aos3 dot point 3

Question 1

cyclical influences

Answer 1

short term, volatile, aggregate demand side factors effecting current account

Question 2

structural influences

Answer 2

long term, more table supply side factors effect current account

Question 3

cyclical influences are strong

Answer 3

-increase in AD eg. little spare capacity in the domestic economy
-increases demand for imports
-value of m>x
-weakens the CA balance

-When the pace of economic activity among our major trading partnersabroad isrising Our overseas trading partners tend to buy more Australian exports and pay higher prices,
-adding to the value of credits relative to debits on our current account.

Question 4

structural influences are weak

Answer 4

-AS weaking eg. wages increase (cost of production)
-price of x increase
-demand for x decreases (tend to slow sales of locally made goods and services abroad)
-m>x
-weakens the CA

Question 5

cyclical influences are weak

Answer 5

low AD and fall in spending, strengthening our current account balance.

This may be due to consumer and business confidence which REDUCES our demand for imports (X>M).
when overseas spending is depressed and there is a slowdown in economic activity perhaps due to consumer or business confidence abroad, they spend less on Australian goods and services,
-reducing the value of credits relative to debits on our current account.

Question 6

structural inflences are strong

Answer 6

More favourable structural or aggregate supply conditions:
If there is a largeCAS, this mightbe partly attributable to generallymore favourable aggregate supply side conditionsthat in turn, would strengthen the current account balance by boosting the value of credits relative to debits.

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Question 7

national savings-investment gap