Aggregate Supply policies    Goals of AS policies  Productivity v efficiency  Productivity v competitiveness  The impetus for AS policies  BP supply side initiatives  Industry policy  Microeconomic reforms  Labour market reforms  Benefits of LM flexibility  Trade liberalisation  MRPs and  internal stability  MRPs and  external stability  MRPs and equity  MRPs and living standards

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 Course notes quick navigation

1 Introductory concepts 2  Market mechanism  3 Elasticities  4 Market structures 5  Market failures  6  Macro economic activity/eco growth  7 Inflation 8  Employment & unemployment  9  External Stability  10  Income distribution 11.Factors affecting economy  12  Fiscal/Budgetary policy  13  Monetary Policy   14 Aggregate Supply Policies  15 The Policy Mix

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MRPs and External Stability

Microeconomic reforms should work to improve the Balance on Goods and Services (BOGS), and reduce pressure on both the CAD and NFD (or net foreign liabilities more generally).  This is because higher efficiency/productivity levels that result from microeconomic reforms will eventually improve the international competitiveness of Australia's tradables sector, increasing both net exports (X -M) and any BOGS surplus.  As the BOGS is one important component of the Current Account, any improvement in the BOGS should reduce the CAD.  As the CAD falls, it means that the gap between national spending and income has reduced, which results in less demand for overseas debt or equity to finance the shortfall.  This exerts downward pressure on NFD (or NFE).

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