economics essays

Question 1

strengths of monetary policy (3)

Answer 1

1. quick action lag
2. political neutrality
3. works well in a boom

Question 2

weaknesses of monetary policy (4)

Answer 2

1. long effect lag
2. blanket effect
3. weak in trough
4. banks not obliged to pass on

Question 3

strengths of fiscal policy (3)

Answer 3

1. quick effect lag
2. can be targeted
3. automatic stabilizers

Question 4

weaknesses of fiscal policy (5)

Answer 4

1. political constraints
2. long implementation lag
3. inflexible
4. fiscal drag
5. twin deficit theory

Question 5

transmission mechanism channels (4)

Answer 5

1. cash flow channel
2. savings and investment channel
3. asset price and wealth channel
4. exchange rate channel

Question 6

causes of CAD (5)

Answer 6

1. savings investment gap
2. Australia’s international competitiveness
3. high exchange rate
4. domestic economy
5. growth of trade partners

Question 7

good CAD (6)

Answer 7

1. foreign investment
2. productivity
3. helps exports
4. improves debt servicing ratio
5. economic growth
6. consenting adult theory

Question 8

bad CAD (6)

Answer 8

1. loss of ownership
2. living beyond means
3. debt trap
4. credit rating
5. vulnerable to shocks
6. depreciation increases debt repayments

Question 9

arguments for free trade (7)

Answer 9

1. competition
2. lowers cost of living
3. lower input costs
4. higher real income
5. economies of scale
6. productivity increases
7. more variety and lower prices

Question 10

arguments against free trade (7)

Answer 10

1. protect infant industries
2. dumping imports
3. domestic employment
4. protection improves ToT
5. protection reduces BoP deficit
6. national security
7. diversification