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

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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
• circular flow model
• components of aggregate demand in the New Zealand System of National
• measuring Gross Domestic Product (GDP) using income and expenditure
• 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
• 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
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.