Unit 3 AOS3 (Deakin)

Question 1

What are the two records in the BOP?

Answer 1

Credits - Money coming into Australia from foreign countries

Debits - Money leaving Australia into foreign countries.

Question 2

Explain the cause of our NFD and NFE.

Answer 2

NFD is due to governments owing debts to fund the fund the savings and investment balance.A ne

A negative NFE is largely due to the excess of super investments overseas.

Question 3

What is NFD and the two components?

Answer 3

Net Foreign Debt is the total stock of loans Australia owe to overseas countries less the total stock of loans owed by foreign countries to Australia. It is comprised of public sector and private sector debt.

Question 4

What is international competitiveness?

Answer 4

IC refers to the ability of the nation to compete in global markets, based on the quality and price of our exports.

Question 5

Define economies of scale

Answer 5

Proportionate savings in cost gained from increased levels of production.

Question 6

What are the four factors that effect the exchange rate?

Answer 6

Interest rates (ROI)

Inflation (International competitiveness)

Forex speculation

TOT (Export prices, and hence the amount of foreign currency converted to Australian currencies)

Question 7

What is the availability of resources and how does it effect IC?

Answer 7

Refers to the natural endowments of resources to countries.

Can effect supply levels and therefore prices for mining and agricultural industries.

Question 8

What is the balance of payments?

Answer 8

The balance of payments is the annual statistical record of the money value of both current, and

capital and financial transactions between Australia and the rest of the world

Question 9

What is free trade?

Answer 9

Free trade involves removing barriers like tarrifs, quotas and protections to local industries to encourage flows of goods and services, income and people between countries.

Question 10

What is NFE?

Answer 10

Net foreign equity is the stock of Australian assets owned by foreign countries less the stock of foreign assets owned by Australians.

Question 11

how to answer how something effects a goal?

Answer 11

define what it is

expalin

then briefly relate to the goal

Question 12

How do you illustrate higher AUD demand?

Answer 12

mention that it must be purchased in aud

Question 13

What is net primary income?

Answer 13

It is the primary income credits less primary income debits

Question 14

How does slower foreign economic growth impact the exchange rate?

Answer 14

Lower need for iron exports
Depreciates AUD

Question 15

How does a higher TOT impact the exchange rate?

Answer 15

Higher export prices
More AUD for a given volume of exports
AUD appreciation

Question 16

What is the availability of resources and how does it effect IC?

Answer 16

Refers to the natural endowments of resources to countries.

Can effect supply levels and therefore prices for mining and agricultural industries.

Question 17

How do relative inlfation rates effect IC?

Answer 17

Relative inflation rates can determine who has the most stable and lowest prices.

Question 18

How do exchange rates effect IC?

Answer 18

Fluctuations in the exchange rate can effect the prices of our exports directly and indirectly through our costs of production

Question 19

What is production costs and how does it effect international competitiveness?

Answer 19

Refers to all the costs involved in producing and distrubuting a good or service.

Effects how expensive exports will be, and hence IC.

Question 20

What is productivity and how does it effect IC?

Answer 20

Productivity refers to the amount of output per given unit of input.

Productivity can impact unit labour costs, hence impacting overall prices.

Question 21

What are the five factors effecting international competitiveness?

Answer 21

Productivity
Production costs
Availabilitty of resources

Relative inflation rates
Exchange rate

Question 22

How can demand increase for the AUD relative to the current account?

Answer 22

Increase for Australian exports.
Secondary income payments Aus
Primary income to AUs
Direct or portfolio investments to Australia

Question 23

What is the TWI?

Answer 23

The trade weighted index is the value of the Australian dollar in compariso to a weighted average basket of currencies from our foreign trading partners.

Question 24

What is the exchange rate?

Answer 24

The exchange rate is the value of the Australian dollar in comparison to other fofreign currencies

Question 25

How can a growing TOT be negative for the economy?

Answer 25

If due to excessive export price rises, can cause high AD growth and lead to demand inflationary pressures.

Question 26

What is the favourable TOT position (growth or decline) and why? Refer to living standards.

