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21 exam-style questions with model answers, plus 27 quick multi-choice questions — every question on the site for this standard, grouped by the 7 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.
Name the four macro-economic goals of the New Zealand government, and state the indicator used to measure each.
An economy's annual real GDP growth falls from 3.5% to 0.6% over a year.
Explain in detail what this means for the goal of economic growth, and explain why it is incorrect to describe this as the economy shrinking.
The New Zealand government pursues four macro-economic goals.
Compare and contrast the goals of economic growth and price stability, explaining why pursuing one can make the other harder to achieve. Refer to the AD/AS model in your answer.
List the three leakages and the three injections in the circular flow model, and explain what happens to the economy when injections exceed leakages.
New Zealand signs a free trade agreement that removes tariffs on its exports in a major overseas market.
Using the circular flow model, explain in detail how this could affect New Zealand's economy.
A recession in New Zealand's major trading partners reduces demand for New Zealand exports.
Compare and contrast the impacts of this on the goals of a balanced current account and full employment. Refer to the circular flow model and the AD/AS model in your answer.
State the components of aggregate demand and explain what happens to real GDP and the price level when aggregate demand increases.
A sharp rise in world oil prices raises transport and energy costs for New Zealand firms.
Using the AD/AS model, explain in detail the impact on the goals of price stability and full employment.
The New Zealand government increases spending on infrastructure while, at the same time, a global slowdown reduces demand for New Zealand exports.
Using the AD/AS model, compare and contrast the impacts of these two influences on the goal of economic growth. Explain which is likely to have the greater impact.
The marginal propensity to save is 0.25 and savings are the only leakage. The government increases spending by $400 million.
Calculate the multiplier and the final change in real GDP.
An economy has MPS = 0.1, MPT = 0.2 and MPM = 0.2. A fall in world demand reduces export receipts by $800 million.
Calculate the final change in real GDP and explain in detail why the fall is larger than $800 million.
A government can stimulate the economy either by cutting income tax or by spending directly on infrastructure, using the same total amount of money.
Compare and contrast the effectiveness of these two fiscal policies in achieving the goal of economic growth. Refer to the circular flow model and the multiplier in your answer.
Explain how the Reserve Bank of New Zealand uses the Official Cash Rate to reduce inflation.
Explain in detail how a rise in the OCR affects inflation through both the spending channel and the exchange rate channel.
The RBNZ raises the OCR to bring inflation back within its target band.
Compare and contrast the effectiveness of this policy in achieving the goals of price stability and full employment. Refer to the AD/AS model and the foreign exchange model in your answer.
Explain what expansionary fiscal policy is and what it does to aggregate demand and to the government's budget.
New Zealand signs a free trade agreement that removes tariffs in both directions with a major trading partner.
Explain in detail the impact on both aggregate demand and aggregate supply, and on the goal of economic growth.
A government wants to achieve economic growth without breaching the RBNZ's inflation target.
Compare and contrast the effectiveness of expansionary fiscal policy and supply side policy in achieving this. Refer to the AD/AS model in your answer.
Explain what a depreciation of the New Zealand dollar means and its effect on the price of exports and imports.
The RBNZ raises the OCR.
Using the foreign exchange model, explain in detail how this affects the exchange rate, and then explain the effect on inflation.
The New Zealand dollar depreciates significantly.
Compare and contrast the impacts of this on the goals of price stability and a balanced current account. Refer to the foreign exchange model and the AD/AS model in your answer.