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Assessment Terms
Analyse
Break things into component parts, determine the distinguishing factors, accept or reject "things" based
on accepted standards.
Apply
Using skills and knowledge to further explain a specific concept or situation.
Assume
Take it for granted that it occurs.
Calculate Work out.
Clearly indicate Show.
Compare
Look at the similarities and differences between two or more ideas.
Complete Finish off/fill in.
Consequences
Things that happen because of a decision.
Construct Work out/make.
Contrast
Note differences between ideas.
Define
Provide a definition of an idea or concept.
Demonstrate
Show an understanding of an idea or concept.
Describe
Make note of the features of an idea or concept, i.e. "what happened?"
Distinguish between What's different?
Evaluate
Give the advantages, disadvantages and draw conclusions.
Explain
State why, demonstrate using examples, use what you know to find solutions to questions, i.e. "why did it
happen?"
Give
Tell me in a few words.
Identify
Give an example.
Illustrate
Use an example to write about.
Influence
Something that impacts on an event or decision.
Investigate
Analyse and explain an idea or event.
Justify
Give reasons for an occurrence.
Outline
Give an overview of an idea or event.
Recognise
Pick out an idea or concept from an event.
Select
Choose an appropriate idea.
Shade and label .
Colour in and mark on the graph.
State
Tell me in a few words.
Graphing
Terms
Suggest
Give a reason.
Column Graph / Bar Graph
Graphical display of discrete data using bars (ie. bars are separated). At level three of the syllabus
students are expected to be able to design and construct compound column graphs. eg. the budget
presented as a column graph with spending categories separated but columns (with no gaps) within each
category showing the amount spent in this area over number of years .
Histograms
Graphical display of grouped continuous data using columns with no gaps.
Line Graph
Graphical display of (usually) time series data joined by a line.
At level three of the syllabus students are expected to be able to design and construct multi line graphs
using 2 different scales on the vertical axes.
Pictogram
Pictorial display of data.
Pie chart
Circle with relative segment sizes representing percentages.
Scatter Diagram
Graphical display of two sets of data against each other.
2.1 Inflation
Deflation
Disinflation
General Price Rise
Inflation
Price Rise in a particular
market
Quantity Theory of Money
(exchange)
AS-AD Model
A fall in the general Price level
e.g. When the change in the general
price level is negative
The rate of inflation FALLS
i.e. (the general level of) prices are
rising but at a slower rate than the year
before
e.g. Inflation rate in 2001 was 3.1% but
in 2003 it was 2.5%
Occurs when prices in an economy on
average rise
e.g 10% increase in CPI
A persistent rise in the general level of
prices over the medium term.
e.g if products rise on average by 10%
then there is 10% inflation
The price of ONE good or service rises
e.g. the price of petrol rises 5c a liter
MV=PQ
The equation is saying the value of
money stock (M= the money in
circulation) multiplied by the number of
times money circulates through the
economy (V= velocity of circulation)
must equal the value of goods produced
(=GDP). The value of goods is the
number of goods produced (Q)
multiplied by the price (P)
Price
Level
Aggregate Demand and Aggregate
Supply model AS
PL
AD
Output (Y) and
employment
Appreciation
Cost Push Inflation
Real
Output
When the NZ Dollar increases in value
i.e. a $NZ will buy more foreign currency
Note: $NZ getting stronger
Inflation caused by an decrease in
aggregate supply
i.e. inflation caused by rising production
costs
Cost Push Inflation on AS-AD
Model
Price
Level
Cost Push Inflation
AS
PL1
PL
AD
Real
Output
Costs of Production
Demand Pull Inflation
Demand Pull Inflation on ASAD Model
The dollar amount producers pay for the
resources used to produce goods and
services
Inflation caused by an increase in
aggregate demand
e.g. inc. C due to and inc. in household
confidence
Price
Level
Demand Pull Inflation
AS
PL1
PL
AD
Y
Depreciation
Inflationary Expectations
Money Flows
Output Gap
Fiscal Policy
Y1
AD 1
Real Output
Occurs when the NZ dollar decreases in
value
i.e. a $NZ will buy less foreign currency
The $NZ is getting weaker
The rate of increase in the general price
level (ie inflation) anticipated by the
public in the period ahead.
