NCEA Level 2 Economics (91223) 2014 — page 1 of 11

Assessment Schedule – 2014 Economics: Analyse international trade using economic concepts and models (91223) Assessment criteria

Achievement Achievement with Merit Achievement with Excellence

Demonstrate understanding Demonstrate in-depth Demonstrate comprehensive involves: understanding involves: understanding involves analysing:  identifying, defining, or  providing a detailed explanation  causes of changes in describing international trade of causes of changes in international trade by comparing concepts international trade, using and / or contrasting their impact  providing an explanation of economic models on international trade causes of changes in  providing a detailed explanation  the impacts of changes in international trade, using of the impacts of changes in international trade by comparing economic models international trade on various and / or contrasting the impact on  providing an explanation of the groups in New Zealand society. various groups in New Zealand impacts of changes in society international trade on various  by integrating changes shown on groups in New Zealand society. economic models into detailed explanations. Explanation involves giving a reason for the answer.

Detailed explanation involves giving an explanation with breadth (more than one reason for the answer) and / or depth (eg using flow-on effects to link the main cause to the main result). Note: Each question should be read as a whole before awarding a grade. NCEA Level 2 Economics (91223) 2014 — page 2 of 11

Evidence Statement

Question Achievement Achievement with Merit Achievement with Excellence One

(a)  Shows the impact of an ONE cause of an appreciation of the New appreciation of the New Zealand dollar (see Appendix Zealand dollar is explained One) D$NZ shifted to the right, in detail by: or S$NZ shifted to the left.  showing the impact of an  Explains ONE cause of the appreciation of the New change to the market for $NZ. Zealand dollar (see Appendix Answer should match shift in One) D$NZ shifted to the right, graph. or S$NZ shifted to the left

Example for D$NZ shifted to the AND right, the appreciation of the  explaining in detail the changes $NZ may be caused by an made on Graph One, eg For increase in interest rates in D$NZ shifted to the right, the New Zealand. This will raise appreciation of the $NZ may be demand for $NZ. The increase caused by an increase in in demand will cause the $NZ interest rates in New Zealand. to appreciate. This will increase overseas OR investor deposits in New

Example for S$NZ shifted to the Zealand banks, which will raise left, the appreciation might be demand for $NZ from D$NZ to caused by a decrease in D$NZ1. The increase in demand imports. This will decrease the will cause the $NZ to supply of the $NZ. The appreciate from P to P1. decrease in supply will cause the $NZ to appreciate. NCEA Level 2 Economics (91223) 2014 — page 3 of 11

(b)  Identifies cost AND / OR  Explains in detail cost OR benefit Compares and contrasts the benefit OR explains cost to New Zealand businesses (eg effect of an appreciation in the AND / OR benefit to New when the $NZ appreciates, New New Zealand dollar on Zealand businesses (eg Zealand export businesses businesses and consumers in New Zealand exports fall) become less price competitive, as New Zealand by: OR when the $NZ goods priced in $NZ are now  explaining in detail ONE cost appreciates, New Zealand more expensive in overseas AND ONE benefit to New export businesses become currencies). Zealand businesses (eg when less price competitive.  Explains in detail cost OR benefit the $NZ appreciates, New  Identifies cost AND / OR to New Zealand consumers (eg Zealand export businesses benefit OR explains cost The appreciation makes imported become less price competitive, AND / OR benefit to New goods cheaper, as goods priced as goods priced in $NZ are now Zealand consumers (eg in overseas currencies are now more expensive in overseas cheaper petrol) OR the cheaper in $NZ, so things like currencies. This appreciation appreciation makes petrol will be cheaper). does, however, make imported imported goods cheaper  Explains in detail the overall raw materials cheaper, as because the $NZ buys impact on New Zealand’s current goods priced in overseas more). account (eg the overall impact of currencies are now cheaper in  Explains the overall impact an appreciation is likely to be $NZ) on New Zealand’s current negative, as the appreciation is  explaining in detail ONE cost account (eg the overall likely to lead to lower export AND ONE benefit to New impact of an appreciation is receipts and higher import Zealand consumers likely to be negative, as the payments, which will make the  explaining in detail the overall appreciation is likely to lead trade balance deteriorate). impact on New Zealand’s to lower exports and raise, current account (eg the overall imports). impact of an appreciation is likely to be negative, as the appreciation is likely to lead to lower export receipts, and higher import payments, which will make the trade balance deteriorate).

