Reading the notation

A small set of symbols carries every part of this paper — get them precise, since the AS/AD model and the quantity theory of money are both graded on using the right symbol in the right place.

📖 Symbols used in inflation

6 terms

Cover the right column and check you can say what each one means.

AD, AS: Aggregate demand and aggregate supply — total spending and total production in the whole economy, plotted against the price level.
PL, Y: Price level (vertical axis) and real GDP (horizontal axis) on the AS/AD graph.
CPI: Consumers Price Index — the weighted basket of goods and services used to calculate New Zealand's inflation rate.
MV = PQ: The quantity theory of money / equation of exchange: Money supply × Velocity of circulation = Price level × real output (Q).
Velocity of circulation (V): How many times, on average, each dollar is spent in the economy over a given period.
Demand-pull / cost-push: Demand-pull inflation is an AD shift right; cost-push inflation is an AS shift left — the same two causes, read off the graph.

Before writing anything

Identify which of the three recurring question types this is: the AS/AD model, the quantity theory of money, or the effects/CPI question — each has its own checklist below.
Skim for a government-revenue question, a real-wage comparison, or a low/high-income household comparison — these signal the deeper skill sections further down this page.

Practice for this standard covers the whole topic — flashcards and quiz.