Presentation on theme: "Student Economics Forum 2011"— Presentation transcript:
1Student Economics Forum 2011 CCI/ETAWAStudent Economics Forum 2011Preparing for theWACE Stage 3 ExamSteven KempSchool of EconomicsCurtin University
2Economics 2011You need to . . .Know the Syllabus in 3A and 3B – textbook theory and concepts account for around 60 – 80% of the paperUse models in your answersBe aware of current economic conditions & events – around 20 – 30% of the paperRemember that the exam paper was written before July
33A: International Economics Global MarketsPatterns & trends in world tradeInternational competitivenessGlobalisationFree Trade & ProtectionComparative advantageDemonstrate the gains from tradeTypes of protection (tariffs & subsidies)Arguments for protection & trade liberalisationTrade agreements
43A: International Economics Pattern of Australia’s tradeThe terms of tradeThe balance of paymentsThe exchange rateForeign liabilitiesForeign debtForeign investment
8AustraliaWhat caused the large fall in the March quarter 2011?
93B – Macroeconomic Theory You must learn 2 models!The AE modelMacroeconomic equilibriumThe multiplierThe AD/AS modelAggregate demand curveAggregate supply curveUse the AD/AS model to explain the business cycle, inflation, unemployment . . .
103B – Macroeconomic Policy Key macroeconomic objectivesSustainable rate of economic growthFull employment/Natural rate of unemploymentPrice stability
22Change in Cash Rate - % points Monetary PolicyDateChange in Cash Rate - % pointsNew Cash Rate Target %3 Nov 2010+0.254.755 May 20104.507 Apr 20104.253 Mar 20104.002 Dec 20093.754 Nov 20093.507 Oct 20093.258 Apr 2009-0.253.00
23Last Year’s ExamThe exam highlighted certain areas of the syllabus that are not well understood:The terms of tradeAutomatic stabilisers in fiscal policyThe link between the current account and the financial account in the balance of paymentsThe aggregate demand/aggregate supply model
24Every Year’s Exam Common Errors Poor understanding & application of basic modelsAgg Expenditure (45o model)Agg Demand & Agg Supplyforeign exchange market – D($A)/S($A)Confusion over the CAD, foreign debt, foreign investment
25Section 113. The graph has a marginal propensity to consume of _______ and, therefore, a multiplier of ________. (a) 0.6, 2.5 (b) 0.6, 1.67 (c) 0.8, 5 (d) 0.8, 2.5
26Section 1A worsening current account deficit is most likely to be a result of(a) a decrease in economic growth.(b) capital expansion in domestic manufacturing plants.(c) a positive gap between domestic savings and domestic investment.(d) an increase in exports.
27Section 1 An increase in aggregate demand is likely to result in (a) higher prices and slower growth in real GDP.(b) higher real GDP and higher interest rates.(c) lower interest rates and higher inflation.(d) higher inflation and job creation.
28Section 1Which one of the following is an example of discretionary fiscal policy?(a) a reduction in marginal income tax rates(b) an increase in tax collections during a boom(c) an increase in government tariff revenue(d) a decrease in government tax revenue
29Section 123. Which one of the following statements about productivity is correct? (a) Productivity growth always results from capital investment.(b) Labour productivity is the best measure of productivity growth.(c) Productivity growth is measured by increases in the output of the economy.(d) Productivity growth results from capital deepening.
30Section 2 Q 25 The Terms of Trade Most students can define the terms of trade, but after that its good night!The increase in Australia’s terms of tradeWhy?The effects on economic activity, B of P & the $A
32Section 329. Consider each of the following events: (i) an increase in world oil prices; (ii) a depreciation of the Australian dollar. (a) With the aid of separate AD/AS diagrams, explain the likely effects of each event on the Australian economy. (10 marks) (b) Discuss the possible macroeconomic policy options available to the Australian Government to combat any negative effects of an increase in world oil prices. (10 marks)
33Section 3 29. Consider each of the following events: (i) an increase in world oil prices;(ii) a depreciation of the Australian dollar.With the aid of separate AD/AS diagrams, explain the likely effects of each event on the Australian economy. (10 marks)An increase in world oil prices would . . .A depreciation of $A would . . .
34Section 329. (b) Discuss the possible macroeconomic policy options available to the Australian Government to combat any negative effects of an increase in world oil prices. (10 marks) What should the government do?
35Australian EconomyBe aware of the state of the economy – key developments & trendsKey indicatorsGDPUnemploymentInflation$ACADCash rateBudget deficit