Economics
Unit of Work
VCE Economics Unit 2, Area of Study 1 - Australia’s External Relationships
Rationale
The focus of this unit of work relates to Australia’s external relationships and the various economic issues surrounding these
relationships. This unit contains a selection of teaching and learning activities based around Unit 2 – Area of study 1 within
the VCE Economics study design guide. It is important that students have an awareness of how the Australian economy
interacts with the world economy so that they can become more informed global citizens. Increased economic involvement
with other countries for the purposes of trade and investment has enabled Australia’s citizens to obtain a higher standard of
living and has made the Australian economy more prosperous. Students need to be aware of these vital links and the way in
which they can impact upon their daily lives.
Aim
This unit of work is designed to assist students in their understanding of the Australian economy in a global context. In
particular, it will highlight the following areas of study:

Issues relating to international trade and financial transactions between countries

Australia’s international trade and investment flows via the balance of payments accounts

Foreign currency markets and the Australian dollar

Australia’s foreign debt and overseas borrowing
Outcomes
On completion of this unit of work the student should be able to explain how the Australian economy interacts with the
economies of other countries. Specifically, the student should be able to demonstrate the following attributes.
Key Knowledge






The
The
The
The
The
The
benefits of trade
composition and pattern of trade and investment flows
structure of the Balance of Payments account
structure of the Current account and recent trends
nature, size and consequences of foreign debt
influences on Australia’s foreign exchange rate and recent trends
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Economics
Unit of Work
Key Skills




Use a variety of sources including print, media & the internet to access economic information
Interpretation, analysis and presentation of economic data
Apply economic reasoning to solve problems and evaluate economic arguments
Work cooperatively in groups to exchange ideas and investigate economic issues
Associated Values



