Year 12
HSC
Economics
2014
Year 12 Economics HSC tips
2014
Short answers
2009 / 2010 / 2011 / 2012 / 2013Inflation / TOT
Trade / Trade Agreements
case study / Protection and Free Trade / Environmental issues
Fiscal Policy / Globalisation/case study / CAD / Inflation / Multiplier/Eco growth
Environment / Fiscal Policy / Wage Determination / Income Inequality / CAD/Foreign Debt
Protection
Subsidies / Exchange Rates / Environment / Unemployment / Micro reform Exchange rate
Past extended responses (stimulus based)
2013
Explain how movements in the Australian dollar can affect the performance of the Australian economy.
Explain the effects of Australia’s macroeconomic policy mix on economic growth and inflation in the domestic economy
2012
Analyse the impact of changes in the global economy on Australia’s Balance of Payments.
Analyse the impact of changes in the global economy on the structure of industry in the Australian economy.
2011
How does fiscal policy affect economic activity and income distribution in the Australian
economy?
How does monetary policy affect inflation and unemployment in the Australian economy?
2010
Discuss the economic concerns that the Australian Government takes into account when formulating policies to manage the environment.
Discuss the consequences for Australia of an unequal distribution of income and wealth, and the policies that can be used to address this issue.
2009
Discuss the impact of microeconomic policies on Australia’s economic performance.
With reference to Australia and at least ONE other economy, discuss the impact of globalisation on development and the distribution of global wealth.
2008
Evaluate the effectiveness of fiscal policy in achieving Australia’s economic objectives.
Evaluate the effectiveness of monetary policy in achieving Australia’s economic objectives
2007
Discuss the impact of sustained fiscal surpluses on resource use and economic activity in the Australian economy.
Explain how Australia’s labour market policies have affected work practices and employment.
Past extended responses
2013
Analyse the effects of domestic AND global free trade and protection policies on the Australian economy.
Analyse the causes of unemployment and its effects on the Australian economy.
2012
For an economy other than Australia, discuss the effects of globalisation on economic growth and the quality of life.
Discuss the effectiveness of economic policies in achieving the Australian government’s economic objectives.
2011
Discuss the effects of microeconomic reform on product and factor markets in the Australian
Economy.
Discuss the impact of changes in the domestic and global economy on Australia’s exchange rate.
2010
Analyse the causes and effects of fluctuations in Australia’s external stability.
Analyse the effects of protectionist trade policies on the Australian economy.
2009
Analyse the federal government’s macroeconomic policy mix to address inflation and unemployment in the Australian economy.
Analyse the impact of changes in the global economy on Australia’s economic growth and external stability.
2008
Discuss the influence of international organisations and contemporary trading blocs and agreements in promoting globalisation.
Discuss the effects of an appreciation of the Australian dollar on Australia’s internal and external stability.
2007
Discuss the economic implications for the Australian economy of Australia’s continuingcurrent account deficits.
For an economy other than Australia, explain how government development strategies have responded to the process of globalisation.
Year 12 Economics- Topic Summary
Topic 1- The Global Economy
The focus of this study is the operation of the global economy and the impact of the globalisation process on individual economies.
International economic integration
· Global economy/globalisation/GWP/international business cycle/ changing global community
· Free Trade v Protection
· Trading Blocs – role of EU and USA
· International Organisations - WTO, World Bank, IMF
Globalisation and economic development
· differences between economic growth and economic development
· distribution of income and wealth
· income and quality of life indicators
· developing economies, emerging economies, advanced economies
· reasons for differences between nations
· effects of globalisation
· trade, investment and transnational corporations
· environmental sustainability
· the international business cycle.
Globalisation
Introduction
What is globalisation?
Globalisation is the integration of individual economies to create a global market. Globalisation is occurring via trade, financial flows, investment, labour movements and the use of technology. The aim of globalisation is to raise living standards globally; however, there are a number of barriers that are preventing the benefits of globalisation spreading to all countries.
