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HSC Economics Exam Questions With Answers

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HSC Economics Exam Questions With Answers Define globalisation The breaking down of geographical & artificial barriers over a period of time (between countries & economies) Explain/ Example: The reduction in protectionist policies e.g. tariffs, quotas and subsidies demonstrates an increased trad...

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  • April 27, 2024
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HSC Economics Exam Questions With
Answers
Define globalisation
The breaking down of geographical & artificial barriers over a period of time (between countries &
economies)
Explain/ Example: The reduction in protectionist policies e.g. tariffs, quotas and subsidies
demonstrates an increased trade between nations


Define, explain and give an example for the global economy
Definition: consists of all production, trade & financial flows, investments, technology and economic
behaviour between nations.
Explanation: Economies are increasingly linked to each other, and because of this changes in
individual economies can have a ripple effect on others.
Example: Debt concerns in the European zone, specifically Greece have impacted Australia. Australia
is seen as a "safe haven" to investors resulting in an appreciation in the AU$


Define, explain and give an example for Gross World Product
Definition: Sum of the output of goods and services of all economies over a period of time
Explanation: We also world GDP at PPP - GWP adjusted for national variation in prices + different
exchange rates
Example: Current GDP is around $US78 trillion (expected to increase)


Define, explain and give an example for economic integration
Definition: Refers to the liberalisation of trade between nations
Explanations: Led to the formation of free trade areas, agreements and monetary unions
Example: European Union (EU), Thailand-Australia Free Trade Agreement (TAFTA)


Define and give an example of the international business cycle
Definition: Refers to fluctuations in the level of economic activity in the global economy & global
economic growth
Example: Economic growth is generally stronger when the rest of the world is growing strongly. 2003-
07 US,EU,Japan, Aus experienced long periods of growth before the 2008 GFC


List the factors that strength the international business cycle
- Trade flows
- Investment flows
- TNC'S
- Financial flows
- Financial market and confidence
- Global interest rate levels
- Commodity prices
- International organisations


List the factors that weaken the international business cycle
- Domestic interest rates
- Government fiscal policies
- Exchange rates
- Structural factors
- Regional factors

,Define and explain the regional business cycle
Definition: Fluctuations in the level of economic activity in a geographical region of the global
economy
Explanation: Its emergence reflects growing popularity of the concept of "regionalisation" in the
global economy. Changes within these regions therefore has a more pronounced effect for countries
within these regions. E.g. North America, Asia-Pacific


Define what trade flows are using statistics
Definition: The exchange of goods & services. It measures how goods & services produced are
consumed overseas.
Example: Trade increased from $US 8.7 trillion in 1990 to $US 42.5 trillion (58% global output) in 2016


What are the three reasons why trade has grown?
1. Countries realise the need to import as they cannot produce all items as efficiently, this highlights
the concept of comparative advantage.
2. Due to the liberalisation of trade (degradation of artificial barriers to trade e.g. tariff) there is
increased trade
3. Due to technological advancements there is a decrease in the cost of transportation resulting in
more trade


Explain the composition of trade using examples
Global trade is dominated by manufacturing (58% in 2016) e.g. vehicles and clothing
High prices for energy sources has increased trade in fuels and minerals
E.g. The Mining boom and Australia increased trade with China. The increase in the middle class in
Asia therefor will result in higher incomes, most likely resulting in an increase of trade in services such
as health, education, finance and communication in future years


Describe the trend in the direction of Trade flows for both Australia and the world
Australia's direction of trade
- initially with England, however the introduction of the EU excluded Australia, therefore turned to
trade with Japan who were the centre of technological development, currently major trading partners
with China due to cheap manufactured goods in return for commodities such as iron ore.
Global direction of trade
Changed in recent years reflecting the development and importance of different regions. The share of
global trade for high income advanced economies such as the US shrunk from 82% in 1995 to 70% in
2009. At the same time East Asia and the Pacific increased shares from 7% to 14%.


Explain what Financial flows are
The growth in financial flows is evidenced by growth in foreign currency, capital flows and financial
securities


What are the 2 main reasons for increased financial flows
1. Financial deregulation in 1970's-80's - removed controls on currency markets, capital, interest rates
and foreign direct investment meaning finance could move around the globe more feely
2. New technologies in communication network have linked financial markets. The buying and selling
of currency takes place in the FOREX market, average daily turn over reached 4 trillion dollars in 2010.


Who are the main drivers of financial flows and how do they operate?
Speculators, they make short term investments in financial assets to earn a profit

, What is the benefits of financial flows?
Countries can obtain funds to finance domestic investment.


What is the cost of financial flows with an example
Causes speculation which may increase volatility. The ramifications of this were felt during the East
Asia Crisis in 1997 and the GFC in 2008-09


Define and use examples of the trends of Investment Flows
Definition: The movement of funds between economies to buy a substantial proportion of shares in a
company (10% and above)
Examples
- During 1990s-2000s: more advanced economies (US,UK, Japan) had greater industrial capacity and
larger consumer markets which in tern attractive investment.
- Since 2010, however, there has been greater investment targeting developing economies e.g. China,
Brazil, Mexico due to their higher growth rates


Define and explain what Transnational Corporations are and how they operate
Definition: Enterprises that manage production + deliver services in more than one country
Explanation: One of there key features is the emergence of strategic global production network.
Meaning, the raw materials, processing, manufacturing and the assembly of parts can take place in
different countries. This is to minimise costs and create economies of scale, promoting greater
efficiency.
Example. Manufacturing plants tend to be located in countries with low labour costs + more
favourable government policies like tax concessions. Such countries are those like China and Mexico.
However, as China's wages rise due to the increase growth of the economy, Mexico might be a
favourable location in the future.


Explain role of technology in the global economy, using examples (4)
Technology has played a crucial role in facilitating an increase in the integration between economies.
1. New products results in an increase in choice, therefore with greater international competition
which results in lower prices for consumers
2. Technology is driver in trade and investment intern, trade can facilitate the spread of technological
innovation
3. Business corporations that develop new technology will move into oversea's markets to sell their
products. They will often invest substantially in the countries they enter, particularly in education and
training
4. Transport infrastructure is key to ensuring goods and services can be moved across countries
resulting in an increase in output


Explain the International Division of Labour and Migration
1. Business - Corporations shifts production between economies in search of the most efficient and
cost effective labour. Operate a process called "offshoring" allows companies to shift production
between countries of reduce costs. The international division of labour reflects the economic concept
of "comparative advantage".
2. Migration - The movement of labour between economies appears to be concentrated at the top
and bottom ends of the labour market. At the top end, highly skilled workers are attracted towards
the richest economies, such as the United States. This is due to higher pay and better opportunities
available to these countries. Smaller advanced economies such as Australia and New Zealand suffer
from a "brain drain" of some of their most talented and skilled workers migrate to there countries for
greater rewards. At the bottom end of the labour market, low-skilled labour is also in demand in

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