Question

SECTION A [40 MARKS] Answer ALL questions in this section. QUESTION 1 (20 Marks) Choose the most appropriate answer. Write down numbers 1.1 to 1.10 in your answer book and next to each number write the letter that represents the correct answer. E.g. 1.11 a 1.1 Which one of the following statements is incorrect? a) b) c) The three major flows in the economy are total production, total income and total spending There are two sets of markets in a simple economy, goods markets and factor markets. In the simple circular flow of economic activity, rear fows of goods and factors, and financial flows, move in opposite directions Firms are buyers in goods markets and sellers in factor markets, while households are buyers in factor markets and sellers in goods markets. d) 1.2 Rich economies which produce more goods and services each year. a) Do not have an economic problem. b) Still have an economic problem. c) Do have an economic problem but are solving it. d) Give more money to the government to solve its problems. 1.3 Macroeconomics is a branch of economics that studies: a) b) c) d) The determination of the price of a specific product. The behaviour of individual decision-making units in the economy. The effects and consequences of the aggregate behaviour of all decision-making units. both A and C above. 1.4 Which of the following is a leakage from the circular flow of income and expenditure in South Africa? a) Defence expenditure by the South African government, via contracts with local military suppliers. b) Government purchases of textbooks for state-run schools. c) The sale of export fruit to the European Union. d) A decision by a major supermarket chain to sell Danish beer. 1.5 A consumer's real purchasing power refers to: a) The nominal income level of the consumer. b) Wage income earned through employment. c) The maximum volume of goods and services that the consumer can buy d) Nominal GDP per capita.

Answer 1

1.1 d) Firms are buyers in goods market and sellers in factor market

This statement is incorrect, firms are buyers in the factor market (as they hire factors of production) and sellers in goods market (sell goods)

1.2 b) Still have an economic problem

Countries even with positive growth in production each year can still have an economic problem of some sort (for eg lack of demand for goods and services)

1.3 c) The effects and consequences of aggregate behavior of all decision making units

1.4 d) The decision by major supermarket to sell danish beer

This decision implies import of danish beer and imports are treated as leakages in the economy

1.5 c) The maximum volume of goods and servies the consumer can buy

1.6 c) Firm buys its sales representitive a car

This is included in the national income by income methods, as it is wages in kind

1.7 d) GDP can be estimated by adding the value added by all the different sectors of the economy

1.8 b) Benefit taxpayers at expense of governement

As inflation causes value of money to go down, taxpayers now pay a less valuable tax to the government

1.9 c) Cyclical unemployment

1.10 b) R72

$ 1 = 1.2 R
$ 60 = 1.2 x 60 R = R72

Question 2

2.1 g

2.2 k

2.3 i

2.4 b

2.5 h

2.6 f

2.7 m

2.8 e

2.9 j

2.10 c