Inflation

Practice

Recall it first, then use it — testing yourself builds the memory, where rereading the notes above only feels easier.

Recall and application shuffled together — you have to work out what each item wants before you can answer it, which is the part the exam actually tests. Both kinds feed the same spacing schedule, so anything you miss comes back sooner.

Say the answer out loud before flipping — that attempt is where the learning happens, even when you get it wrong.

Exam-style only. Instant feedback, shuffled each attempt, best score saved on this device.

What actually comes up

Three questions every year, in a fixed order: the AS/AD model (draw two shifts from two real events, then judge which had the bigger impact), the quantity theory of money (MV = PQ, always tied to a real economic event like a recession), and the effects of inflation (CPI measurement, then who is affected and how). Every "Explain the impact" part explicitly requires you to refer back to your own graph.

Across 3 years

The pattern — what to prepare

The 2025 paper ↗ Marking schedule ↗

Question One — Causes of inflation

2024 saw large-scale job losses in New Zealand, hitting cafes and restaurants; separately, petrol prices fell, including the removal of Auckland's regional fuel tax.

• a On Graph One, show the impact of job losses on aggregate demand, fully labelled. Achieved
• b Explain the impact of job losses on the price level, referring to Graph One. Merit
• c On Graph Two, show the impact of decreasing petrol prices on aggregate supply, fully labelled. Achieved
• d Explain the impact of decreasing petrol prices on the price level, referring to Graph Two. Merit
• e Explain whether job losses or decreasing petrol prices will have the bigger effect on the price level, referring to both graphs. Excellence

Question Two — Inflation and the quantity theory of money

NZ inflation slowed from a high rate; the Reserve Bank has been decreasing the Official Cash Rate and interest rates.

• MV = PQ

• a Explain the difference between disinflation and deflation, using the given inflation figures. Achieved
• b Explain one reason why the change in inflation rate from 2022 to 2024 is positive for the NZ economy. Achieved
• c Explain why decreasing interest rates may increase the velocity of circulation. Merit
• d Using the quantity theory of money, explain how an increasing velocity of circulation will impact inflation — both when other variables stay constant, and when real GDP also increases. Excellence

Question Three — The CPI and its effects on inflation

General questions on how the CPI works and who is affected by inflation.

• a What does CPI stand for? Achieved
• b Explain how the CPI is used to calculate the rate of inflation. Achieved
• c Explain why the rate of inflation, as calculated by the CPI, does not affect all households equally. Merit
• d Explain one reason why government revenue might increase during a time of high inflation. Merit
• e Compare and contrast the impact of high inflation on low-income and high-income households. Excellence

The 2024 paper ↗ Marking schedule ↗

Question One — Causes of inflation

The Fieldays event was held in the Waikato region; separately, Cyclone Gabrielle raised production and insurance costs for NZ businesses.

• a On Graph One, show the impact of Fieldays on aggregate demand. Achieved
• b Explain the impact of Fieldays on inflation, referring to Graph One. Merit
• c On Graph Two, show the impact of Cyclone Gabrielle and higher production/insurance costs on aggregate supply. Achieved
• d Explain the impact of Cyclone Gabrielle and higher costs on inflation, referring to Graph Two. Merit
• e Discuss whether Fieldays or Cyclone Gabrielle is likely to have had the more significant impact on NZ's inflation rate. Excellence

Question Two — Quantity theory of money and a recession

Experts suggest NZ could experience a recession over the next two years, with a significant decrease in output predicted.

• MV = PQ

• a Mark with an X the point on the business-cycle model that best represents a recession. Achieved
• b State the components of the quantity theory of money (M, V, P, Q). Achieved
• c Explain why the velocity of circulation is likely to decrease during a recession. Merit
• d Assuming other variables stay constant, use the quantity theory of money to explain how a decrease in velocity of circulation impacts inflation. Merit
• e Use the quantity theory of money and the business cycle to explain how a recession may impact overall inflation, covering both real output and velocity of circulation. Excellence

Question Three — Impacts of inflation

NZ's 2023 annual inflation rate (4.7%) was down from 2022 (7.2%), but higher than the UK (4.0%) and EU (3.1%).

• a Define inflation. Achieved
• b Explain whether minimum-wage workers would prefer a lower or higher inflation rate. Achieved
• c Explain whether savers would prefer a lower or higher inflation rate. Merit
• d Compare and contrast the impact of NZ's higher inflation rate on NZ importers and exporters to the UK and EU. Excellence

The 2023 paper ↗ Marking schedule ↗

Question One — The AS/AD model

A shortage of migrant workers and rising minimum wage pushed up wage costs for NZ businesses; separately, cost-of-living payments were made to New Zealanders.

• a On Graph One, show the impact of increased wage costs on aggregate supply. Achieved
• b Explain the impact of increased wage costs on inflation, referring to Graph One. Merit
• c On Graph Two, show the impact of the cost-of-living payments on aggregate demand. Achieved
• d Explain the impact of the cost-of-living payment on inflation, referring to Graph Two. Merit
• e Discuss whether increasing wage costs or the cost-of-living payment is likely to have had the larger impact on NZ's inflation rate. Excellence

Question Two — Quantity theory of money

NZ's inflation rate was 7.2% (Dec 2022), considered high; the Reserve Bank could reduce the money supply, which was at a record high post-COVID.

• MV = PQ

• a Explain one reason why a high inflation rate would negatively impact the NZ economy. Achieved
• b Identify the variables in the quantity theory of money (M, V, P, Q). Achieved
• c Use the quantity theory of money to explain how a 2% decrease in money supply would impact inflation, other variables constant. Merit
• d Compare and contrast the inflation impact of a 2% money-supply decrease when other variables are constant, versus during a recession when output has fallen 3%. Excellence

Question Three — Measurement and impacts of inflation

General questions on CPI measurement and household impacts, with resource material on minimum-wage real wage changes.

• a Explain how inflation is measured in New Zealand. Achieved
• b Explain why New Zealand is likely to experience disinflation, rather than deflation, as the Reserve Bank acts to control inflation. Merit
• c Using the resource material, explain the change in real wages for minimum-wage workers compared to other workers. Merit
• d Compare and contrast the impact of high inflation on low-income and high-income households. Excellence

Grades above are read from each year's own Achievement/Merit/Excellence evidence statement, condensed to the actual task — the schedules also grade holistically per question on a 0–8 scale, not a fixed mark per bullet.

Past exams & resources

⏱ Timed opens the paper and starts a countdown matching the exam length. Official NZQA PDFs. If a link 404s, that year’s paper may sit under a slightly different code: browse the NZQA subject page.