Anticipated inflation encourages
households to buy TODAY increasing
current inflation levels
Payments for goods and services
purchased e.g money payment for
goods bought and wages for labour
supplied
The difference between the economys
actual output and the level of production
it can achieve with existing labour,
capital and technology without putting
sustained upward pressure on inflation
The use of Government income and
expenditure policies to achieve
economic objectives
Fiscal Policy – Contractionary
Fiscal Policy – Expansionary
Monetary Policy
Monetary Policy – loose
Monetary Policy – tight
Official Cash Rate - OCR
PTA
2.2 Economic Growth
Economic Growth
Full Employment on PPC(F)
When govt decreases spending or
increases taxes or both
This will cause a decrease real GDP
(dec. AD)
When govt increases spending or
decreases taxes or both
This will cause an increase in real GDP
(Inc AD)
The controlling of the money supply and
credit availability in an economy so as to
achieve certain economic objectives
e.g OCR and interest rates to maintain
price stability
Implementing monetary policy to expand
the economy and so promote growth
etc.
Implementing monetary policy to
contract the economy and so reduce
inflation
The overnight or cash rate set by the
Reserve Bank of New Zealand (RBNZ)
which determines the rate at which
banks can borrow and lend overnight
cash
Policy Targets Agreement – an
agreement between the Minister of
Finance
When the total level of production and
real income in an economy rises
This means that people living in that
economy are able to satisfy more of
their needs and wants
Consumer
Goods
On Frontier
= full
employment
of resources
Capital
Goods
Gross Domestic Product
(GDP)
Income
Total Market value of all final goods and
services produced by an economy in a
year
A FLOW of money earned by the
owners of resources
Ie labour earns wages, natural
resources earn rent, capital earns
interest, enterprise earns profit
Net Social Welfare
Nominal GDP
Productive Capacity
Real income/Real GDP
Unemployment or
underutilisation of resources
on PPC
A countries overall well-being. It
includes both economic (or material) as
well as non-economic (quality of life)
indicators of performance
The total market (money) value of all
final goods and services produced by an
economy in one year
The maximum possible output of an
economy with current resources and
technology
Ie an economies PPD
Note: if productive capacity increases
the PPC shifts out BUT the current level
of output may not change
Nominal GDP divided by a price deflator
and so a measure of output changes in
an economy in a year
Note:
Nominal GDP=PxQ
Real GDP = nominal GDP/P
= PxQ/P = Q
Consumer
Goods
Inside frontier
=
unemployment
or
underutilisation
of resources
Capital
Goods
Wealth
Aggregate Demand
Aggregate Supply
A stock of assets owned by an individual
household or other group. It can also be
defined as our NET WORTH
The total of all planned expenditure in
an economy at each level of prices.
Aggregate Demand is the total level of
demand in th eeconomy. IT is the total
of all desired expenditure at any time by
all groups in the economy. The main
groups who spend are consumers
(consumtion), firms (who spend on
investment), government (government
expenditure) and overseas (exports and
imports)
Therefore:
AD=C+I+G+(X-M)
Aggregate Supply is the total of all
planned production at each level of
prices. Aggregate supply is the total
quantity supplied at every price level. It
is the total of all goods and services
produced in an economy in a given time
period
Capital Goods
Man made factors of production used to
produce other goods and services.
