Reference no: EM132368474

Apply Economic Principles to Work in the Financial Services Industry

Learning Outcomes

On successful completion of this unit, the learner/trainee will be able to;

• Apply economic principles and theories
• Evaluate economic aspects that apply to decision making
• Review own work
• Maintain personal understanding of economic policies

Assessment Task 1: Practical Exercises: Economic Principles

Complete the following tasks;

Task1. Price Elasticity

Price ($)	Quantity demanded	Elasticity coefficient
11	1250	A
10	1350	B
9	1450	C
8	1550	D

Required:

(a) Find the elasticity coefficients using the arc method (round off to 2 decimal places);

((Q1 - Q2)/(Q1 + Q2))/((P1 - P2)/(P1 + P2))

(b) Explain when demand is elastic, demand is inelastic, and demand has unit elasticity.

Task2. Market Structures

(a) Give three characteristics of each of the market structures

(b) Give two examples of each market form.

Market Structure

#	Perfect competition	Monopolistic competition	Oligopoly	Monopoly
Features
Examples

Task3. Three-column matching activity

Identify related terms across the three columns. First match a term in column A to a term in column B, writing the corresponding number on the blank line. Then match the terms in Column B to Column C, writing the corresponding code on the blank line in Column C.

	Exercise
1	monopoly		a	price shocks		demand and supply
2	tax concessions		b	funds paid overseas		market structure
3	stable prices		c	substitution effect		law of demand
4	price mechanism		d	perfect competition		market economy
5	commodity prices		e	unit trusts		price elasticity of demand
6	substitutes		f	competitive markets		non-bank authorised deposit- taking institutions
7	new buyers		g	derived demand		methods of protection
8	currency depreciation		h	market perceptions		balance on current account
9	funds received		i	tariff quotas		exchange rates
10	factor markets		j	complementary		cost push inflation
11	credit unions		k	economic growth		Govt.'s economic objectives

Task4. Economics Terms

Unscramble these 12 jumbles to form an ‘Economics' term. Gather all encircled letters and unscramble to answer the mystery word.

(a)   kamter

O

(b)   emotionpict

O

(c)   pliertilum

O

(d)   flagstation

O

(e)   cencurry

O

(f)   ganche

O

O

(g)   myone

O

(h)   clastie

O

(i)    damned

O

(j)   coinme

O

(k)   cripe

O

(l)   morpit

O

Mystery words clue: The amount on which goods are sold depend on the changes on demand.

Task 5. Multiple-Choice

1. Wants in economics is defined as: A limited and affordable
B human resources
C expensive and available D unlimited and recurring

2. In a modern market economy, Australia has a ‘mixed ‘economy because:
A it has an economic system in which both private and the government coexist. B government gives concession to private businesses.
C consumers and businesses compete with each other. D government makes decision for the business.

3. Which of the following is also known as a primitive or less-developed economy? A cultural economy
B economic system
C traditional economy D command economy

4. In economics, the questions of what, how, how much and for whom to produce are answered mainly by: A government
B price
C enterprise D tradition

Assessment Task 2: Apply Economic Principles and Evaluate Impacts

Assessment Task Apply Economic Principles and Evaluate Impacts

Description:

This assessment task contains five parts that include tasks based on economic principles and how they apply to decision making.

This is a summative task in which you will be required to apply your learning in answering questions, conducting research and solving problems such as structure of balance of payment and trade-weighted index. Each part of the tasks should be completed as an independent task. It also includes research tasks where you will be required to research and collect information on certain topics.

Ideally, this task should be completed within designated assessment time during learning sessions. Your trainer/assessor will discuss task schedule with you. Components of this task can be completed at different times. However, you will need to compile and organise all the information in order and submit for grading. If you have any difficulty in completing the tasks or need more clarification, discuss with your trainer/assessor at the earliest.

Complete the following tasks.

Part A

1. What does CAD stands for? Explain the term.

2. Outline some economic factors that may have contributed to the CAD. Support your answer with two examples.

3. The following figures refer to the balance of payments of a hypothetical country. All figures are in millions of dollars.

