1111111111111111111 , NZ~A · ... and intervening in the foreign exchange market, so that the exchange rate is ... illustrate the influence that an exchange rate

L 91403

_j

1111111111111111111 ,_ NZ~A NEW ZEALAND Q UALIFICATIONS AUTHORITY MANA TOHU MATAURANGA 0 AOTEAROA

Level 3 Economics, 2013

SUPERVISOR'S USE ONLY

91403 Demonstrate understanding of macro-economic influences on the New Zealand economy

Achievement

Demonstrate understanding of macro-economic influences on the New Zealand economy.

9.30 am Monday 18 November 2013 Credits: Six

Achievement with Merit Achievement with Excellence

Demonstrate in-depth understanding of Demonstrate comprehensive macro-economic influences on the New understanding of macro-economic Zealand economy. influences on the New Zealand

economy.

Check that the National Student Number (NSN) on your admission slip is the same as the number at the top of this page.

You should attempt ALL the questions in this booklet.

If you need more space for any answer, use the page(s) provided at the back of this booklet and clearly number the question.

Check that this booklet has pages 2-12 in the correct order and that none of these pages is blank.

YOU MUST HAND THIS BOOKLET TO THE SUPERVISOR AT THE END OF THE EXAMINATION.

© New Zealand Qualifications Authority, 2013. All rights reserved.

Low Achievement

TOTAL 9 ASSESSOR'S USE ONLY

No part of this publication may be reproduced by any means without the prior permission of the New Zealand Qualifications Authority.

2

You are advised to spend one hour answering the questions in this booklet.

QUESTION ONE: THE INFLUENCE OF TRADE POLICIES ON THE NEW ZEALAND ECONOMY

New Zealand records big December trade surplus

In the December 2012 quarter, New Zealand recorded its biggest December trade surplus since 1991, as imports- particularly of aircraft- fell more sharply than exports.

The trade surplus was $486 million in December, equal to 12% of exports- roughly 10 times the average surplus of $49m for December in the previous five years, Statistics New Zealand said. Source (adapted): www.3news.eo.nz/NZ-records-big-December-trade-surplus/tabid/421/article!D/284802/ Default.aspx

Government policies designed to encourage a balanced current account could include signing free-trade agreements, and intervening in the foreign exchange market, so that the exchange rate is favourable to a trade surplus.

These policies will also affect employment in the New Zealand economy.

Graph One - Foreign exchange policy

Price level (PL)

(a) (i) On Graph One above, illustrate the influence that an exchange rate favourable to a trade surplus would have on the macro-economy.

In your answer:

label the curves

label any curve shifts

identify the equilibrium points

Economics 91403,2013

ASSESSO.J USE ONLY I

SSOR'~ ONL'(!

3

(ii) Explain the impact of an exchange rate favourable to a trade surplus on employment, by referring to the changes you made to Graph One.

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j Question One (b) is on page 4 ~

Economics 91403, 2013

ASSESSOR'S USE ONLY,

4

The government has macro-economic goals of a balanced current account, as well as full employment.

Graph Two- Free trade agreements Price level

(PL) I; -:"'i

t\Yt Income, employment, output (Y)

(b) Compare and contrast the effectiveness of signing free-trade agreements on the macroeconomic goals of a balanced current account AND full employment.

In your answer:

make changes to Graph Two, above, to illustrate the influence that free trade agreements would have on the macro-economy. Label curves and identify equilibrium points

• refer to changes in Graph Two

explain how free trade agreements can lead to a balanced current account

explain how free trade agreements can lead to full employment

explain why free trade agreements could be more effective at achieving a balanced current account than full employment.

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6

QUESTION TWO: THE INFLUENCE OF GOVERNMENT POLICIES ON GROWTH AND INFLATION

In recent years suggestions for government policies to stimulate economic growth, while maintaining price stability in the New Zealand economy have included making Research and Development (R&D) attractive to business, removing regulations to improve productivity and investment, and reducing government spending.

Source (adapted): www.scoop.co.nz/stories/P01011/S00043/nz-needs-world-leading-pro-growth-policies.htm

Complete (a) to (c) to compare and contrast the influence that different government policies have on economic growth and inflation.

Graph Three-Removing regulations to improve productivi-;;ty:,__ ___

Price level (PL)

Income, employment, output (Y)

(a) (i) On Graph Three above illustrate the influence that removing regulations to improve productivity has on the macro-economy.

In your answer:

label the curves

• label any curve shifts

identify the new equilibrium.