Understanding and tolerance of other cultures
Understanding the value of prudential behaviour (in relation to the consequences of excessive debt)
Materialism and impulse consumption (in relation to excessive demand for imported consumable goods)
Key Concepts
Free trade
Comparative advantage
Balance of Payments
Capital flows
Trade weighted index
Gross foreign debt
Protectionism
Infant industry
Current Account Deficit
Foreign exchange rates
Appreciation
Bi-lateral agreements
Tariffs, Quotas & Subsidies
Specialisation
Exports
Floating exchange rate
Depreciation
Multi-lateral agreements
Trade liberalisation
Economies of scale
Imports
Fixed exchange rate
Net foreign debt
External stability
Unit Overview
1.
2.
3.
4.
5.
6.
7.
8.
Intro & glossary game.
Danger - exploding myths ahead.
What’s the story morning glory?
He who has the advantage wins.
What’s news?
The big B.O.P.A (Balance of Payments account).
How sad is our CAD?
To invest or not to invest, that is the question.
2
9. Sailing the seas of debt.
10. Commanding Heights (part 1).
11. Commanding Heights (part 2).
12. FX Web quest.
13. Newton’s Law
14. Swings & roundabouts.
15. FX Trading Game.
Economics
Unit of Work
Resources
Textbooks
Economics down under (book one) - VCE Economics Units 1 & 2
Chapter 8 – Australia’s external relationships
Richard Morris
Exporting for the future – Resources for Years 11 & 12
Derigo, Stanton, Wharton & Forsyth
Checkpoints 2004/2005 – VCE Economics
Nina de Garis
Chapter 9 – External Stability
Newspapers and periodicals
The Age, www.theage.com.au
The Herald Sun, www.heraldsun.news.com.au
The Australian Financial Review, www.afr.com.au
The Economist, www.economist.com
RBA Monthly Bulletins
Media
Commanding Heights: The new rules of the game.
Willam Cran – DVD/Videorecording
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Economics
Unit of Work
Internet
Australian Bureau of Statistics, www.abs.gov.au
Reserve Bank of Australia, www.rba.gov.au
Austrade, www.austrade.gov.au
Department of Foreign Affairs and Trade, www.dfat.gov.au
Mr Wood, www.mrwood.com.au
Wikipedia, www.wikipedia.org
VCTA, www.vcta.asn.au
World Trade Organisation, www.wto.org
Oanda Online FX Game, www.oanda.com
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Economics
Unit of Work
Main Content
Lesson
Intro &
glossary
game.
Teaching and Learning Activities
Assessment Tasks
Resources
Read Economics down under - Chapter 8
Introduction p.215-216.
Contributions to
brainstorm activity
Economics down under
Richard Morris
Ask students to brainstorm examples of trade
between countries that they are aware of and write
these on the board. These examples could include
physical goods exported & imported or services such
as tourism, education, entertainment,
transportation, communication, etc.
Satisfactory completion
of glossary game
handout
Glossary Game
Handout – adapted
from terms and
definitions found in
Exporting for the future
Derigo et al.
(Appendix 1)
Contributions to the
DFAT activity
Exploding the myths
DFAT
Organise class into groups. Hand out glossary game
for students to match the terms with their
definitions. The focus of this game is to familiarise
students with the terms used throughout this unit of
work. The completed handout can then act as a
glossary for them to reference throughout the
course.
Danger –
Group post box activity based on the DFAT
exploding
‘Exploding the myths’ publication whereby students
myths ahead. register their opinions regarding trade related
statements and then investigate the validity of these
statements based on the DFAT statistics.
A full explanation of this activity is outlined on page
39 of the VCAA Economics study design guide 20042007.
Place a piece of paper labelled ‘Free Trade’ and
‘Protectionism’ at opposite ends of the room and ask
students to locate themselves along this spectrum
according to which viewpoint they prefer based on
the information discovered from the DFAT activity.
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Economics
Unit of Work
Lesson
Teaching and Learning Activities
Assessment Tasks
Resources
What’s the
story
morning
glory?
Read ‘wake up in the morning’ story and ask
students to underline the global links. Give students
the second version of the story to show the
interconnectedness of simple daily events and the
benefits we enjoy from international trade.
Divide class into 8 groups. Assign each group a
benefit from freer trade taken from Economics down
under - Chapter 8 p. 216-217. Ask each group to
summarise their benefit, in their own words, and
present their summary to the class.
Ask students to read through the disadvantages of
freer trade from Economics down under - Chapter 8
p. 217-218 and summarise these in their own
words.
Homework out of text
Economics down under
Q.1 C, D & E p.246
Economics down under
Richard Morris
He who has
the
advantage
wins.
Use Activity 3 from Exporting for the future p.38 to
reinforce the idea of absolute advantage. Read
pages 38 & 39 on absolute and comparative
advantage from Exporting for the future. Organise
students into pairs to answer questions 1 & 4 from
Exporting for the future – Activity 4 p.40.
Ask students to contribute their answers to the class
for discussion.
Homework out of text
Economics down under
Q.1 A & B p.246
6
Contribution to the
summary of freer trade
benefits
Contribution and
answers to Activity 3
Answers to Activity 4
‘Wake up in the
morning’
Global Ed
(Appendix 2)
Exporting for the future
Derigo et al.
Economics down under
Richard Morris
Economics
Unit of Work
Lesson
Teaching and Learning Activities
Assessment Tasks
Resources
What’s news? Hand out Herald Sun cartoon from 15-7-05. Ask
students to analyse cartoon in order to identify the
economic concept being portrayed, symbolisms,
distortions, the cartoonist’s message and their own
reaction. Ask for contributions from students on
their findings.
Present students with ‘free trade label’ article from
The Age 20-07-05. Arrange students in pairs to
identify the economic issue being discussed,
statements of fact, statements of opinion, biases
present and their reaction to the article. Ask
students to work in groups to prepare a concept
map outlining the main ideas and links present in
the article. Allow students time for a brief
presentation of their concept map to class.
Contribution to cartoon
discussion
Herald Sun cartoon
(Appendix 3)
Satisfactory completion
of concept map on the
Age article
‘No turning away from
free-trade label’ article
from The Age
(Appendix 4)
The big
B.O.P.A.
Homework out of text
Economics down under
Q.2 A, C & D p.246
Economics down under
Richard Morris
Read Economics down under - p.218-221 on
measuring Australia’s trade and capital flows using
the BOP account. Ask students to copy figure 8.2 of
the structure of the BOP account on page 219 into
their notebooks.
Give students the Balance of payments cloze activity
to complete in pairs. Upon completion have students
contribute answers to class.
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Satisfactory completion
of BOP cloze activity
Balance of payments
cloze activity sourced
from VCTA website.
Balance of payments
cloze activity
(solutions)
Economics
Unit of Work
Lesson
Teaching and Learning Activities
Assessment Tasks
Resources
How sad is
our CAD?
Read Economics down under - p.221-222 on the
recent trends in Australia’s Current account deficit
and its causes.
Give students the Current account handout from
Exporting for the future p.50. Ask students to
answer questions 1, 2 & 3 in pairs and submit their
answers to class upon completion.
Read Economics down under - p.223 on the trends
in the composition and direction of Australia’s trade.
Ask students to answer question 4 from Economics
down under - p.246 and contribute their answers to
class upon completion.
Homework out of text
Economics down under
Q.3 A, B & F p.246
Exporting for the future
Derigo et al.
Read Economics down under - p.224 -226 on the
trends in Australia’s international capital flows and
their causes. Place a piece of paper labelled ‘Free
Trade’ and ‘Protectionism’ at opposite ends of the
room and ask students to locate themselves along
this spectrum according to which viewpoint they
prefer (as done in Lesson 2). See if any students
have altered their viewpoint in light of what they
have learnt so far. (If so as them why.)
Divide the class into two groups. Stage a mini
debate whereby the students in favour of free trade
are required to argue the case for protectionism and
the students in favour of protectionism have to
argue in favour of free trade. Use question 1 from
the Team Debate section of Economics down under p.250
Contribution to the
mini debate
To invest or
not to invest,
that is the
question.
8
Satisfactory completion
of the Current account
handout and
contribution to the
class discussion.
Economics down under
Richard Morris
Economics down under
Richard Morris
Economics
Unit of Work
Lesson
Sailing the
seas of debt.
Commanding
Heights 1.
Commanding
Heights 2.
Teaching and Learning Activities
Assessment Tasks
Resources
Read Economics down under - p.229-230 on
Australia’s foreign debt.
Give students the foreign debt handout to complete
in pairs. Ask students to contribute their answers to
class upon completion.
Homework out of text
Economics down under
Q.7 A & B p.248
Economics down under
Richard Morris
View a segment of the Commanding Heights video
which covers issues surrounding:

NAFTA

USA trade union opposition to free trade

Mexican benefits arising from NAFTA

USA promotion of free trade and open markets
by the Clinton administration

Increased investment/loans to emerging markets

Mexican social unrest causing a currency slide
and investor panic spreading to other economies
View remaining segment of the Commanding
Heights video which covers issues surrounding:

IMF bailout of emerging market debt

Spread of crisis to Thailand, Malaysia, Indonesia,
South Korea, Russia and Brazil

Impact of investor panic on these countries
foreign currency value, economic stability and
their citizens welfare
At the conclusion of the video ask students to work
in groups to prepare a short description outlining the
main points of the documentary. Ask each group to
present their summary to the class.
9
Foreign debt handout
Adapted from VCTA
website.
Commanding Heights:
The new rules of the
game.
Willam Cran –
DVD/Videorecording
(Allow approx 70 mins
for the first segment of
the video)
Satisfactory completion
of summary.
Commanding Heights:
The new rules of the
game.
Willam Cran –
DVD/Videorecording
(Allow approx 70 mins
for the second segment
of the video)
Economics
Unit of Work
Lesson
FX web
quest.
Newton’s
law.
Teaching and Learning Activities
Assessment Tasks
This activity requires Internet access. Give students
FX web quest handout. Students are required to
submit handout to teacher for marking.
This web quest serves as an introduction to foreign
exchange rates. It covers areas including:

Exchange rates & FX markets

Exchange rate regimes

How the A$ is expressed in terms of other
nations currencies

The Trade Weighted Index (TWI)