Components ($ millions) Goods credits   50

Goods debits                    70

Current transfers credits      10

Current transfers debit          5

Service credits                   15

Service debits                    10

Income credits                    5

Income debits                   -32

Capital transfers credits     20

Capital transfers debits      15

Required:

Calculate and prepare a structure of the balance of payments for the following:
(a) Balance of goods.
(b) Net service.
(c) Balance of goods and services.
(d) Net income.
(e) Net current transfer.
(f) Balance of payments on the current account.

Part B

Australia trades dollars with the United States, South Africa, Switzerland and the United Kingdom. In Year 1, the base year, the exchange rates for each country are, for one Australian dollar: United States dollar (USD) 0.90, South Africa Rand (ZAR) 0.40, Switzerland Francs (CHF) 0.70, and United Kingdom pounds (GBP) 0.80.

Australia spends $100 buying these currencies: United States dollar (USD) $40, South Africa Rand (ZAR) $20, Switzerland Francs (CHF) $15, and United Kingdom pounds (GBP) $25. There will be
36 USD, 8 ZAR, 10.5 CHF and 20 GBP in the basket.

In Year 2, exchange rates have changed, so that A$1 will now buy 0.80 USD, 0.40 ZAR, 0.75 CHF and 0.80 GB. Using Excel, prepare a calculation of a ‘trade-weighted index'.

1. What is Australia's trade-weighted index in Year 1?

2. What is Australia's trade-weighted index in Year 2?

Part C

Research questions: Research, collect and analyse information on the following topics.

1. List the duties and responsibilities of the Reserve Bank of Australia (RBA).

2. What are the top banking groups in Australia and how do they differ with the other banks?

3. Discuss the impact of the recent flood in Queensland on the financial sector

4. The corporate law and regulations in Australia; especially relevant to the financial markets

Each of these answers should be brief (up to one page each). However, size of the answer should not limit the rigour of research. It will be expected that you will draw upon a range of diverse views and opinions on the topics and provide your own viewpoints. Refer to an appropriate capital adequacy regulation and requirements where needed. Attach copies of relevant legislative instruments.

All external sources should be cited using the Harvard Referencing System.

Part D

Research and Analysis: Collect some published articles or reports that are relevant to the study of microeconomics. The study of microeconomics includes the following topics:

• Economic system

• Demand and supply

• Elasticity

• Market structures

• Production and trade

• General equilibrium

• Market failure.

Write 500 to 700 words in your reflective journal about your article research, addressing issues related to microeconomics. Refer to an apply appropriate capital adequacy regulation and requirements where needed.

In this part, you have to summarise the key concepts in your own words using other published sources as references. Identify current issues in relevant areas and write your views supported by a range of diverse opinions.

All external sources should be cited using the Harvard Referencing System.

Part E

Discuss the impact of the 2011 Japan earthquake on our economy. Examine the following areas and write a brief analysis on what impact the Japanese earthquake had on Australian economy in both short and long terms.

• Supply and demand
• Exchange rate
• International trade (import and export)
• Economic problem that we are facing
• Natural resource (what can we do to protect this?)

You will be using the macro and microeconomic theories of the market in your analysis. Also, research and provide an example of a financial modelling technique (e.g. credit scorecards, forecasting with regression and Markov methods) that economist can use in such scenario.

You may draw upon published articles and other public domain information including media report and analyses. However, straight copy-paste or excessive use of quotations should be avoided. It will be expected that you will produce an original work in your own words and understanding.

Assessment Task 3:

Assessment Task - Knowledge Test

Part A

Choose the correct answer from the following multiple choice questions.

1. Which of the following would normally be a characteristic of a monopoly?
(a) have high economies in size
(b) protected by consumers
(c) have controls over vital raw materials
(d) protected by a limited market which supports only one firm

A (a) and (c) only B (b) and (c) only C (a) and (b) only D (a), (b) and (d)

2. BHP Steel, ACI Glass, CSR Sugar Company and water supply are examples of: A monopolistic competition
B monopoly C oligopoly D polygram.