Answer 26

TOT is growing: If due to higher export prices, profits increase, which either increases investment or consumption from high incomes and therefore material LS increase. If due to lower import prices, lowers cost of production and encourages investment, hence increasing AS and lowering inflation and hence increases material LS Opposite of TOT is shrinking. Therefore a growing TOT is the favourable position.

Question 27

What are the two main factors that influence the TOT?

Answer 27

Changes to AD and AS that effect import and/or export prices. The exchange rate. Appreciation, export become more expensive and imports become cheaper, TOT increases. Depreciation, exports become cheaper and imports dearer, TOT decreases.

Question 28

What is the terms of trade and how is it calculated?

Answer 28

TOT = (Export price index / import price index) x 100 The TOT is the ratio for the average prices recieved for Australian exports relative to the average prices paid for our imports, using an index of prices of exports and imports over time. DOES NOT REFER TO VOLUME.

Question 29

Explain the cause of our NFD and NFE.

Answer 29

NFD is due to governments owing debts to fund the fund the savings and investment balance.A ne A negative NFE is largely due to the excess of super investments overseas.

Question 30

What is the NIIP

Answer 30

The Net Internation Investment Position refers to the net futurre obligations Australia has with the rest of the world, and is comrpised of the NFD and NFE.

Question 31

How do you answer a "Explain how x effects the CA balance" question?

Answer 31

Describe factor and whats occuring Refer to specific sub category of CA and changes in credits and debits Overall position on the change

Question 32

What is a competitive advantage?

Answer 32

A condition or circumstance that puts a company in a favorable or superior business position

Question 33

What is the cyclical component of the CA and two examples of it?

Answer 33

The cyclical component of the CA refefs to the portion of it that changes in line with the economic cycle over time. Increased foreign economic growth rates increase mineral export demand. Increases economic growth increases wages which spills over into greater M spending

Question 34

What is the structural component of the CA and two examples of it?

Answer 34

The structural component of the CA refers to the current account balance that is unrelated to changes in economic growth and exists when the economy is running at it's long term rate of growth. The gap in savings/investments, which neccitates foreign investment. Low producitivty and high costs, therefore low international competitiveness

Question 35

What is the financial account and it's three components?

Answer 35

Records changes of ownership of assets and liablitlies. Net direct investment - Changes in controlling interests (>10%) of assets, such as a Chinese company purchasing an Australian coal mine (credit) Net portfolio investments - Changes in non-controlling interests (<10%) of assets, such as purchasing shares or bonds. Others - Reserve assets (RBA or government), derivatives and others.

Question 36

What is the capital account?

Answer 36

Relatively insigificant, accounts for capuital transfers and acqusitions or disposal of non-produced, non-financial assets (such as patents or licenses)

Question 37

What are the four components of the current account?

Answer 37

Net goods, export receipts minus import receipts Net services, value exported services - value of imported services. Net primary income, which is the receipts of income from holding foreign assets minus payments of income to service foreign liabilities. (dividends, rent, interest) Net secondary income, simple one way transfers between countreis (gifts and foreign aid)

Question 38

What are the two types of accounts the make up the BOP?

Answer 38

Current account - Records all receipts and payments of a current nature (no future obligiations) Capital and financial account - Records credits and debits for financial and capital payments. (future obligiations)

Question 39

What is the balance of payments?

Answer 39

The balance of payments is the annual statistical record of the money value of both current, and capital and financial transactions between Australia and the rest of the world

Question 40

The balance of payments is the annual statistical record of the money value of both current, and capital and financial transactions between Australia and the rest of the world

Answer 40

Economies of scale Increased competition and efficiency Lower prices Increased choice Access to resources.

Question 41

What are imports?

Answer 41

Foreign goods and services sold to Australian consumers, businesses, governments and other groups.

Question 42

What are exports?

Answer 42

Exports are Australian made goods and services sold to foreign households, businesses, governments and other groups.

Question 43

What, aside from goods and services, are the types of trade?

Answer 43

Human capital - Skilled migration Financial capital - Foreign debt or equity to fund ventures. International transfers - Foreign aid.