenditure by the government.

 

[Vampire]

umm that stuff on the kyoto protocol...do we need to know that?

 

[Cityboy]

Probably not, its more geo than econmics and in the HSC they probably wouldn't ask you the effects of a specific non economic policy

 

[Rafy]

Well you would mention it on a question on enviromentally sustainable development or similar. (which is in the syllabus as an economic issue.)

Look at past papers, on some occasions there has been an entire short answer question on the strategies to acheive sustainable dev. Kyoto is just one of them.

 

[furrycatau]

Please don't forget with micro economic reform that it is SUPPLY SIDE economics.

 

[Rafy]

Please don't forget with micro economic reform that it is SUPPLY SIDE economics.

As well as long term. Effects are only seen 5-10years after implementation. Sometimes even 20years after...

 

[Haku]

still no clear definition on micro reform is there?

 

[sunjet]

... reform at the firm level, supply to the right -> lower price to achieve technical, dynamic and allocative efficiency, surely it's in the textbook?

 

[furrycatau]

Microeconomic reform is action taken by the government to improve resource allocation between firms and industries, in order to maximise output from scarce resources. It aims to improve allocative efficiency, technical efficiency and dynamic efficiency/innovation. Rather than focusing on demand like Macroeconomics, Microeconomic reform is known as supply side economics, in that it aims to improve efficiency on the supply side.