3. What is a restrictive trade practice?

A an action that restricts individuals and reduces the effectiveness of the price mechanism B an action that restricts buyers and increases the effectiveness of the price mechanism
C an action that restricts competition and reduces the ineffectiveness of the price mechanism D an action that restricts competition and reduces the effectiveness of the price mechanism

4. Which of the following industries in Australia are examples of oligopoly? A retail company and wholesale company
B motor vehicle manufacturers and Government Company C retail stores and petro refining company
D car manufacturing and detergent company

5. Which of the following is a characteristic of monopolistic competition? A form a large number of sellers of heterogeneous products
B graph forms an elastic supply curve
C market forms a small number of sellers
D demand curve more elastic and more responsive to price rises

6. Which of the following is not a characteristic of perfect competition? A many buyers and sellers
B product differentiation C hard to enter
D one seller

7. In economics, collusion is defined as:
A an agreement between a buyer and a seller.
B an understanding or agreement between firms
C relationships between firms and government agency D involvement between communities

8. Which of the following is not a main market form? A perfect competition
B monopoly C polygamy
D monopolistic competition

9. Which of the following is a characteristic of perfect competition? A restriction of trade
B limited skills
C products are heterogeneous D too many buyers and sellers

10. Which statement is incorrect?
A Informative advertising provides information about the product and its price. B A duopoly describes a market controlled by two or more firms.
C Oligopoly is the market form with a small number of firms.
D The entry of new firms to the industry would force down the profit.

11. One of the characteristics of perfect competition is that: A Products are standardised and are heterogeneous.
B buyers and sellers are selected. C products are homogeneous.
D controlled movement of prices.

12. In which type of market structure would you find a small number of firms?

A perfect competition
B monopolistic competition C monopoly
D oligopoly

13. Product differentiation means:
A the product of the competitor does not become a perfect substitute. B products are priced differently according to manufacture.
C sellers are not limited to selling one product.
D competitors should register an Australian business number.

14. Informative advertising provides information about: A the product, its size and the style.
B material, quality and the manufacturer C the supplier, controller and importer D the product, price and where to buy

15. The practice of a supplier directing resellers not to sell or advertise below a specified minimum price is called:
A exclusive dealing.
B resale price maintenance C misuse of market power D third-line forcing

16. The situation is which individuals or firms concentrates on one task, or produce a limited range of goods and services, is referred to as:
A barter
B multiplier C diversify
D specialisation

17. An economic system in which all land and capital are owned by the state is known as a: A planned system
B microeconomics system C unplanned system
D market system

18. Opportunity cost refers to:
A the prices paid to an opportunity shop
B wants that are given up in order to get something else C unwanted resources
D cost use to produce resources.

19. The economic problem is that:
A wants are unlimited and resources are unlimited. B wants are limited and resources are limited.
C wants are limited and resources are unlimited. D wants are unlimited and resources are limited.

20. In economics, capital refers to:
A the produced means of production.
B financial involvement in takeovers and mergers C funds borrowed from overseas. D money invested in shares.

21. Wants in economics is defined as: A limited and affordable
B human resources
C expensive and available D unlimited and recurring

22. In a modern market economy, Australia has a ‘mixed ‘economy because:
A an economic system in which both private enterprise and the government coexist. B the government gives concession to private businesses.
C consumers and businesses compete with each other. D the government makes decision for the business.

23. The four factors of production are: A land, building, enterprise, machinery B land, labour, capital, enterprise
C labour, liberal, national, capital D land, labour, money, resources

24. An economic system must answer four fundamental questions. Which of the following is not one of the fundamental questions?
A What to produce?
B How to produce?
C For whom is the output to be produced? D When to produce?

