Marking criteria: For all questions, marks will be awarded according to:

•   Clarity, accuracy and coherence of explanation;

•   Use of evidence to support arguments;

•   Evidence of wider reading (beyond the lecture notes and recommended text);

•   Application of appropriate economic models, including diagrammatic analysis where required;

•   Quality of writing and overall presentation.

Question 1 [5 marks]

Considering the graphs below from the Reserve Bank of Australia Statement on Monetary Policy, August 2021, answer the following questions.

(i)       Briefly, what factors have driven the growth in crude steel production in China over the past 10 years, as shown on the left-hand graph? [2 marks]

(ii)       Explain how this growth in crude steel production has affected economic welfare in

China and the rest of the world. [3 marks]

Question 2 [5 marks]

With reference to the graphs in Question 1 above, explain how the growth in China’s iron  ore imports from Australia (the right-hand graph) has affected macroeconomic variables in Australia and economic welfare in Australia.

Question 3 [5 marks]

Considering the graphs below from the Reserve Bank of Australia Statement on Monetary Policy, August 2021, answer the following questions.

(i)       Briefly, what has happened to the value of the Chinese currency in terms of the US$ since 2019? [2 marks]

(ii)       Discuss the range of factors that may have led to this pattern since 2019. [3 marks]

Question 4 [5 marks]

Are there any potential long-term forces, different to factors mentioned in Question 3 (ii)    above, that could, in theory, lead to an appreciation in the foreign exchange value of the   Chinese currency? There is no need to refer to actual data. Rather you should discuss      theoretical channels through which the Chinese currency could appreciate in the long-run.

Question 5 [5 marks]

Greece was particularly hard hit by the COVID pandemic due to its high dependence on   international tourism. Tourism revenue declined by 78% during the first 9 months of 2020.

In this context, critically evaluate the following statement:

‘Greece’s membership of the Eurozone constrains its ability to adjust to such a large external shock’.

Question 6 [5 marks]

Further to the theme in Question 5 above, does Australia, consisting of the States of Australia which all adopt the Australian dollar as their common currency, meet the    conditions for an optimal currency area?

Question 7 [5 marks]

Considering the graphic below from the Australian Productivity Commission, answer the following questions.

(i)       What were the two main components of the gain in labour productivity from 1901 to 2016? What was the proportional contribution of each? Show your calculations. [1 mark]

(ii)       How does ‘capital deepening’ occur? [2 marks]

(iii)      What causes ‘multifactor productivity’ to increase? [2 marks]

Question 8 [5 marks]

With reference to the graphic in Question 7 above, answer the following questions:

(i)       Which of the factors identified in the bar chart would be most affected by population ageing (an increase in the proportion of the population aged 65 years and over)?    Briefly explain. [2 marks]

(ii)      Which of the factors mentioned in the bar chart would be most affected by

immigration? Briefly explain. [2 marks]

(iii)      Which of the factors mentioned in the bar chart would be most affected by terms of

trade? Briefly explain. [1 mark]

Question 9 [5 marks]

Considering the graph below from The Economist magazine, 18 January 2020, answer the following questions.

(i)       Does this graph show evidence that economic growth in developing economies is ‘catching up’ to growth in advanced economies? Explain briefly. [1 mark]