Economics Study Material and Solved Assignments

Economics
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Section A
Answer 1
The consumer price index (CPI) in case of New Zealand will be measuring the change in price of a given
basket of services and goods which the individual of the country will be buying. The consumer price
Index for the present year is calculated by
CPI= Price of desired basket ∈current year
Price of desired basket ∈base year × 100
Answer 2
a)
The gross domestic product calculation by the expenditure approach
GDP=23100+9500+1300+6200+(13300−15100)
Gross domestic product -= 38300
b)
the National Income of the gross domestic product is known to fail to capture the true economic activity
of the country since it does not take into account the transactions which takes place in the informal
market. It will not be not capturing the level of existing income inequality in the country.
c)
the nominal gross domestic product is known to measure the values of services as well as goods in the
present year price. This is known to represent the monetary values of the current year price of the
market. The real gross domestic product on the other hand, is known to estimate the values of output at
the fixed base year prices. For assessing the gross domestic product of the current year prices and also
in inflation adjusted manner of gross domestic product it is required for computing real as well as
nominal terms.
d )
the real gross domestic product is known as the inflation adjusted total output of the economy of a
country which is produced per individual. It might show the welfare of an individual of the country .
e)

the two measures of the gross domestic product are the human development Index and the Fordham
Index of Social Health. The human development index is known to include to income , educational
factors and health factors.
Section B
1
As migration of New Zealand will be increasing, the labour supply in the country will also rise. This will
result to rise in the demand in the economy and for that reason the aggregate demand in the economy
will be moving to right from AD1 to AD2 which is shown in the above figure. The rise in the labour force
will also add to productivity in the country which will rise the supply of output in the economy. For this
reason, the aggregate supply will be shifting right from AS1 to AS2. For this reason, the output in the
economy will be increasing due to rise in migration.
Answer 2
a)
fall in business confidence

Decrease in the business confidence will be decreasing the real gross domestic product that will be
decreasing the rate of inflation and also will lead to rise in the rate of unemployment.
b)
rise in the household savings
Rise in the household savings will be decreasing the aggregate demand that will be creating deflationary
effect which will also lead to decline in the price level. The contraction in the economic activity will be
increasing the unemployment rate in the economy.