Recent trends in the A$ & the TWI

The TWI weightings and their correlation to
Australia’s export destinations and import
sources
Submission of handout
Read Economics down under - p.226-227 on
Australia’s exchange rate.
Read Exporting for the future – p.63 on changes in
the exchange rate.
Ask students to complete questions 1, 2, 4 & 6 from
Activity 16 from Exporting for the future on page
63-64.
Further exchange rate questions are available from
Activity 7 on pages 102-103 of the Exporting for the
future text, if required.
Homework out of text
Economics down under
Q.6 A, B, C, E, F, G &
H p.248
10
Resources
FX web quest handout
Internet access
Exporting for the future
Derigo et al.
Economics down under
Richard Morris
Economics
Unit of Work
Lesson
Swings &
roundabouts
FX Trading
Game
Teaching and Learning Activities
Assessment Tasks
Resources
Ask students to work in pairs creating a list of
factors that influence the demand and supply of
foreign exchange. Ask for contributions to the board.
Ask students to complete Activity 14 from Exporting
for the future – p. 61.
Organise students into 6 groups. Hand each group
one of the following scenarios:
1. An increase in exports
2. A decrease in exports
3. An increase in imports
4. A decrease in imports
5. Australian interest rates higher than the rest
of the world
6. Australian interest rates lower than the rest
of the world
Ask each group to investigate the likely impact on
the value of the A$, given their scenario, and
present their findings to the class using the
demand/supply diagram to explain their answer.
Divide class into groups/teams.
Explain the rules of the FX Trading Game and
provide an example of what is required using the
first power point slide scenario.
The FX Trading Game is designed to give students
the opportunity to role play as currency investors
using their economic knowledge and skills to help
predict future movements in the A$ based on a
specific economic scenario. Teams are in
competition to maximise their investment returns
over a number of trading rounds featuring various
scenarios.
Satisfactory completion
of Activity 14
Exporting for the future
Derigo et al.
11
Contribution to group
presentation
Contribution to the FX
Trading Game
Investing chips
(different pasta
shapes, dried beans,
play money, etc)
Investment board
containing area for ‘A$
appreciation’, ‘A$
depreciation’ and ‘No
impact on A$’
FX Game power point
file
Economics
Unit of Work
Appendix 1 Glossary Game
Match the following terms to the definitions listed below:
Absolute advantage
Balance of Payments
Balance of trade
Bi-lateral agreements
Comparative advantage
Current Account Deficit Exchange rate
Exports
Floating exchange rates Foreign exchange
Free trade
Globalisation
Imports
Multi-lateral agreements Opportunity cost
Protectionism
Quotas
Specialisation
Subsidy
Tariff
Trade
Trade barriers
World Trade Organisation (WTO)
Trade liberalisation
___________________________________________________________________________________________________
1. An import tax designed to protect locally produced goods and services from competition by overseas goods and
services.
2. Trade agreements between multiple countries (i.e. between more than two countries).
3. The cost of the next best alternative given up to have the final choice.
4. Various ways the production of a country can be protected from competition by imports.
5. When a country has a lower cost in production of a product than another.
6. The price of one nation’s currency when it is swapped for another
7. A summary of all economic transactions between Australia and the rest of the world for a given year.
8. A system whereby market demand and supply determines the value of a nation’s currency.
9. The absence of trade barriers, or restrictions on foreign trade.
10. Goods and services bought from a seller overseas.
11. When the value of goods and services imported is greater than that which is exported.
12. The process of increasing global inter-dependence between nations.
13. The ability to produce more goods using fewer resources.
14. The difference between the import and export of goods by a country.
15. The sale or purchase of foreign currencies.
16. Goods and services sold to foreign buyers.
17. A payment made (usually from a government) to help a producer keep prices low or stay in business.
18. Limits placed on the amount of a product to be imported annually.
19. An international body that deals with the rules regarding trade between nations.
20. The process of removing barriers to trade and moving towards free trade.
21. A trade agreement between two countries.
22. The various ways a country can restrict or limit trade such as tariffs, quotas, subsidies and quarantine restrictions.
23. Producing a narrower range of goods and services in order to become more efficient at this production.
24. International selling and buying of goods and services and making investment in foreign countries.
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Appendix 2 Wake up in the morning
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Economics
Unit of Work
Appendix 2 Wake up in the morning 2
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Unit of Work
Appendix 3 Herald Sun Cartoon
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Appendix 4 The Age article – No turning away from free trade label
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