(2.5 marks mob part)
Using the aggregate demand — aggregate supply (AD-AS) diagram, show how the four economic events would affect economic activity and the price level. (Note: use a separate AD-AS diagram for each event)
- An improvement in the marketing and selling skills of firm managers;
- An increase in personal income tax;
(a) An increase in exports;
(d) A significant destruction in an economy's capital stock because of war;
Question 6:
- The consumer price index (i.e. CPI) is the most commonly used measure of changes in the general level of prices in Australia. Discuss some of the advantages and disadvantages of using this measure. (4 marks)
- Explain why some people lose' from inflation and why do some people 'win' from inflation? (6 marks) Question 7:
Which of the following would cause a growth in the money supply? Answer
yes, no, or possibly and explain your answer (i.e. please provide reasons). (2 marks each)
- The selling of government securities to banks;
- A fall in interest rates;
(a) An increase in government expenditure, financed by borrowing from the banking sector;
- The purchase of government securities by the Central Bank from the banking sector;
- It is agreed by the Treasurer and the Governor of the Central Bank to
reduce the target rate of inflation
Question 8:
The following are the various elements within a nation's balance of payments account
- Imports of goods (—)
- Exports of goods (+)
- Imports of services (—)
- Exports of services (+)
- Other income outflows (—)
- Other income inflows (+)
- Capital transfers sent overseas from the nation (—)
- Capital transfers to the nation from overseas (0)
- The nation's investments overseas (—)
- Investment in the nation from overseas (+)
- Short-tens financial outflows (—)
- Short-tern financial inflows (+)
- Adding to reserves (—)
- Drawing on reserves (+)
Into which of the above categories would you put the following? (total 10 marks — I mark each)
- DVD recorders imported into the nation from Japan;
4
- Insurance cover purchased in the nation by overseas residents;
(a) The nation gives overseas aid to a developing country;
- A US car company sets up a factory in the nation;
- Some of the nation's residents take a holiday in Bali; Interest eamed by the nation's residents on overseas assets; (8) Running down the stock of foreign exchange in the Central Bank of the nation;
Migrants to the nation transferring properly to the nation;
New deposits made in banks in the nation by overseas residents; The nation's palm oil is sold in the United Kingdom.