An introduction to the New Zealand economy

Flashcards about the New Zealand Economy

What is economics?

The study of how people produce goods for others to consume, and services for other people to use. It's about maximizing goods and services from limited resources.

What is an economic system?

A country's way of organizing the production and consumption of goods and services, relying on the interaction of consumers, producers, governments, and financial institutions.

What role does consumer demand play in an economic system?

It signals to producers which goods and services are popular and successful.

What is international trade?

The exchange of goods and services between countries all over the world.

What is an economy?

A system that involves the production, distribution, trade, and consumption of goods and services by individuals, businesses, organizations, or governments.

Name the 3 types of resources.

Natural resources, labour resources, and capital resources

What are natural resources?

Inputs from nature, such as water, forests, or fertile land, used in the production of goods and services.

What are labour resources?

People’s intellectual or physical efforts needed to produce a good or service.

What are capital resources?

Inputs from manufactured goods, such as machines or computers, that are used to produce further goods and services.

What is scarcity?

Unlimited wants and limited resources.

Define scarcity.

Not enough of a resource in relation to the demand for it.

What is opportunity cost?

The next best alternative forgone.

Name the participants in the New Zealand economy.

Consumers, businesses, the government, and financial institutions.

Define free enterprise.

An economic system in which privately owned businesses operate with minimal government interference.

What is profit?

The amount of money a business earns after taking away its expenses – Revenue minus cost of production.

What is tax revenue used for?

To provide public services (Roads, defense, schools, hospitals, welfare payments etc)

What is a flow on effect?

A series of events which happen as a result of something….like a domino effect – a chain reaction.

What is the overseas sector?

Where we are linked to international markets, is another key part of the NZ economy

What is the exchange rate?

The amount of one currency that can be exchanged for another at a particular point in time.

What happens if the NZ$ rises in value (appreciates) against other currencies?

NZ export will be more expensive and imports will be cheaper.

What happens if the NZ$ falls in value (depreciates) against other currencies?

NZ exports will become cheaper and imports will become more expensive

What is the purpose of the 'Circular Flow' model?

To show the flow of money and goods/services through the economy.

Name the sectors included in the Five sector circular flow of income model.

Consumers, producers, financial, government and overseas sectors

What is the financial sector?

Consists of banks and non-banking institutions such as credit unions, building societies and the stock market

What is the government sector?

Represents our government. It uses a mix of money from taxes paid by consumers, and money the government sets aside in its budget each year

What is the overseas sector?

Represents the interaction between NZ and the rest of the world. It consists of trade in goods, services and foreign investment between nations

Define injections.

Money that enters the economy

Name the 3 sources of injection in this model.

Investment, Government spending, Exports

Define Leakages.

Money that leaves the economy

Name the 3 sources of leakages in this model

Saving, Taxation, Imports

What does economic expansion mean?

When more money enters the economy than leaves (injections greater than leakages)

What does economic contraction mean?

When more money leaves the economy than enters (Leakages greater than injections)

What is Globalisation?

The increasing interconnectedness of countries around the world

Why is trade with other nations important?

Nations will not trade unless it is beneficial to do so. Reasons include: NZ earns money by exporting its goods and services; International trade provides employment for both Nzers and people overseas; Nz can buy products from other countries that is does not produce itself; etc.

What are economies of scale?

The benefits of growing larger – savings in costs resulting from higher levels of production