N1 N2 A3 A4 M5 M6 E7 E8 Very little Some Most Nearly all Some Merit Most Merit Excellence Excellence Achievement Achievemen Achievemen Achievemen evidence. evidence. evidence. evidence. evidence. t evidence, t evidence, t evidence, Most points One part partial including at including at covered. may be explanation. least one least one weaker. explanation. explanation. N0= No response; no relevant evidence. NCEA Level 2 Economics (91223) 2014 — page 4 of 11

Question Achievement with Achievement Achievement with Merit Two Excellence NCEA Level 2 Economics (91223) 2014 — page 5 of 11

 Identifies the new supply  Shows the new supply curve Compares and contrasts curve for orange juice for orange juice concentrate in the impact that an increase concentrate in Brazil and Brazil and the new level of in the Brazilian the new level of exports exports (see Appendix Two) government subsidy could (see Appendix Two). AND shows the new level of have on the following  Identifies the new level of orange juice concentrate groups: orange juice concentrate imports to New Zealand and  New Zealand orange juice imports to New Zealand the new world price that would producers result from the increase in the and the new world price  New Zealanders employed Brazilian government subsidy that would result from the in orange juice production increase in the Brazilian for orange juice concentrate  New Zealand consumers government subsidy for (see Appendix Two). of orange juice orange juice concentrate  Explains in detail how (see Appendix Two). producers will be worse off (eg  the New Zealand Government  States or explains how the lower price will mean that New Zealand producers New Zealand producers will by: are worse off (eg because reduce their Qs, as orange  showing the new supply the price of orange juice juice becomes a relatively less curve for orange juice has decreased, meaning attractive product to produce. concentrate in Brazil and cheaper juice, and this Their revenue will fall, making the new level of exports lower price reduces New them worse off). (see Appendix Two) AND Zealand producer OR showing the new level of revenue, so they are explains in detail how orange juice concentrate worse off OR they are producers are better off (eg a imports to New Zealand, better off because they decrease in the world price of and the new world price now have lower costs of concentrate will mean a that would result from the production). decrease in the costs of increase in the Brazilian  States or explains how production of NZ producers. government subsidy for NZers employed in OJ This will therefore increase orange juice concentrate production will be worse profits making them better off). (see Appendix Two) off (eg NZ workers could  Explains in detail how New  explaining in detail how face lower incomes or Zealanders employed in most, or all, of the groups unemployment making orange juice production will be will be worse off, or better them worse off OR vice worse off (eg to maintain profit off, from the increase in versa if producers are margins and lower costs the Brazilian government better off) workers could face lower subsidy on orange juice  States or explains how incomes or unemployment concentrate New Zealand consumers making them worse off OR vice  appropriately referring to are better off (eg New versa if producers are better Graph Two in the Zealand consumers are off) explanation, eg the better off because the  Explains in detail how increase in the Brazilian price of juice has consumers will be better off (eg subsidy will result in a shift decreased) the price of orange juice will to the right of the Brazilian  States or explains how the decrease. This will mean that supply curve from S to S1. NZ Government will be New Zealand consumers will The increased supply increases exports from X worse off (eg The NZ increase their Qd, as orange Government will receive juice becomes a relatively to X1 The increase in less tax or pay more in more attractive product to supply lowers the world benefits. The NZ purchase, making them better price to Pw1. The lower Government will be worse off. world price encourages New Zealand importers to off OR vice versa if NZ  Explains in detail how the NZ increase imports of producers are better off). Government will be worse off Brazilian orange juice (eg The NZ Government will concentrate from M to M . receive less income tax from 1 NZ orange juice producers, The increase in imports less PAYE because workers and lower price will mean will be earning less and pay that New Zealand orange more in benefits as some will juice producers will need lose their jobs. The NZ to lower their prices to Government will be worse off remain competitive. The lower prices will result in NCEA Level 2 Economics (91223) 2014 — page 6 of 11

OR vice versa if NZ producers lower New Zealand output are better off). and less revenue for the New Zealand orange juice producers, making them worse off. Lower output, and a desire to reduce costs, may result in those working in New Zealand orange juice production to earn lower incomes, or lose employment and become worse off. The lower price of orange juice will mean that New Zealand consumers will

increase their Qd, as orange juice becomes a relatively more attractive product to purchase, making them better off. The New Zealand government will receive less income tax from New Zealand orange juice producers, less PAYE because workers will be earning less, and pay more in benefits, as some will lose their jobs. The New Zealand government will be financially worse off. Graph Two must be integrated into the explanation.

N1 N2 A3 A4 M5 M6 E7 E8 Very little Some Most Nearly all Some Merit Most Merit Excellence Excellence Achievement Achievemen Achievemen Achievemen evidence. evidence. evidence. evidence. evidence. t evidence, t evidence, t evidence, Most points One part partial including at including at covered. may be explanation. least one least one Graph Two weaker. explanation. explanation. integrated Graph Two into the integrated answer. into the answer. N0= No response; no relevant evidence. NCEA Level 2 Economics (91223) 2014 — page 7 of 11

