12 Economics Assessment Task 1.Part 1

Which of the following would be an example of foreign direct investment?

• A European corporation increases its purchases of Australian government securities.

• an Australian textiles manufacturer buys a controlling interest ( more than 10% of shares ) in an Indonesian garment factory.

• A Mexican entrepreneur takes out a number of option and swap contracts in order to hedge against exchange rate risks.

• The Reserve Bank of Australia sells Australian dollars to foreign central banks in return for foreign assets.

What would be the most likely outcome of increased economic integration?

• Increased financial deregulation in global capital markets.

• Higher levels of tariff protection to protect local producers from excessive levels of overseas competition.

• Reduced levels of financial contagion during a global financial crisis.

• Higher levels of global inflation due to increased production activity.

Which of the following is NOT a favourable characteristic of the process of globalisation?

• The integration of financial systems to create a world financial system.

• More companies and businesses conducting trade and investment across natioanal boundaries.

• International trade is increasingly linked with companies using anti-competitive practices.

What is meant by the international business cycle?

• Changes in world output or GWP over time.

• The international business cycle reflects short term fluctuations in global interest rates.

• Regional business cycles refers to changes i output, trade and financial flows in particular geographic regions.

• The global business cycle involves the acquisition of debts or equity securities in foreign capital market and other capital flows.

Which of the following is a negative outcome of the protection of a domestic industry.

• Manufacturing and other industries will face pressures for structural change.

• Domestic firms will face increased competition from foreign competition and have more incentive to introduce new products.

• The stimulation of product improvement if domestic producers know that tariffs are only temporary and will eventually be removed.

• Trading partners may react to tariffs being applied to their products by overseas governments by lobbying their governments to apply tariffs on imports.

The following diagram shows the impact of a subsidy on the production and price of wheat with the equilibrium price being $100 per tonne.

From the diagram, what is the size of the subsidy paid to domestic wheat producers?

• $20 per tonne

• $10 per tonne

• $100 per tonne

• $90 per tonne

What would be the most effective source of statistical data for comparing the living standards of countries in the global economy?

• Real GDP growth rates

• The Human Development Index

• Real GDP per capita

• The Terms of Trade Index

The following diagram shows the effect of a tariff. What effect does the imposition of the tariff have on domestic supply?

• Domestic supply falls from HX to H1X1

• Domestic supply rises from the free trade price to the tariff price.

• Domestic supply rises from H to H1.

• Domestic supply is HX.

What are the distinguishing features of a developing country?

• Low economic growth with higher per capita incomes.

• Low levels of saving and investment and high unemployment.

• Low real per capita incomes and high rates of capital formation.

• Low levels of capital mobility and a high level of technological transfers.

If there was a recession ( 2 consecutive quarters of negative economic growth ) in the global economy what is the likely impact on regional economies?

• Higher interest rates and budget surpluses.

• Higher commodity prices and terms of trade.

• Increased capital flows and foreign investment.

• Lower trade and financial flows.