(ii) Explain the changes you made to Graph Three.


Price level (PL)

7

Graph FourReducing government spending

I

: I f'<;D '

\',_ y, '\\ Income, employment, output (Y)

(b) (i) On Graph Four, illustrate the influence that reducing government spending has on the macro-economy.

In your answer:

• label the curves label any curve shifts identify the new equilibrium.

(ii) Explain the changes you made to Graph Four.

ASSESSOR'S USE ONLY

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8

The government's task of managing the economy is made difficult by the challenge of achieving both economic growth along with maintaining price stability.

(c) Compare and contrast the effectiveness on achieving economic growth and maintaining price stability of the two suggested policies of removing regulations to improve productivity and reducing government spending.

In your answer:

explain the effect of encouraging productivity on both economic growth and price stability

• explain the effect of reducing government spending on both economic growth and price stability

• explain which policy is more effective in encouraging economic growth and maintaining price stability

integrate changes to Graphs Three and Four .

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.A If '

9

QUESTION THREE: MACRO-ECONOMIC INFLUENCES

NZ employment growth and real GOP growth 6.0

* ..c: 2.0

~ \!) 0.0

-2.0

-4.0 --Sep. 2000

Sep. 2002

Sep. 2004

Sep. 2006

Sep. 2008

.,.~""" HLFS employment growth .....,.. Real GDP growth

Sep. 2010

Sep. 2012

Source (adapted): www.rbnz.govt.nz/statistics/econind/

Complete (a) to (c), to discuss the impacts that the business cycle and macro-economic influences have on growth and employment.

(a) (i) From the resource above, identify a time period when the New Zealand economy could have experienced increased consumption.

;ffvfl_ septeh'\~:o' -~~ Cci':SC<mf'b'on~ _i'\ILcr-c:c•s-_eql_fz,_

Septem 1-:rer ~r,l . . __ _

(ii) Explain the impact that increased consumption has on Real GOP growth and employment. Refer to the business cycle model in your answer.

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cf.es:.~.eci'e<AJBS i.{V\s::Mp!oyrhkl11ts" cts _. tl"<>re u;c..,.-K.er;

Y\~eo{:eOl ·Z/

I Question Three (b) is on page 10 ~


ASSESS( USEO~

10

(b) Define what savings is, and explain the short-term impact that increased levels of savings has on Real GDP growth and employment.

Refer to the business cycle model in your answer.

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The macro-economic influences of consumption, savings, and investment should not be viewed as independent, with all three having an influence on each other. The right balance between the three can help ensure sustained economic growth over the long term.

(c) Compare and contrast the effectiveness of encouraging consumption or encouraging savings as a way to achieving sustained economic growth in the New Zealand economy.

In your answer:

• explain ONE positive and ONE negative impact of increased consumption on the macro-economy

• explain the link between savings and investment

• explain ONE positive and ONE negative impact of increased savings on the macroeconomy

explain which is more likely to lead to sustained economic growth - increased consumption, or increased savings

refer to the business cycle model in your explanation.

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11

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ASSESSOR'S USE ONLY

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'• Economics 91403,2013

12

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1.··

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!

I I I

I I I j

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I

Low Achieved

Question Score Commentary One N2 This candidate has received a N2 in this question because they:

a) Failed to shift AD, incorrect AS shift to right and explained impact on employment. (1)

b) Correctly shifted the AD curve but did not shift the AS curve. The AD shift is not explained correctly (2). The impact on employment (3) has been explained but lacks detail for merit.

Two A4 This candidate has received an A4 in this question because they: a) Correctly shifted the AS curve and explained the impact of improved

productivity on the AD/ AS model in brief terms (4). A detailed reason for the AS shift, more specific use of the model and explaining the impact on economic growth and/or inflation are needed for a merit answer.

b) Incorrectly shifted the AS curve and explained the incorrect shift (5). c) Provide no further explanations to support or extend a) and b).

Three A3 This candidate has received an A3 in this question because they: a) Briefly explained the impact of increased consumption on Real GDP

growth and employment but made an incorrect time period reference to the business cycle model (multi-line graph) in a) (i). (6)

b) Briefly explained the impact of increased saving on Real GDP growth and employment including a correct time period with reference to the business cycle model but did not define savings in economic terms (7).

c) Provided further brief explanations without reaching the detail required for a higher score (8).

