Question

[40 MARAUT ECTION A Answer ALL questions in this section. (20 Marks) QUESTION 1 1 to 1 10 in your answer book Choose the most appropriate answer. Write down numbers write the letter that represents the correct answer. E.g. 1.11 A iswer book and next to each number 1.1 The rise in the value of one currency in relation to another is: a) Depreciation of the currency. b) An appreciation of the currency. c) A debasement of the currency. d) A weakening of the currency 1.2 Which of the following does NOT represent a key macroeconomic variable? 7 B a) The unemployment rate. b) The inflation rate. c) Gross Domestic Product (GDP). d) The population growth rate. 1.3 The inflation rate is measured by: a) b) c) d) e) The ratio of current year CPI to base year CPI. The percentage change in the CPI from one year to the next The percentage change in GDP from one year to the next. The ratio of current year CPI to the next year's CPL The ratio of current year PPI to the next year's PPL 1.4 A consumer's real purchasing power refers to: a) The nominal income level of the consumer. b) Wage income eamed through employment. c) The maximum volume of goods and services that the consumer can buy. d) Nominal GDP per capita. 1.5 Keynesians believe that the fluctuations in economic activity (business cycles): a) are caused by external factors such as the inappropriate use of government policy b) are caused by changes in weather patterns. c) are caused by structural or institutional changes. d) occur naturally in economies and require government intervention

Answer 1

1.1 Option B - an appreciation of the currency A currency is said to be appreciated when its value increases in relation to another currency. 1.2 Option D-the population growth rate Key macroeconomic variables include national income (GDP), unemployment rate, inflation rate, interest rate etc. Whereas, population growth rate is key element in demographic studies. 1.3 Option B - the percentage change in the CPI from one year to the next CPI of the current year-CPI of the base year. Inflation rate = CPI of the base year 1.4 Option C Real purchasing power of a consumer refers to the maximum volume of goods and services that the consumer can purchase. 1.5 Option D. According to Keynesian economic thought, fluctuations in economic activities are natural and it is caused by changes in aggregate demand and expectations. Keynes advocates government intervention as a solution to stabilize such fluctuations.

1.6 Option B. In a mixed economy legitimate areas of government intervention includes, regulation of monopoly power, stabilization of economy during the period of cyclical fluctuations and redistribution of income through taxation and transfers in favor of poor etc. Competitive markets are not a part of mixed economy and hence its price regulation cannot be considered as a legitimate area of government action. 1.7 Option D Rand is the South African currency. When rand depreciates, it value decreases relatively and this increases the cost of imports. Therefore increases the cost of imported goods 1.8 Option A Option is A is the incurrent statement. Cost push inflation is associated with the overall increase in the cost of inputs. 1.9 Optionc Unemployment occurs when people of working age who want to get employed cannot find employment. 1.10 Option C A tariff is a form of tax that is imposed on imports.