25. Which of the following is a public good? A Woolworths
B police protection C ocean
D rainforest

26. An economic system is the:
A interaction between governments and enterprise. B set of rules created by the government.
C approach which is used to organise the production and distribution of goods and services. D system that makes business profitable

27. Laptop, school bags and motor vehicle are all examples of: A public goods
B consumer goods C private goods
D economic goods

28. Which of the following is also known as a primitive or less-developed economy? A cultural economy
B economic system

C traditional economy D command economy

29. In economics, the questions What, How, How much and For whom to produce are answered mainly by:
A government B price
C enterprise D tradition

30. In economic, ‘market failure' occurs when:
A enterprise fails to make profit in their area of expertise. B all market prices are low.
C there is inefficient allocation goods and services required by the general community. D excessive of supply goods and services

31. Capital goods refers to goods:
A used to produce goods or services B satisfying wants directly.
C provided by the community.
D that are scarce relative to wants.

32. Consumer goods are goods that are:
A sold to final users, satisfying wants directly. B used to produce goods and services.
C used to satisfy wants indirectly. D provided by government.

33. Which is not a statement about the ‘production possibility frontier'?
A It is significant because it represents all possible output combinations the economy can choose from when it is operating at full capacity.
B It must be sometimes curved to reflect all the facts. C Points outside the curve are impossible to achieve.
D Points within the curve are considered obtainable but inefficient.

34. Which of the following is not a feature of a ‘market economy'? A competitive market
B price mechanism C relative scarcity D profit motive

35. In microeconomics, the factor of production ‘land' refers to is: A an empty area used to cultivate crops.
B huge farmland used for agriculture C resources provided by nature.
D resources own by the queen.

36. Which is not the main economic role of governments in a modified market economic system? A the redistribution of income
B the provision of certain goods and services not adequately provided by the market mechanism C the government recognises that markets are not perfectly competitive
D ensuring fair competition and helping ensure economic efficiency

37. The government's economic objectives are:
A high rates of employment, stable prices, economic growth and internal stability.
B high rates of unemployment, stable prices, economic growth and external stability. C high rates of employment, unstable prices, economic growth and external stability. D high rates of employment, stable prices, economic growth and external stability.

38. An economy that has a high rate of employment is vulnerable to inflationary pressures because: A high employment means employees can apply for an annual leave anytime.
B high employment is likely to lead to balance of payments problems.
C with high demand and labour scare, firms expand by reducing the wages of employees. D high employment means that the government can push to increase interest rates.

39. Three of the five government economic policy instruments are: A fiscal policy, structural policy, external policy
B drink-driving policy, bullying policy, discrimination policy
C multicultural policy, non-English speaking background policy, religious policy D school policy, housing policy, environmental policy

40. Other problems with implementing government economic policy are:
A changing priorities, human behaviour, and conflict between economic and other goals and between different groups
B constitutional and political limitations, accuracy of information, and migration
C external problems, out-of-date and conflicting information, changing economic environment D none of the above

Part B

Select the correct answer.

		True	False
1	Quotas involve a certain amount of goods being allowed into the country at the normal rate of tariff.	True	False
2	Protection is any government action which has the effect of discouraging exports, thereby allowing a greater market share to local market.	True	False
3	Subsidies/bounties are payments to local producers to reduce their costs or raise their income so they can sell a lower price and compete with imports.	True	False
4	Nominal rate of protection= [(post protection price -pre protection price)/pre protection price ] x 100	True	False
5	Tariffs are taxes on exports goods. They are also known as exports duties or custom duties.	True	False
6	Meat, wool and wheat are examples of rural products.	True	False
7	Health concessions are given to firms competing against imports.	True	False
8	The effective rate of protection shows how much effect the protection has on the protected firm's own business and profitability.	True	False
9	Quotas are restrictions on the quantity of goods that can be imported, giving locally made goods a bigger share of the domestic market.	True	False
10	Local content rules a rule concerning the content of manufactured goods which must contain a certain proportion of material which is locally produced and not imported.	True	False

Part C

Short-response question

Describe the main economic goals of modern governments. Include a discussion of possible clashes between these objectives.

Assessment criteria

The following assessment criteria will be used for marking this assessment task. Ensure that you have addressed all of the criteria in your work.

• Test completed as per the given instructions and conditions
• All the questions are attempted and answered
• Answers are consistent with the model answers
• Answers demonstrate the required breadth of knowledge for this unit