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Inflation · Part 1 of 3
9 exam-style questions with model answers, plus 14 quick multi-choice questions — every question on this part of the standard, grouped by the 3 pages of notes they come from.
Write a full answer before you reveal the model one. That comparison is where the learning happens.
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.