Body
Outline each of the factors causing globalisation
Trade – growth in global trade is double the growth of GDP. Trade creates employment because it is a source of aggregate demand. Trade continues to be restricted by protection and trading blocs eg EU and NAFTA. These trading blocs promote internal trade but discriminate against non-members. This is having a significant on global inequality. The rich countries are getting richer and the poor countries are getting poorer because they find it so hard to gain access to the EU and NAFTA. Emerging economies (China and India are having a significant impact on global trade)
Finance- Fastest growing indicator of globalisation- money transfers to buy foreign currency for speculation and saving. Speculation is now the major factor determining exchange rates. Financial flows have caused lots of financial instability in currency markets eg. GFC
Investment – FDI has grown dramatically (7X larger than 10 years ago). TNCs now are the major driving force behind economic growth in developed and underdeveloped countries. This raises many issues about the exploitation of labour in less developed countries (Nike in Indonesia) Discuss positives and negatives
Labour Movement – Labour movement tends to be at the top end and bottom end of skills. Highly skilled workers are attracted to the larger economies (US and Europe) and low skilled labour is attracted to developed countries (Indonesian maids in Singapore)
Technology – has played a key role in trade, finance, investment and labour movements. The internet has provided information and communications globally thus increasing the pace of globalisation
International Business Cycle- As economies are more integrated international factors have a greater influence on domestic economies (draw the business cycle). A recession in the USA has an impact Japan and then the whole world. Australia’s exports are now more dependent of the Chinese business cycle and the demand for resources. Domestic interest rates are affected by overseas interest rates as countries try to attract foreign savings. Exchange rates are more volatile due to speculation. Many countries have experienced structural change as protection levels have fallen globally.
Conclusion
Protection, Free Trade and Trade Organisation
Introduction
What is protection?
Protection is an artificial advantage given to domestic producers when competing with foreign imports. Free Trade is the removal of all protection so that market forces can operate freely. Generally the world has been moving towards less protection due to the WTO. However, protection still exists in a number of regions due to trading blocs.
Body
Outline briefly the different types of protection and their impact
Tariffs, subsidies, quotas, local content rules, embargoes.
Short term benefits to employment, long term problems as prices rise and resources are wasted. Protection encourages production by inefficient industries at the expense of efficient industries.
Outline the advantages of free Trade
Specialisation, economies of scale, efficient resource allocation, international competitiveness, innovation, higher living standards
Role of the WTO
Attempts to promote free trade and encourage countries to decrease protection- has had considerable success in reducing protection on industrial goods- has had very little success with reducing protection on agricultural goods.
The Doha round concentrated on agricultural protection in an effort to improve living standards in the poor world- most developing economies depend on agricultural exports but find it difficult to gain access to EU and USA. The Doha Round failed.
The WTO also attempts to settle trade disputes among member countries
World Bank
WB provides development loans to developing economies. WB’s aim of the next 10 years is to reduce by 50% the proportion of the world’s population living in absolute poverty. The World Bank also supports a program to reduce the debt levels of the world’s poorest countries.
International Monetary Fund
Supports globalisation and free market theory. The IMF assists countries that are experiencing problems with exchange rate instability. The IMF usually develops a strategy for poor countries based on structural adjustment, free markets and modernisation.
Trading blocs and free trade agreements
Trading blocs have restricted the progress of free trade. The EU and NAFTA discriminate against non-members. They encourage an increase in trade between member countries but a decrease in global trade because they are protecting their own inefficient industries. In general the poorest countries in the world experience the greatest problems in gaining access to high-income markets.
In recent years there has been a movement towards free trade agreement. Australia has free trade agreements with New Zealand, Thailand, Singapore, Japan and the USA
Conclusion
Globalisation and Economic Development
Introduction
What is globalisation / economic development?
Define globalisation. Outline trade, finance, investment, labour mobility and technology as reasons for/ features of globalisation/change in global economy. Explain that globalisation has had a positive impact on trade, finance, investment labour mobility and technology but there are also negative consequences.
Body
Explain what the global economy is like
High income countries (USA, Japan, Australia etc) have approx 15% of the world’s population but earn approx 70% of the world’s total income. Low income countries (Vietnam, Cambodia, Uganda etc) have approx 45% of the world’s population but earn approx 5% of the world’s total income.
Outline the characteristics of Advanced Economies (USA), Emerging Economies (China), Developing Economies (ranges from middle income to low income economies – Cambodia).
Economic Development (Global Issues)
Global trade barriers are restricting trade. Trading Blocs (EU and NAFTA) limit trade from developing countries.
