New Zealand’s economic recovery has remained subdued, with recent quarterly GDP figures showing a marginal expansion of just 0.1%. The Treasury has highlighted that external demand shocks are primary drivers of this sluggishness, pointing directly to cooling consumer demand in China and rising interest rates in Australia, which have combined to squeeze export revenues. While domestic business groups have advocated for tax cuts to stimulate consumer demand, economists warn that without a revival in external demand for dairy and meat exports, any domestic stimulus will have limited effectiveness.
Extract C states: 'The Treasury has highlighted that external demand shocks are primary drivers of this sluggishness, pointing directly to cooling consumer demand in China and rising interest rates in Australia...'
With the help of an appropriate diagram, explain why a slowdown in economic growth in New Zealand's major international trading partners is likely to hinder the recovery of its domestic economy.
222 exam-style questions on AQA A Level Economics 2.2 How the macroeconomy works: the circular flow of income, aggregate demand/aggregate supply analysis and related concepts, covering 2.2.1 The circular flow of income, 2.2.2 Aggregate demand and aggregate supply analysis, 2.2.3 The determinants of aggregate demand, 2.2.4 Aggregate demand and the level of economic activity, 2.2.5 Determinants of short-run aggregate supply, and 2.2.6 Determinants of long-run aggregate supply. Each one has a worked solution and a mark scheme showing where the marks go.