Question Achievement Achievement with Merit Achievement with Excellence Three

(a)  Describes the Current Account, The impact of the TPP on the eg the Current Account of the New Zealand Balance of BOP consists of the Balance on Payments Current Account is Goods, Balance on Services, explained in detail by: Balance on Investment Income  referring to the items and Balance on Transfers OR specified in the stimulus identifies the Current Account material to support the balance in the stimulus material answer – eg the Current – ie Balance on Goods and Account of the BOP consists Balance on Services. of the Balance on Goods,  States that the TPP will Balance on Services, improve the Current Account Balance on Investment balance OR explains the impact Income and Balance on of the TPP on the Current Transfers. By opening up the Account, eg by opening up the trade in goods and services, trade in goods and services, the the TPP will increase the TPP will improve the Current Balance on Goods and the Account balance. Balance on Services surpluses, therefore improving the Current Account balance. NCEA Level 2 Economics (91223) 2014 — page 8 of 11

(b)  Illustrates on Graph Three how  Illustrates on Graph Three Compares and contrasts the an overseas tariff on New how an overseas tariff on impact of the Trans-Pacific Zealand fish products impacts New Zealand fish products Partnership with the impact of on the New Zealand squid impacts on the New Zealand international trade barriers on market (refer to Appendix squid market (refer to New Zealand fish products by: Three). Appendix Three).  illustrating on Graph Three how  Explains how an overseas tariff  Explains in detail how an an overseas tariff on New on New Zealand fish products overseas tariff on New Zealand fish products impacts will impact on the New Zealand Zealand fish products will on the New Zealand squid squid market – eg an overseas impact on the New Zealand market (refer to Appendix tariff will lower the price that squid market. Referring to Three) New Zealand squid exporters Graph Three in the  explaining in detail how an receive in those countries. The explanation – eg an overseas overseas tariff on New Zealand lower price will cause exports to tariff will lower the price that fish products will impact on the fall. New Zealand squid exporters New Zealand squid market.  Explains that the overseas tariff receive in those countries, as Referring to Graph Three in the on New Zealand fish products some of the price paid by the explanation – eg an overseas will result in a worse Current overseas consumer will go to tariff will lower the price that Account balance since exports their government with a New Zealand squid exporters will decrease OR that the reduced amount flowing receive in those countries. That through to the New Zealand Trans-Pacific Partnership will will reduce Pw(without tariff) to exporter. That will reduce have a larger impact on the Pw(tariff). The lower price will Current Account of the Balance Pw(without tariff) to Pw(tariff). The discourage squid production, lower price will discourage of Payments than the so Qs will fall. The lower price international trade barriers on squid production, so Qs will will encourage local fall. The lower price will New Zealand fish products – eg consumption, so Qd will rise. the TPP will have a larger encourage local The impact is that exports will consumption, so Qd will rise. impact on the Current Account, fall to X(tariff). because it covers more The impact is that exports will OR countries OR The TPP covers a fall to X(tariff). Explanation can include the wider range of goods and OR idea that as a result of the tariff services.  Explanation can include the the price exporters receive will idea that as a result of the fall OR revenue will decrease tariff the price exporters and that as a result exports will receive will fall OR revenue decrease. will decrease and that as a  explaining in detail why the result exports will decrease. Trans-Pacific Partnership will have a different impact on the Current Account of the Balance of Payments than the international trade barriers on New Zealand fish products, by offering one or more of the ideas in the following example: The TPP will have a larger impact on the Current Account, because it covers 12 countries, whereas the tariffs mentioned only exist in two of those 12 countries. Also, the TPP covers a wide range of goods and services, whereas the tariff applies only to seafood – which is only one export goods category. The TPP has a positive effect on the Current Account, because it creates the opportunity for New Zealand to increase exports. NCEA Level 2 Economics (91223) 2014 — page 9 of 11

The trade barriers restrict exports, and, therefore, have a negative effect on the Current Account. Candidates may also comment that the TPP may increase the value of imports, though the overall effect on Current Account is still positive.

N1 N2 A3 A4 M5 M6 E7 E8 Very little Some Most Nearly all Some Merit Most Merit Excellence Excellence Achievement Achievemen Achievemen Achievemen evidence. evidence. evidence. evidence. evidence. t evidence, t evidence, t evidence, Most points One part partial including at including at covered. may be explanation. least one least one Includes weaker. explanation. explanation. ONE idea of Includes at the least ONE contrasting idea of the effects of contrasting the TPP effects of and the the TPP and tariff on the the tariff on BoP. the BoP. Graph must be correct. N0= No response; no relevant evidence.

Cut Scores Achievement Achievement Not Achieved Achievement with with Merit Excellence Score range 0 – 6 7 – 12 13 – 18 19 – 24 NCEA Level 2 Economics (91223) 2014 — page 10 of 11

Appendix One Question One (a) Graph One: Market for the New Zealand dollar

OR NCEA Level 2 Economics (91223) 2014 — page 11 of 11

Appendix Two Question Two

Graph Two: Two-country model

Appendix Three Question Three (b)

Graph Three: Market for New Zealand squid