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Inflation occurs when the average level of prices increases. In New Zealand, the inflation rate is determined by changes in the Consumer Price Index (CPI), which is published quarterly by Statistics New Zealand.

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Key concept indicators

  • Identifies and uses, in context, concepts related to inflation, such as:
    • inflation, disinflation, and deflation
    • individual price rises versus rises in the general price level, for example, the CPI
    • cost push and demand pull inflation
    • nominal indicators and real indicators.
  • Integrates the quantity theory of money into detailed explanations of causes of inflation.
  • Integrates changes in price level shown on the aggregate demand and aggregate supply model into detailed explanations of causes:
    • demand pull inflation, for example, rising aggregate spending (due to increases in consumer spending, investment spending, government spending or net export receipts) that increase aggregate demand
    • cost push inflation, for example, rising inputs costs that decrease aggregate supply.
  • Integrates the business cycle model into detailed explanation of the reasons for changes in inflation through a business cycle.
  • Compares and contrasts the impact of the different causes of changes in inflation, for example, the differing impacts of a depreciation of the New Zealand dollar and an increase in petrol prices on inflation.
  • Compares and contrasts the impacts of changes in inflation on various groups in New Zealand society, for example:
    • the government’s operating balance
    • those involved in international trade (exporters and importers)
    • the financial sector (savers and borrowers)
    • households, for example, income distribution
    • firms, for example, factor costs and business confidence.

Last updated May 9, 2013