ASSESSMENT EXEMPLAR WITH GUIDE FOR INSTRUCTORS:
TERMS OF TRADE
Topic:
☐Microeconomics
☒Macroeconomics
☐Statistics/Econometrics
Learning domains:
☒Knowledge
☒Application
☐Data analysis
☒Communication
☒Reflection
Core concepts:
Terms of trade; exchange rate; national
income; living standards
Type(s) of task (can be more than one)
☒Constructed response given stimulus material
(clip/narrative/etc.)
☐Constructed response with no stimulus material
☐Quantitative analysis
☐Independent data sourcing
☒Independent research (not data sourcing)
☒Written presentation
☐Oral presentation
☐Group collaboration
☐Use of nominated maths/stats software (specify):
☐Use of other technology (specify):
☐Other (specify):
________________________________________
This assessment item is about the importance of the macroeconomic performance of Australia’s
major trading partners for Australia’s macroeconomic performance. The item would be suitable for an
undergraduate course in either macroeconomics (1st or 2nd year) or international economics. An
extended version for Masters level is also provided. The data is from the Reserve Bank’s Quarterly
Statement on Monetary Policy, the latest version of which should be used to keep the analysis
current. The item is designed to assess students understanding of the effects of economic growth in
China and Australia’s terms of trade, and in turn Australia’s national income, exchange rate,
employment growth and living standards. Students should be able to explain the economic ideas and
principles in a clear and coherent way which includes, at Masters level at least, to a range of
audiences including non-specialists.
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Bachelors level task
Consider the following two charts and answer the questions that follow:
Source for charts: Reserve Bank of Australia, Statement on Monetary Policy, Feb 2015
2
Questions:
(i)
Imagine you are talking with a relative or friend who has no training in economics. In 200
words or fewer, explain to him/her the links between economic activity in China and Australia’s terms
of trade. Avoid using economic jargon where possible. (200 words) [CB1, KB1, AB2]
Now suppose you are an economist for a stockbroking firm and you are preparing a brief for clients
on the importance of China for Australia’s macroeconomic performance.
(ii)
Explain the relative importance of the components of China’s GDP growth. Is this likely to
change over the next two or three decades? Why? (200 words) [KB1, AB2, RB2]
(iii)
Consider the graph of Australia’s terms of trade. Critically evaluate the following statement,
identifying any important assumptions or value judgements in your analysis: “The sharp rise in
Australia’s terms of trade between 2001 and 2010 was unsustainable. The collapse was inevitable
and the Government should have planned for the budgetary consequences.” (300 words) [KB1, AB2,
RB1]
(iv)
Over the past two decades, explain in general terms how Australia’s terms of trade affect has
affected its:
 national income
 exchange rate
 employment
 living standards
(300 words) [KB1, AB2, RB2]
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Masters level task
The item could also be adapted as an exam question of, say, 30 minutes in length, by shortening the
questions and/or dropping one or more questions.
This Bachelor level item is presented here as a 1000 word assignment. It easily could be lengthened
to a 2000 word assignment by, for example, adding a graph of the exchange rate and a graph of
Australia’s GNP and asking for reference to these graphs in answering the questions.
Masters level assignment (1500 words)
Masters students would be expected to demonstrate a more advanced evaluation of:
 the sustainability of the rise in Australia’s terms of trade in the 2000’s decade, and an
understanding of different interpretations of what is meant by sustainability of an economic
variable;
 whether the fall in the terms of trade should have been foreseen by the Government and, if so,
whether the Government should have built up larger surpluses in anticipation of the significant
fall in company tax revenues from the decline in commodity prices.
 the macroeconomic effects of Australia’s terms of trade using diagrammatic analysis.
The Masters level assignment has been extended to 1500 words to allow further depth of analysis.
