Albany Senior High School/economics/level3/as3.4

Achievement Standard 3.4 - 90632

Please find a copy of the Achievement Standard 3.4

The description of the aggregate level of economic activity will involve a selection from: • circular flow model • components of aggregate demand in the New Zealand System of National Accounts • measuring Gross Domestic Product (GDP) using income and expenditure approaches • nominal and real GDP • the business (trade) cycle. The description of how the aggregate demand and aggregate supply model is used will involve a selection from: • reasons for the downward slope of the aggregate demand curve • shifts of the aggregate demand curve as a result of changes in consumption, government revenue and expenditure, investment, exports and imports • reasons for the aggregate supply curve becoming steeper as the economy approaches capacity output • shifts of the aggregate supply curve as a result of exogenous changes in nominal wages, imported factor costs and productivity • aggregate demand/aggregate supply equilibrium in terms of price level, national income (= output = real GDP) and employment.

Influences on New Zealand’s aggregate economic activity will involve a selection from: • Monetary Policy • the roles of the Reserve Bank (Reserve Bank of New Zealand Act 1989 and the Policy Target Agreement) − the effect of a change in the official cash rate on market interest rates − effects of interest rate changes on consumption, investment, exchange rates and net exports. • External Influences • supply and demand analysis of the foreign exchange market − impact of exchange rate changes on the balance of payments (current, capital and financial accounts) − terms of trade − other factors that impact on trade. • Fiscal Policy − changes in tax rates (direct or indirect) − government revenue and expenditure, and the operating balance − major components of the government’s budget (reference: Current Economic Fiscal Updates) − constraints imposed on government by the Public Finance Amendment Act 2004. Fully explain influences on New Zealand’s aggregate economic activity will involve a further selection from: • a full analysis of the effects of policy changes on components of Aggregate Demand and Aggregate Supply and therefore on the level of aggregate economic activity • a thorough understanding of the interrelationships in the macro economy.