The Circular flow Model
A diagram showing flows between
different sectors of the economy –
households, government, producers, the
financial sector, the overseas sector
The quality or skill level of human
resources which can be improved by
better education or workplace training
Human Capital
Increase production leads to
Economic Growth on PPC
Consumer
Goods
B
A
Capital
Goods
Increased Productive
Capacity leads to Economic
Growth on PPC
Consumer
Goods
B
A
Capital
Goods
Investment
Production
Production Possibility Curve
(Frontier)
Resource Endowments
(Factor Endowments)
R+D
The production/purchase of capital
goods/ man-made resources to be used
in the production process
- also called capital formation
The process of turning inputs into
outputs
Ie it is the total output of a firm/country
A line on the production possibility curve
model showing the various output
options that are possible is all resrouces
and technology are fully utilised
These are the natural resources or ‘gifts
of nature’ available to an
individual/economy
Research and Development
By funding R+D and by spending on
their own R+D the govt can help create
innovation and new industries that could
lead to growth through increased
productivity or the opening of new
markets
Regional Development
Resource allocation
Supply side policies
Trade Union
GDP Deflator
Real GDP Per Capita
Standard of Living
Sunrise industries
Sunset industries
The govt can inject money in to regions
that are going through a depression
phase that are stagnant or are key
areas that could lead to strong
economic growth in the future
This can take the form of tax incentives,
setting up the infrastructure needed to
entice business in to the area or in the
form of cash grants to help
entrepreneurs to start up business
The appointment of factors of
production among the different uses.
This rises as an issue because the
resources of a society are in limited
supply whereas human wants are
usually unlimited and because any given
resource can have many alternative
uses. In free-enterprise systems the
primary mechanism through which
resources are distributed among the
uses most desired by consumers is the
price system
Policies designed to increase supply
curve
Ie policies that reduce costs of product
(like removing red tape)
Or
Increase productivity (eg training
schemes aimed at improving skills of
workers)
A group of employees organised to
exercise some influence over the labour
market
They are organised principally for the
purpose of increasing wages and
improving conditions
Nominal GDP
X 1000
Real GDP
Real GDP divided by the population of
the country
The overall quality of life that people
enjoy. Usually refers to individuals/
countries per capita income but also
takes account of additional conditions
that matter for a person’s or household’s
well-being such as leisure or the quality
of the environment
A new industry that is exporected to be
a strong sector in the future
The secotrs that sunrise industries
replace are sometimes referred to as
sunset industries eg the VCR industry in
the 1990’s was overtaken with the
sunrise DVD industry
2.3 International Trade
Current Account
Exports
Free Trade
Imports
International Trade
Offshore Services
Onshore Services
Protectionism
Quota
Regional Trade
Tariff
2 country S/D Model
Absolute advantage
Appreciation
Comparative Advantage
Depreciation
A balance in the balance of payments recording
current transfers.
Calculated by adding
Balance of goods + balance of services + balance
on income + balance of current transfers
Goods and services made in NZ but sold to buyers
from another country
When the sale or purchase of goods and services
occurs without direct intervention by government
Goods and services made overseas and sold to
NZers
Exchanging goods and services between countries
Services provided by a country (exporter) to buyers
overseas
e.g. Air NZ flying German tourists from Germany to
the US
Services provided by a country (exporter) to foreign
buyers within it’s own shores
Eg US tourists bungy jumping in Queenstown
When a government intervenes (barriers) in the
exchange of goods or services
Eg subsidy, tarrif, quota
Limit on the number of imports that can be brought
in to a country giving local producers chance to
supply the local market
Exchanging goods and services within a country eg
Bluff Oysters sold in Chch
Tax imposed on imports which raises their price
making domestic products more competitive
This illustrates trade between 2 countries – refer to
page 159 in green book
Being able to produce a product using fewer
resources
When the NZ Dollar increases in value
i.e. a $NZ will buy more foreign currency
Note: $NZ getting stronger
Being able to produce a product or service for a
lower opportunity cost
When the $NZ decreases in value
Ie a $NZ will buy less foeign currency
Note: $NZ getting weaker
PPC showing basis for
trade
Bottles
Of Wine
England
Bottles
Of Wine
Portugal
CPC
PPC
Specialise
M
X
A
B
X
CPC
S/D Forex Graph
Bolts of
Cloth
M
Bolts
Cloth
Consumption Possibility Curve – shows possible
consumption
Exchange
Rate
Exchange
Rate
S$NZ
NZ Ex Rate
e.g.
$1=$Aus .90
D$NZ
Q
Subsidy
Payout by govt to producers that lowers the price to
consumer / raises revenue received by producer
World Price
The rpice that countries agree to trade with each
other at.