Masters level questions:
Referring to the two charts above:
(i)
Imagine you are talking with a relative or friend who has no training in economics. In 200
words or fewer, explain to him/her the links between economic activity in China and Australia’s terms
of trade. Avoid using economic jargon where possible. (200 words) [CM1, KM1, AM2]
Now suppose you are an economist for a stockbroking firm and you are preparing a brief for clients
on the importance of China for Australia’s macroeconomic performance.
(ii)
Explain the relative importance of the components of China’s GDP growth. Is this likely to
change over the next two or three decades? Why? (400 words) [KM1, AM2, RM2]
(iii)
Consider the graph of Australia’s terms of trade. Critically evaluate the following statement:
“The sharp rise in Australia’s terms of trade between 2001 and 2010 was unsustainable. The
collapse was inevitable and the Government should have planned for the budgetary consequences.”
Your answer should identifying any important assumptions or value judgements, and briefly define
what is meant by “unsustainable” in this context:(400 words) [KM1, AM2, RM1]
(iv)
Explain, using diagrammatic analysis where appropriate, how Australia’s terms of trade affect
has affected its:
 national income
 exchange rate
 employment
 living standards
(500 words) [KM1, AM2, RM2]
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Advice to assessors
The charts should be updated using the RBA’s quarterly Statement on Monetary Policy.
Re Q (i), advice should be given to students about the use of jargon and the style of communication
to non-specialist audiences.
Re Q(iii), advice should be provided about the meaning of “assumptions” and “value judgements”. For
example, assumptions and value judgements are required in evaluating whether a terms of trade path
is “sustainable”. This requires an explanation of what is a “sustainable” path of an economic variable.
Students could comment, for example, that in a narrow sense the terms of trade might be regarded
as sustainable if it can be maintained at its current level for a very long period of time. Or perhaps
fluctuate around its current level? Students should identify any assumptions that this requires about
the state of the world economy? Students could take a broader interpretation of a sustainable path for
the terms of trade, for example in terms of the ability to maintain living standards of future
generations. The latter idea is based on value judgements about intergenerational equity.
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Learning
domain
Learning outcomes
Bachelor Degree
Masters Degree
Knowledge
KB1 Bachelor graduates will be able to
identify, coherently explain and synthesise
core economic concepts
KM1 Masters graduates will be able to
identify, coherently explain and synthesise
core and advanced economic concepts,
including recent developments in the
discipline
Application
Bachelor graduates will be able to:
Masters graduates will be able to:
AB1• frame problems in terms of core
economic concepts and principles
AM1• frame and critically analyse problems in
terms of core and advanced economic
concepts and principles
AB2• apply economic reasoning and
analytical skills, in order to make informed
judgments and decisions
AM2• apply advanced economic reasoning
and analytical skills, including quantitative
techniques where appropriate, in order to
make informed judgments and decisions
AM3• plan and execute a research-based
project
Data analysis
Bachelor graduates will be:
Masters graduates will be able to:
DB1• able to use economic data to address
typical problems faced by economists
DM1• select and apply an appropriate
empirical method to address typical problems
faced by economists
DB2• aware of, and able to implement,
basic empirical techniques and interpret the
results
DM2• critically evaluate the results
Communication CB1 Bachelor graduates will be able to
present a clear and coherent exposition of
economic knowledge, ideas and empirical
evidence both orally and in writing,
individually or in collaborative contexts
CM1 Masters graduates will be able to
communicate complex ideas clearly and
coherently, in written form and interactive oral
form to expert and non-expert audiences,
individually or in collaborative contexts
Reflection
Bachelor graduates will be able to reflect
on:
Masters graduates will be able to reflect on
and evaluate:
RB1• the nature and implications of
assumptions and value judgments in
economic analysis and policy
RM1• the nature and implications of
assumptions and value judgments in
economic analysis and policy
RB2• interactions between economic
thinking and economic events, both
historical and contemporary
RM2• interactions between economic thinking
and economic events, both historical and
contemporary
RB3• the responsibilities of economists and
their role in society
RM3• the responsibilities of economists and
their role in society
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