Total: 09

L 91403

_j

1111111111111111111 ,_ NZ~A NEW ZEALAND Q UALIFICATIONS AUTHORITY MANA TOHU MATAURANGA 0 AOTEAROA

Level 3 Economics, 2013

SUPERVISOR'S USE ONLY

91403 Demonstrate understanding of macro-economic influences on the New Zealand economy

Achievement

Demonstrate understanding of macro-economic influences on the New Zealand economy.

9.30 am Monday 18 November 2013 Credits: Six

Achievement with Merit Achievement with Excellence

Demonstrate in-depth understanding of Demonstrate comprehensive macro-economic influences on the New understanding of macro-economic Zealand economy. influences on the New Zealand

economy.

Check that the National Student Number (NSN) on your admission slip is the same as the number at the top of this page.

You should attempt ALL the questions in this booklet.

If you need more space for any answer, use the page(s) provided at the back of this booklet and clearly number the question.

Check that this booklet has pages 2-12 in the correct order and that none of these pages is blank.

YOU MUST HAND THIS BOOKLET TO THE SUPERVISOR AT THE END OF THE EXAMINATION.

© New Zealand Qualifications Authority, 2013. All rights reserved.

High Achievement

TOTAL 12 ASSESSOR'S USE ONLY

No part of this publication may be reproduced by any means without the prior permission of the New Zealand Qualifications Authority.

2

You are advised to spend one hour answering the questions in this booklet.

QUESTION ONE: THE INFLUENCE OF TRADE POLICIES ON THE NEW ZEALAND ECONOMY

New Zealand records big December trade surplus

In the December 2012 quarter, New Zealand recorded its biggest December trade surplus since 1991, as imports- particularly of aircraft- fell more sharply than exports.

The trade surplus was $486 million in December, equal to 12% of exports- roughly 10 times the average surplus of $49m for December in the previous five years, Statistics New Zealand said. Source (adapted): www.3news.eo.nz/NZ-records-big-Decernber-trade-surplus/tabid/421/articleiD/284802/ Default.aspx

Government policies designed to encourage a balanced current account could include signing free-trade agreements, and intervening in the foreign exchange market, so that the exchange rate is favourable to a trade surplus. These policies will also affect employment in the New Zealand economy.

Graph One - Foreign exchange policy

Price level (PL)

~ . ~R 'y I ~"~


(a) (i) On Graph One above, illustrate the influence that an exchange rate favourable to a trade surplus would have on the macro-economy.

In your answer:

label the curves

label any curve shifts

• identify the equilibrium points

Economics 91403. 2013

' r]-

ASSESSoR~I' USEONI.Y,

l '

~SSESSOR', USE ONLY,·

(ii) Explain the impact of an exchange rate favourable to a trade surplus on employment, by referring to the changes you made to Graph One.

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re~"'»f'ov-+- },-..<\\ <::h;<f't-~~ "iJCd,.'"'\3""{-.,_J~~ouvv-e. ....

ASSESSOR USI;ONLY

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/Vj '/t,e /0 fv-re_ /

I Question One (b) is on page 4 ~


4

The government has macro-economic goals of a balanced current account, as well as full employment.

(b)

Graph Two- Free trade agreements Price level

(PL)

j'LI

jL t ______ ------I

1 I 1 I

'-t-1 y '(I 'l'f


Compare and contrasl_tll~U~ff~!i~ of signing free-trad_l~__<!g.r:eements on the macroeconomic goals of a~alanced current account AND full employ~

In your answer:

/ make changes to Graph Two, above, to illustrate the influence that free trade agreements would have on the macro-economy. Label curves and identify equilibrium points

•

refer to changes in Graph Two

explain how free trade agreements can lead to a talanced current accou;tl

explain how free trade agreements can lead to~oyment) explain why free trade agreements could be more effective at achieving a balanced current account than full employment.

• S,·~,"'~ ~- i'cee- 4-,,.,J.,e "CCreer-"""+ . """""'s th,.t (\- Ls -~.i!:r

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6

QUESTION TWO: THE INFLUENCE OF GOVERNMENT POLICIES ON GROWTH AND INFLATION

In recent years suggestions for government policies to stimulate economic growth, while maintaining price stability in the New Zealand economy have included making Research and Development (R&D) attractive to business, removing regulations to improve productivity and investment, and reducing government spending. . . Source (adapted): www.scoop.co.nz/stories/P01011/S00043/nz-needs-world-leading-pro-growth-policies.htm

Complete (a) to (c) to compare and contrast the influence that different government policies have on economic growth and inflation.

