90199 Describe major sectors of the economy and the relationships between them

1. 90199 Describe major sectors of the economy and the relationships between them

2. 90199 The Economy Q ONE (a) Name the sectors labelled (A), (B), (C) (A) Financial Institutions/Banks (B) Government (C) Producers/Firms (b) Names of the flows labelled (1), (2), (3) (1) Investment (2) Income Taxation / Direct Tax (3) Export Receipts

3. 90199 The Economy Q ONE (c) Name the real flow that is linked to the following money flows. Imports Goods and services Labour (d) (i) Describe what the Consumer Sector represents. The consumer sector represents all households of New Zealand grouped together.

4. 90199 The Economy Q ONE (d) (ii) Describe what the Overseas Sector represents. The overseas sector represents the economies in other parts of the world that New Zealand trades with. (e) The “Y“ symbol represents income. State the 3 types of income other than wages. rent profit interest

5. 90199 The Economy Q TWO (a) (i) Name the money flow from Producers to Government. Company Tax / GST / Indirect Tax (ii) Explain TWO ways this flow could increase. • An increase in company profits will result in increased amounts of company tax. • An increase in the rate of tax will increase the amount paid. • An increase in the rate of Goods and Services tax will increase the amount paid.

6. 90199 The Economy Q TWO (b) Explain how the consumer, producer, and financial sectors are interdependent. The consumer sector relies on the financial sector to provide interest on savings and to provide loans for housing and other consumer goods and services. The consumer sector relies on the producer sector for income and the provision of goods and services. The producer sector relies on the consumer sector to provide resources such as labour, capital, land and enterprise, and to consume the goods and services the producer sector provides. The producer sector relies on the financial sector to provide loans for investment in capital goods and business expansion. The financial sector relies on the consumer sector to save their surplus income so loans can be provided to the producer sector. The financial sector relies on the producer sector to borrow funds and to pay interest on those funds.

7. 90199 The Economy Q THREE (a) Explain ONE immediate benefit and ONE flow-on effect tax cuts will have for households in New Zealand. (i) Tax cuts will result in an increase in disposable income for households. (ii) This will allow households to consume more goods and services and enable an increase in savings.

8. 90199 The Economy Q THREE (b) (i) Fully explain the likely flow-on effects of the tax cuts on The Producer Sector The flow-on effects to producers from the tax cuts are positive. • Consumers will have more disposable income so they will increase consumption of goods and services. • Producers will increase production/output to meet the increased demand. This should result in an increase in profits. • If consumers save more there may be an increase in funds available for investment by producers.

9. 90199 The Economy Q THREE (b) (ii) Fully explain the likely flow-on effects of the tax cuts on the Government Sector: The flow-on effects to the government sector from tax cuts are negative and positive. • There will be a decrease in the amount of income tax collected from consumers. • If consumers spend their increased disposable income there will be an increase in goods and services tax paid to the government, and eventually company taxes. • The net effect is likely to be negative so there may be a decrease in government spending on health, education, defence, roads, police.

10. 90199 Describe major sectors of the economy and the relationships between them