Investment from AEs mainly occurs in other AEs. There has been significant investment in emerging economies (China, Malaysia) but many African and South American countries are generally ignored by TNCs.
Global aid and assistance to developing economies is very small- only 0.24% of GWP. Aid is often tied thus benefiting the donor country.
Access to technology is restricted in most developing countries.
Economic Development (Domestic Issues)
Many developing countries lack access to capital funds for private investment- are often highly indebted to foreign banks. There is a shortage of skilled labour- most depend on agriculture for export income and lack the industrial base required to produce high value added exports. Population growth is usual high causing problems in major cities. Govt corruption is common.
Impact of development and growth
Economic growth and development has favoured AIEs and emerging economies (China, Malaysia)- those countries that have been able to benefit from trade and investment.
Trade – favoured those countries in strong trading blocs and disadvantaged non members
TNCs – investing in low-income economies to exploit cheap labour (advantages/disadvantages)
Increased global inequality- inequality has increased between countries and within countries- the rich are getting richer at a much faster rate- approx 32% of the world’s population lives in poverty but poverty has been decreasing in emerging economies
Environment- All countries experience environmental problems because of economic growth. Developing countries generally experience the more obvious problems because they want to attract foreign investment and are willing to sacrifice the environment to achieve higher national income.
Conclusion
Year 12 Economics- Topic Summary
Topic 2- Australia’s Place in the Global Economy
The focus of this topic is an examination of Australia’s place in the global economy and the impact of changes in the global economy on Australia.
Australia’s trade and financial flows
· Trends/CAD/Capital and Financial account
· BOP links
· Debt trap
· Net Foreign Liabilities and Foreign Debt
· International competitiveness
Exchange Rates
· Flexible exchange rates/FOREX markets
· Demand and supply factors
· Appreciation and depreciation
· Effects on economy
· Role of the RBA
Free Trade and Protection
· Recent trends in Australia
· Positives and negatives for individuals, firms and government
Australia’s Place in the Global Economy
Introduction
How is Australia part of the global economy?
Australia is part of the global economy through trade, finance, investment, labour and technology. Australia has experienced a period of great structural change as it has reduced protection, floated its exchange rate and encouraged foreign investment. As a result Australia has become a more dynamic and competitive economy capable of adjusting to changes in global markets. On the other hand it has also experienced structural U, a fluctuating CAD, exchange rate instability and a growing Foreign Debt.
Body
CAD (goods and services)
Outline the components of the CAD = (X- M) Goods & Services + primary income + secondary income
Explain how X-M has changed – increase in mining exports and relative fall in agriculture and manufacturing
Change in direction of trade = more towards Asian markets and particularly China
Fall in protection from average tariff of 36% (1970) to 1.9 % (2012) and eventually zero.
As a result Australia is exporting more but also importing more causing a trade surplus XM from time to time. The CAD has reduced in recent years due to the mining boom and trade surpluses. The future of the CAD is closely linked with exports to China.
CAD (net income)
CAD is financed by foreign capital inflow- FDI + Foreign savings. Foreign savings is attracted by high Australian interest rates. This has created a debt-trap cycle for the CAD (draw the cycle and explain)
Positives of foreign investment (debt and equity)-increased funds for Australians to borrow + FDI creates extra employment and production. Negative consequences are profit and interest repayments and debt trap. Australia’s foreign debt has grown from 45% GDP in 1990 to 65% GDP 2014.
Consequences of a high CAD
Growth in foreign liabilities (debt + equity) and debt trap cycle. Exchange rate more volatile and depreciation is more likely. CAD becomes a constraint on economic growth- government can’t let the economy grow too quickly because imports will surge. Loss of international confidence
Flexible exchange rate
Australia has a floating exchange rate. This has allowed foreign capital to flow freely into Australia – increasing Australia’s net foreign liabilities. Australia’s exchange rate has declined in value since being floated, however in recent years it has appreciated to around $1 US. From time to time the Australian currency has collapsed due to speculators selling large quantities of AUD. In 2014 the AUD has stabilised due to foreign savers buying AUD due to our relatively attractive domestic interest rates. It is important to have a stable exchange rate so that international investors have confidence in the Australian economy.