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Government policies · Part 1 of 2
12 exam-style questions with model answers, plus 18 quick multi-choice questions — every question on this part of the standard, grouped by the 4 pages of notes they come from.
Write a full answer before you reveal the model one. That comparison is where the learning happens.
Name the four families of government policy the standard allows, and name the New Zealand institution responsible for each.
Explain in detail the difference between demand-side and supply-side policies, and why choosing the wrong one wastes the policy.
New Zealand faces high inflation and rising unemployment at the same time.
Compare and contrast the suitability of monetary policy and fiscal policy for this situation, and give a reasoned judgement about what the government and the RBNZ should do.
State the RBNZ's inflation objective and explain how raising the OCR reduces inflation.
Explain in detail how monetary policy affects inflation through both the spending channel and the exchange rate channel.
The RBNZ raises the OCR sharply to bring inflation back to its target band.
Explain the direct impact on inflation, and the flow-on effects on economic growth and on international trade. Refer to economic models throughout.
Explain how expansionary fiscal policy reduces unemployment. Refer to an economic model in your answer.
Explain in detail the difference between demand-side and supply-side fiscal policy, using the AS/AD model and the PPF.
The government increases spending substantially to reduce unemployment during a downturn.
Explain the direct impact on unemployment and the flow-on effects on inflation and on the balance on goods and services. Refer to economic models throughout, and explain how the design of the spending changes the size of the negative flow-ons.
Explain how a tariff protects a domestic industry, and name one reason New Zealand generally avoids protection.
Explain in detail how a regulation that raises firms' compliance costs affects the economy, and explain the case for and against removing it. Refer to an economic model.
New Zealand signs a major free trade agreement that removes tariffs on its agricultural exports to a large market.
Explain the direct impact on international trade, and the flow-on effects on economic growth and on inflation. Refer to economic models throughout.