Category: Economics

➤ Why are healthcare and water not considered basic rights in strict free-market theory?
Strict free-market theory treats goods and services as outcomes of voluntary exchange. Healthcare and water are often viewed as collective needs or public goods and may require regulation or redistribution. Free-market frameworks do not inherently guarantee universal access to these services without state intervention or social policy.

➤ How do you calculate the economic growth rate?
Calculate growth as the percent change in real GDP between two periods: ((Real GDP_t − Real GDP_{t−1}) / Real GDP_{t−1}) × 100. For small changes, log differences approximate growth. Quarterly rates are often annualized by compounding to provide a yearly equivalent for comparison.

According to the labor demand and supply model, unemployment results if the minimum wageis set equal to the equilibrium wage.is set below the equilibrium wage.is set above the equilibrium wage.

➤ How do exchange rate and terms of trade interact to shape the current account outcome?
Rising commodity prices improve terms of trade and attract capital, which tends to appreciate the Australian dollar. A stronger AUD reduces import prices and can curb export volumes. If the price effect remains larger than the demand effect, the net impact still raises the nominal trade balance and strengthens the current account.

➤ How does the financial account differ from the current account?
The current account logs trade in goods and services, primary income, and transfers. The financial account records capital flows and changes in financial claims and liabilities. In practice, a current account deficit must be financed by net inflows recorded in the financial account or by reserve changes to balance the payments.

2. Why does private demand differ from social benefit in positive externalities?
Private demand measures benefits captured by buying consumers only. Social benefit adds private benefit plus external benefits that spill over to others. Because third-party gains are not included in private decisions, private demand lies below the social benefit curve, which leads to underconsumption relative to the socially optimal level.