Loading subjects
33 exam-style questions with model answers, plus 50 quick multi-choice questions — every question on the site for this standard, grouped by the 11 pages of notes they come from.
Write a full answer before you reveal the model one — that comparison is where the marks come from. Every block links back to the notes that teach it.
Define inflation.
New Zealand's annual inflation rate falls from 5.6% one year to 2.9% the next.
Explain in detail whether this is disinflation or deflation, and explain what has happened to the purchasing power of money over the two years.
A commentator writes: "Inflation has fallen sharply this year, so households should finally be better off."
Discuss this statement. In your answer, compare and contrast what falling inflation does and does not do for households, and explain why deflation would not simply be an even better outcome.
Explain how inflation is measured in New Zealand.
Explain in detail why the Consumers Price Index is a weighted index.
A student says: "The CPI said inflation was 3% last year, so every New Zealand household's cost of living went up by 3%."
Discuss this statement. Compare and contrast the experience of two different types of New Zealand household, and explain what the CPI can and cannot tell us.
A worker receives a 2% increase in their nominal wage in a year when inflation is 5%.
Explain what has happened to their real wage.
Inflation in New Zealand is 6%. A bank offers a savings account paying 3.5% interest, and a fixed-rate mortgage at 6.9%.
Explain in detail the effect of this inflation rate on a saver and on a borrower.
Over one year, New Zealand's nominal GDP rises by 7% and the general price level rises by 6%. Over the same year, average nominal wages rise by 4%.
Compare and contrast what these figures tell us about the performance of the economy and about the position of the average worker, and explain which of the three figures is the least useful on its own.
State the formula for aggregate demand and explain which curve would shift, and in which direction, if New Zealand households significantly increased their saving.
A sharp rise in international shipping costs raises the cost of imported raw materials for New Zealand manufacturers.
Explain in detail the impact on New Zealand's price level and real GDP. Refer to the AS/AD model in your answer.
In the same year, the New Zealand government makes a large one-off payment to low-income households, and a drought sharply reduces agricultural output and raises food processing costs.
Compare and contrast the effect of these two events on New Zealand's price level and on real GDP. Refer to the AS/AD model in your answer, and give a reasoned judgement about which is likely to have the larger effect on the price level.
The Reserve Bank lowers the Official Cash Rate and retail interest rates fall.
Explain one reason why this could lead to demand-pull inflation.
New Zealand's major trading partners experience strong economic growth, and demand for New Zealand's exports rises sharply.
Explain in detail how this could cause demand-pull inflation in New Zealand. Refer to the AS/AD model in your answer.
Two events occur in the same year. The government increases spending on infrastructure by a large amount, and at the same time consumer confidence falls sharply after a series of job losses.
Compare and contrast the effect of these two events on New Zealand's price level and real GDP, and explain which is likely to have the greater effect. Refer to the AS/AD model in your answer.
New Zealand's minimum wage is increased significantly.
Explain the impact on the price level. Refer to the AS/AD model in your answer.
The New Zealand dollar depreciates sharply against the currencies of its major trading partners.
Explain in detail how this could cause cost-push inflation in New Zealand. Refer to the AS/AD model in your answer.
In one year, New Zealand experiences a sharp rise in wage costs across the economy, and in the same year world oil prices fall substantially.
Compare and contrast the impact of these two events on the price level, and explain which is likely to have the larger effect on New Zealand's inflation rate. Refer to the AS/AD model in your answer.
State the four components of the quantity theory of money and what each one measures.
Assume the velocity of circulation and real output remain constant.
Use the quantity theory of money to explain in detail the effect of a 3% decrease in the money supply on inflation.
Economists predict that New Zealand will enter a recession, with a significant decrease in real output over the next two years.
Use the quantity theory of money and the business cycle to explain how a recession may affect overall inflation. In your answer, include:
Name the four phases of the business cycle, and state which phase has the greatest inflationary pressure.
Explain in detail why the velocity of circulation is likely to decrease during a recession, and use the quantity theory of money to explain the effect on the price level.
An identical increase in government spending is announced in two different years: once when the economy is at the peak of the business cycle, and once when it is at the trough.
Compare and contrast the effect on the price level and on real GDP in each case, and explain which timing is better for New Zealand. Refer to the AS/AD model in your answer.
Explain whether a worker on the minimum wage would prefer a lower or a higher inflation rate.
Explain in detail one reason why a high inflation rate may cause income distribution in New Zealand to become more unequal.
New Zealand's annual inflation rate rises to 6%.
Compare and contrast the impact of this on savers and on borrowers in New Zealand, and on workers whose wages are set annually compared with superannuitants. Give a reasoned judgement about which of these four groups is worst affected.
Explain whether savers would prefer a lower or a higher inflation rate.
New Zealand's annual inflation rate is 4.7%. Annual inflation in New Zealand's major trading partners averages 2.5%.
Explain in detail the impact of this on New Zealand exporters.
New Zealand's annual inflation rate rises well above that of its major trading partners.
Compare and contrast the impact of this on New Zealand exporters and on New Zealand importers, and give a reasoned judgement about the overall effect on the New Zealand economy.
An economy experiences both a rise in consumer confidence and a fall in the world price of imported fuel.
State which curve each event shifts, and in which direction.
A large increase in government infrastructure spending occurs in the same year as a sharp rise in the cost of imported building materials.
Explain in detail the impact of each event on New Zealand's price level. Refer to the AS/AD model in your answer.
During one year, New Zealand experiences large-scale job losses across several industries, and in the same year petrol prices fall substantially.
Discuss whether the job losses or the fall in petrol prices will have the bigger effect on New Zealand's price level. Refer to the AS/AD model in your answer.