(a) (i)

Graph Three-Removing regulations to improve productivity

Price level (PL)

y 'l, Income, employment, output (Y)

On Graph Three above illustrate the influence that removing regulations to improve productivity has on the macro-economy.

In your answer:

label the curves

• label any curve shifts

identify the new equilibrium.

(ii) Explain the changes you made to Graph Three.

~r,ov''"':5 ~u1,..\-; ,_, ~o '""Prove f,-,clvd;v i ~ b """' -r~ \o-> ~ 'fhe eov~~i • s\'"'-Ce '\t,e, 30V'"'rY\ \"-~'1- V'·i\1 CV\c

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I ' L--

AssEssoRl' USEONL~

l

(t

IS OR\ ONLy

Price level (PL)

7

Graph FourReducing government spending

Yr Income, employment, output (Y)

(b) (i) On Graph Four, illustrate the influence that reducing government spending has on the macro-economy.

In your answer: • label the curves

label any curve shifts • identify the new equilibrium.

(ii) Explain the changes you made to Graph Four.

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ASSESSOR'S USE ONLY

8

The government's task of managing the economy is made difficult by the challenge of achieving both economic growth along with maintaining price stability. ·

(c) Compare and contrast the effectiveness on achieving economic growth and maintaining price · stability of the two suggested policies of removing regulations to improve productivity and reducing government spending.

In your answer:

• explain the effect of encouraging productivity on both economic growth and price stability

explain the effect of reducing government spending on both economic growth and price stability

• explain which policy is more effective in encouraging economic growth and maintaining price stability

integrate changes to Graphs Three and Four.

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OR

"'

9

QUESTION THREE: MACRO-ECONOMIC INFLUENCES

6.0

4.0

'* 2.0 fj 3: e 0.0 \!!

·2.0

-4.0

NZ employment growth and real GOP growth

Sep. 2000

Sep. 2002

Sep. 2004

Sep. 2006

Sep. 2008

~"'"- HLFS employment growth ..,._Real GDP growth

Sep. 2010

Sep. 2012

Source (adapted): www.rbnz.govt.nz/statistics/econind/

Complete (a) to (c), to discuss the impacts that the business cycle and macro-economic influences have on growth and employment.

(a) (i) From the resource above, identify a time period when the New Zealand economy could have experienced increased consumption.

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(ii) Explain the impact that increased consumption has on Real GDP growth and employment. Refer to the business cycle model in your answer.

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I Question Three (b) is on page 10 II>- I


ASSf;SSOR'S USE ONl-Y

10

(b) Define what savings is, and explain the short-term impact that increased levels of savings has on Real GOP growth and employment.

Refer to the business cycle model in your answer.

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The macro-economic influences of consumption, savings, and inv:stment should not be viewed as independent, with all three having an influence on each other. The right balance between the three can help ensure sustained economic growth over the long term.

(c)

In your answer:

•

•

•

•

explain ONE positive and ONE negative impact of increased consumption on the macro-economy

explain the link between savings and investment

explain ONE positive and ONE negative impact of increased savings on the macroeconomy

explain which is more likely to lead to sustained economic growth - increased consumption, or increased savings

refer to the business cycle model in your explanation .

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@

ESSOR1 E ONLY~

'

11

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I

I

I

ASSESSOR'S USE ONLY

QUESTION NUMBER

3

<>d i)

12

Extra space if required.

Write the question number(s) if applicable.


ASSESSOR'S USE ONLY

High Achieved

Question Score Commentary One A4 This candidate has received an A4 in this question because they:

a) Failed to shift AS left, correct AD shift, explained why the AD curve shifted (1) and the impact on employment. (2)

b) Correctly shifted the AD curve but did not shift the AS curve. The AD shift (3) has been explained but lacks detail for merit (required). The impacts on the current account (4) and employment (5) have been explained in detail.

Two A4 This candidate has received an A4 in this question because they: a) Incorrectly shifted the AD curve (6). b) Correctly shifted the AD curve and explained the impact of decreased

government spending on AD (7). Not in-depth. c) Provided further explanations of the incorrect curve shift from a) and has

not provided an in-depth reason why the decrease in government spending has caused the AD curve to decrease. (8)

Three A4 This candidate has received an A4 in this question because they: a) Explained the impact of increased consumption on Real GDP growth in

some detail but didn't specifically explain the impact on Aggregate Demand. (9)

b) Explained the impact of increased saving on Real GDP growth in some detail but didn't specifically explain the impact on Aggregate Demand. (10)

c) Provided no further relevant points. Total: 12

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