Question

Section A

B3 Which of the following statements regarding taxation is incorrect?
[1] As interest rates increase, bond prices decrease.
[2] As interest rates decrease, bond prices increase.
[3] There is a positive relationship between the interest rate and bond prices.
[4] If interest rates are high, the quantity of money demanded will tend to be low.
[5] If interest rates are low, the quantity of money demanded will tend to be high.

B4 Which of the following is not part of the South African Reserve Bank’s monetary policy framework?
[1] inflation targeting.
[2] maintaining price stability
[3] influencing interest rate levels
[4] achieving sustainable economic growth.
[5] all of the above form part of the South African Reserve Bank’s monetary policy framework.

B5 Which of the following statements regarding the foreign sector is/are correct?
a. Absolute advantage is a prerequisite for international trade.
b. Differences in resource endowments necessitate international trade.
c. Countries can only benefit from trade if the opportunity costs among the trading countries are the same.
[1] Only a and b
[2] Only and c
[3] Only b and c
[4] Only b
[5] Only c

B8 A decrease in the demand for USA dollar ($) in the South African foreign exchange market would result if there is
[1] a decrease in South African exports to the USA.
[2] a decrease in the gold price in South Africa.
[3] a decrease in South African tourists to the USA.
[4] a decrease in USA tourists to South Africa.

B9 Other things equal, recessions in the economies of South Africa’s trading partners will
[1] have no perceptible impact on the South African economy.
[2] cause inflation in the South African economy.
[3] depress real output and employment in the South African economy.
[4] stimulate real output and employment in the South African economy.
[5] None of the statements are correct.

B10 If the SARB buys dollars in the South African foreign exchange market, the South African rand will
[1] not be affected
[2] appreciate
[3] depreciate

B11 When the rand appreciates against the dollar, it
a. appreciates against other currencies as well.
b. stimulates the exports and dampens the imports.
c. improves the balance of payments.
[1] None of the statements are correct.
[2] Only a and c
[3] Only b and c
[4] Only b
[5] Only c

B12 In the simple Keynesian model,
[1] production is always equal to aggregate expenditure
[2] aggregate expenditure is less than production
[3] aggregate demand determines production
[4] aggregate supply determines production

B13 Which one of the following statements regarding Say`s law is correct?
[1] overproduction is not possible
[2] demand determines supply
[3] aggregate spending determines production
[4] consumption is equal to savings

B14 Which one of the following statements regarding the assumptions of the Keynesian model is correct?
[1] the simple Keynesian model can be used to study inflation
[2] the simple Keynesian model can be used to explain the workings of the labour market.
[3] the simple Keynesian model can be used to study monetary policy
[4] in the simple Keynesian model prices, wages, money supply and the interest rate are given meaning that their value is determined outside the model.

B20 To get the equilibrium level of income in the simple Keynesian model
[1] we multiply the autonomous aggregate spending by the multiplier
[2] we add all the autonomous aggregate spending component and subtract the multiplier
[3] we divide the multiplier by aggregate demand
[4] we multiply the interest rate by the multiplier

B21 An increase in the tax rate in the Keynesian model will
[1] shift the aggregate spending curve upwards in a parallel way
[2] shift the consumption curve upwards in a parallel way
[3] not affect the aggregate spending curve
[4] swivel the aggregate demand curve downwards

Answer 1

Section A) B3

Answering only first four parts as per HomeworkLib policy

[1] True.

Interest rate & bond prices are inversely related.

If interest rate rises, then people will want to put money in the bank & earn higher interest income, thus demand for bonds will fall, so to attract people to buy bonds, bond prices will fall.

2) True,

Interest rate falls, demand for bonds rise & so bond prices rise.

3)False.

Interest rates and bond prices have an inverserelationship; so when one goes up, the other goes down.

4) True

Money Demand is inversely related to interest rates

As interest rate rises, opportunity cost of holding money ( in terms of forgone interest by putting money in the bank)., rises.

Thus people will want to hold less money in hands & hence fall in money Demand .

5) False

Explanation from part 4th