Task 2

Question 1

give an example of an externality

Answer 1

Pollution caused by commuting to work or a chemical spill caused by improperly stored waste

Question 2

How is external stability Measured

Answer 2

Current Account Deficit (CAD) as a percentage of GDP. Net Foreign Debt as a percentage of GDP.

Question 3

what is the terms of trade

Answer 3

the ratio of an index of a country’s export prices to an index of its import prices.

Question 4

define exchange rate

Answer 4

the value of one currency for the purpose of conversion to another.

Question 5

recent trends in external stability in australia

Answer 5

In recent years, net long-term debt liabilities have risen as foreign investors have increased their holdings of Australian government debt. Meanwhile, net short-term debt liabilities have fallen.

Question 6

name a cause of poor external stability

Answer 6

net long-term debt liabilities

Question 7

define economically sustainable development

Answer 7

Development that meets the needs of present generations while not compromising the ability of future generations to also meet their needs

Question 8

define market failure

Answer 8

a situation defined by an inefficient distribution of goods and services in the free market

Question 9

define public and private goods

Answer 9

Private Goods are products that are excludable and rival. Public goods describe products that are non-excludable and non-rival

Question 10

name 2 conflicting objectives

Answer 10

Achieving a simultaneous reduction in unemployment and inflation
Achieving economic growth and external balance