AS91223 Analyse international trade using economic concepts and models (2022)
Question 1
In 2021, New Zealand’s kiwifruit export receipts were $2.8 billion. The world price of kiwifruit is forecast to increase over the next few years.
New Zealand can be considered a price taker in the kiwifruit market.
Question 1.a
Explain why New Zealand grows and exports kiwifruit.
Question 1.b
Question 1.b.i
On Graph One below, show the impact of a higher world price for kiwifruit on exports. Label the new level of exports as X1.
Question 1.b.ii
Referring to Graph One, explain the impact of a higher world price for kiwifruit on the quantity of exports.
Question 1.c
In 2021, New Zealand had a current account deficit.
Explain how the increase in the world price for kiwifruit will impact New Zealand’s current account deficit. Refer to Graph One in your answer.
Question 2
Question 2.a
New Zealand and the United Kingdom both produce wool. New Zealand exports wool to the United Kingdom.
The current trade price is shown as PT on Graph Two, below.
The New Zealand Climate Change Commission has advised that for New Zealand to meet its emission targets, herd numbers, including sheep, need to be reduced.
Question 2.a.i
On Graph Two above, show the impact of reducing herd numbers in New Zealand on the wool market. Label the new level of exports as X1 and imports as M1.
Question 2.a.ii
Referring to Graph Two, explain the impact of reducing herd numbers on the level of exports and export receipts for New Zealand wool.
Question 2.b
Although the United Kingdom is a significant trading partner for New Zealand, it is no longer one of the top five trading partners for exports or imports.
Identify two of the top five countries, by value, that New Zealand imports from.
Question 2.c
Choose one of the countries from your answer to (b). Compare and contrast the impact of importing from that country on New Zealand producers and consumers.
Question 3
In October 2021, the New Zealand–United Kingdom Free Trade Agreement ... ... ... and totalled NZ$1.7 billion in 2020.
Question 3.a
Explain what is meant by a free trade agreement.
Question 3.b
Why would the “highly complementary” trade between New Zealand and the United Kingdom be expected to maximise the benefits of the free trade agreement to New Zealand producers?
Question 3.c
The free trade agreement is expected to result in a significant increase in New Zealand exports to the United Kingdom.
On Graph Three below, show the impact on the exchange rate of a large increase in New Zealand exports to the United Kingdom.
Question 3.d
Explain in detail the impact on the exchange rate of a large increase in New Zealand’s exports to the United Kingdom. Refer to Graph Three in your answer.
Question 3.e
A local business operates a tour guide service and expects many visitors from the United Kingdom. They plan to purchase a vehicle from the United Kingdom to help provide the service.
Discuss whether the exchange rate change you identified on Graph Three will benefit the business.
