Question

Set Five: Miscellaneous

1. This year, COVID-related disturbances have reduced Australia’s net migration to about zero, instead of about 150 000, and construction is forecast to remain low over the short term. What principle of macroeconomics explains why a steady level of net investment in the construction of new offices, houses, retail centres etc. depends significantly on the steady growth of population. [Hint: look at the lecture recording for 24 Sept.] [Limit 5 words: 1 mark]

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2. During recent decades, state how the slope and position of Australia’s Phillips Curve has changed [Limit 20 words: 1 mark]

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3. What happens to Australia’s measured productivity while largescale investment in new mines is happening? Why? [Limit 20 words: 1 mark]

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4. Over the last 30 years, does the quantity theory explain inflation over the trend in Australia? [Limit 20 words: 1 mark]

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5. During Australia’s mining boom this century, did Australia regularly achieve a positive balance of trade? If yes, state one year when it did not. If no, state one year when it did. [Limit 20 words: 1 mark]

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6. Why does it matter for the price of assets that the stock of existing assets is much greater than the flow of newly produced assets?   
   [Limit 20 words: 1 mark]

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Answer 1

1 answer) Lower migration results in decline in prices and decrease in overseas migration into Australia result in lower poulation growth.Lowering the migration intake leads to lower GDP growth.Lower migration may reduce house demand but a new home builder program named Australian government new builder program sanction grant for construction of new home.If there is equilibrium between production growth and population growth steady level of economy is achieved.

2 answer) there is flattening in Phillips curve .The slope of philips curve measures output gap inflation.There is decline in output gap inflation .The slope of curve is negative.The output gap inflation and persistence in inflation decreases.As there is deviation in output gap so there is flexibility in price which flattens phillips curve

3 answer) Due to increased investment there is low productivity growth due to new capitalisation.Due to mining investment boom long term investments are related to infrastructure,R&D etc.Due to capital lag effect and natural source depletion effect there is decrease in measured production.

4 answer) The quantity theory explains the inflation as long term money growth relates to long term inflation.The growth rate of real GDP is taken in quantity theory.Against inflation equities will serve as a hedge,In terms of stock selection in Australia investors should be selective and particular in equities today.So quantity theory explain inflation over trend in Australia.

5 answer) Australia mining boom ends in 2018.The Australian term of trade has reached 75% growth.Global demand for coal,gas has increased ,urbanisation,new investment in housing etc has lead to achieve positive balance of trade.Due to increase in price of Australia commodity exports Australian trade boom is increased.The global increase in demand,urbanisation and industrialisation led to boom in Australian trade.

6 answer) Newly produced fixed assets enlarge the stock of fixed capital.used assets are existing in market .the value of capital stock is affected by price inflation.The price of assets depends on current market value.current assets are lower than current liabilities.