The LG 91222 Analysing Inflation Learning Guide is a structured, write-on student resource specifically designed for the NCEA Level 2 Economics Achievement Standard: Analyse inflation using economic models. This guide breaks down complex macroeconomic theories into manageable sections, providing the foundational knowledge required to understand why the cost of living changes and how those changes ripple through the New Zealand economy.
Key Features
Core Definitions and Concepts: Clear, accessible explanations of Inflation, Deflation, and Disinflation. It establishes the difference between a "relative" price change (one item getting expensive) and a change in the "general price level" (inflation).
The Consumer Price Index (CPI): A step-by-step breakdown of how inflation is measured in New Zealand.
The Regimen: Understanding the "basket of goods and services" used by Stats NZ.
Calculation Practice: Guided exercises on how to calculate price indexes and annual percentage changes using base years and current prices.
Weighting: Explaining why price shifts in essential items like housing or transport have a larger impact on the CPI than luxury items.
The AD/AS Model (Aggregate Demand / Aggregate Supply): The primary analytical tool of the guide. Students learn how to draw and shift these curves to illustrate inflationary pressures.
Causes of Inflation:
Demand-Pull: Analyzing how increases in spending (Consumption, Investment, Government spending, or Net Exports) pull prices up when the economy is near full capacity.
Cost-Push: Investigating how rising production costs—such as increased wages, electricity prices, or imported raw materials—push prices higher.
The Quantity Theory of Money: Introduces the equation MV=PQ. Students learn the relationship between the money supply (M), the velocity of circulation (V), the price level (P), and real output (Q).
Real vs. Nominal Data: Practical skills in "deflating" nominal values. Students learn how to calculate Real Income and Real GDP to see if people are actually better off once the "noise" of inflation is removed.
Impacts on Stakeholders: A detailed look at the "winners and losers" of inflation, including:
Fixed Income Earners: The loss of purchasing power for pensioners or those on set salaries.
Savers and Lenders: How inflation erodes the real value of money held in banks.
Borrowers: Why high inflation can actually benefit those with large debts (like mortgages).
Exporters and Importers: The impact of domestic inflation on New Zealand's international competitiveness.
Introduction to Monetary Policy: A look at the Reserve Bank of New Zealand (RBNZ) and its mandate to keep inflation between 1% and 3%. It introduces the Official Cash Rate (OCR) as the primary tool for maintaining price stability.
NCEA-Style Practice Tasks: Includes "Achievement," "Merit," and "Excellence" level questions that mirror the style of external examinations. These tasks focus on linking shifts in the AD/AS model to written explanations of economic consequences.
Step-by-Step Worked Examples: Provides clear models for how to structure an economic analysis, ensuring students know how to define, measure, and explain the impacts of inflation.
Glossary of Terms: A comprehensive list of essential economic vocabulary to ensure students communicate with technical precision.