External Stability

Question 1

What is external stability

Answer 1

Is when Australia’s external economic relations do not have negative effects on the domestic economy. This means that we are able to service our external liabilities to avoid volatility in our accounts and constraints on the domestic economy

Question 2

What are the structural influences on the Balance on goods and services to influence a CAD

Answer 2

Narrow Export Base
Capacity Constraints
Net Importer of Capital

Question 3

What are the cyclical influences on the Balance on goods and services to influence a CAD

Answer 3

International competitiveness
Terms of Trade
Domestic and global growth rates

Question 4

What are the structural influences on the primary income account to influence a CAD

Answer 4

Savigns investment gap

Accumaulated Debt

Question 5

What are the cyclical influences on the primary income account to influence a CAD

Answer 5

Domestic business cycle

Domestic and global interest rates

Question 6

What are the structural influences on the Exchange rate

Answer 6

Speculation

Investment Opportunites

Question 7

What are the cyclical influences on the Exchange rate

Answer 7

Commodity Prices

Demand for exports/imports

Question 8

What are the structural influences on the Net Foreign Debt

Answer 8

Persisting and increasing CAD
Depreciation
Domestic Savings
Federal Budget Deficit

Question 9

What are the positive effects of a CAD

Answer 9

Borrowing from overseas allows businesses to fund investment and growth of different industries, which creates employment and development within the economy.

Pitchford Theory

Question 10

What are the negative effects of a CAD

Answer 10

• Constraints on economic growth
• Exchange rate volatility
• The growth of foreign liabilities
• HIgher Servicing costs