Note: in 2 country case this occurs where X=M in
others (eg price taker) it occurs at the world market
equilibrium
Australia, New Zealand Closer Economic Relations.
A free trade agreement signed between NZ and Oz
in 1983
CER or ANZCER
Deregulation
EU
Fair trade
The reduction of government from the market place
and is based on the assumption that resources are
better allocated if the free market does it rather
than govt
European Union
The most recent development of this group of
European countries is the ‘euro’ a single currency
used by all member countries
An alternative approach to conventional
international trade. It is a trading partnership which
aims at sustainable development for excluded and
disadvantaged producers. It seeks to do this by
providing better trading conditions by awareness
raising and by campaigning.
Fixed exchange rate
Flexible exchange rate
Free Market Policy
Free Trade
Infant Industry Argument
Operating Balance
WTO
Balance of Payments
Balance on current
transfers
Balance on goods
When the exchange rate of a currency is not
allowed to fluctuate against another (the exchange
rate remains constant) Typically under fixed
exchange rate regimes currencies are allowed to
fluctuate within a small margin. They require central
bank intervention to maintain the fixed rate
NOTE: NZ has not had a fixed exchange rate since
March 1985
A system in which the value of a country’s currency
is determined by market forces.
Note: also called a floating exchange rate
NZ has had this sort of system since 1985
The idea of reducing government intervention. It is
based on the assumption that resources are better
allocated if the free market does it rather than the
govt
When the sale or purchase of goods and services
occurs without direct intervention by govt
The view that ‘temporary protection’ for a new
industry or firm in a particular country through tariff
and non-tariff barriers to imports can help it to
become established and eventually competitive in
world markets in which case the protective
measures will no longer be needed.
The difference between govt revenue and govt
expenses in a given year
Eg R>Exp = operating surplus
R<Exp = operating deficit
World Trade Organisation
Established in 1995 as the successor to GATT (the
General Agreement on Trade and Tariffs). WTO
promotes fair competition and trade development
and administers various multilateral trade
agreements
An account that records transactions between one
country and another
Made up of current a/c capital a/c and financial a/c
A deficit = more payments than revenues
A balance in the current a/c. This is current
transfers inflows less current transfers
outflows.Transfers occur when resources are
provided with no exchange of goods or services e.g.foreign aid, benefits + pensions received from
o'seas govts.
A balance in the current a/c. This is goods exports
(credits) less goods imports (debits).Sometimes
called merchandise trade balance.
Balance on income
A balance in the current a/c. This is income(credits)
less income (debits).Income refers to earning from
the use of factors of production (land, labour and
financial capital).It includes investment income
derived from ownership of international financial
assets - e.g.dividends, interest earned or paid on
foreignloans).
Boom
A balance in the current a/c. This is services
exports (credits) less services imports
(debits).Includes transport services (e.g. shipping,
land or aircraft transport between residents and
non-residents - e.g. international airfares),
travel(includes, all goods and services acquired for
personal use by NZers travelling abroad or
foreigners travelling to NZ i.e.
accommodation,meals, transportation within the
economy visited,gifts souvenirs ), communication
(includes telecommunication + postal), royalties
andlicence fees.
Occurs when the economy has reached
theend(top) of its growth phase- excessive
confidence, speculation occur
Capital account
A balance in the balance of payment recording
capital transfers eg Written off debt, migrants funds
Balance on services
Financial account
Terms of trade
A balance in the balance of payment recording
transactions affecting international assets and
liabilites
An index measuring the buying power of exports
(assuming a constant quality)
Export Price Index
Import Price Index
X 1000
Trade Cycle
The fluctuations in the rate of economic growth that
take place in the economy. These fluctuations
appear to occur around every 3 to 5 years
NZ Business Cycle
Output
Recession
Recovery
Trough
Boom
Time
TWI
Net Exports
Trade Weighted Index
An index measuring the average of the rate of
exchange between NZ and a basket of currencies
of our major trading partners. Each currency in the
TWI is weighted according to the relative
importance of that country in terms of our trade with
them.
The balance between receipts from exports and
payments for imports
Otago Girls’ High School