JUNE 2013 EXAMINATION DATE: 13 JUNE 2013 DURATION: 3 HOURS PASS MARK: 40% (BUS-EC) ECONOMICS

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1 ECOBUS JUNE 2013 EXAMINATION DATE: 13 JUNE 2013 TIME: 09H00 12H00 TOTAL: 100 MARKS DURATION: 3 HOURS PASS MARK: 40% (BUS-EC) ECONOMICS THIS EXAMINATION PAPER CONSISTS OF 4 SECTIONS: SECTION A: CONSISTS OF: (i) 10 MULTIPLE-CHOICE QUESTIONS (10 MARKS) (ii) 5 TRUE OR FALSE QUESTIONS (10 MARKS) (iii) 10 MATCHING-STATEMENT QUESTIONS (10 MARKS) SECTION B: SECTION C: SECTION D: CONSISTS OF 4 SHORT QUESTIONS CONSISTS OF 4 LONG ANSWER QUESTIONS CONSISTS OF 3 INTERPRETATIVE QUESTIONS ANSWER ANY ONE OF THE QUESTIONS (10 MARKS) (40 MARKS) (20 MARKS) INSTRUCTIONS: 1. Read the following instructions carefully before answering the paper, as failure to act upon them will result in a loss of marks. 2. Write your answers in your answer book, which is provided in the exam. 3. Ensure that your name and student number are clearly indicated on your answer book. 4. Write your answers in either blue or black ink in your answer book. 5. Read each question very carefully before you answer it and number your answers exactly as the questions are numbered. 6. Begin with the question for which you think you will get the best marks. 7. Note the mark allocations for each question give enough facts to earn the marks allocated. Don't waste time by giving more information than required. 8. You are welcome to use diagrams to illustrate your answers. 9. Please write neatly we cannot mark illegible handwriting. 10. Any student caught cheating will have his or her examination paper and notes confiscated. The College will take disciplinary measures to protect the integrity of these examinations. 11. If there is something wrong with or missing from your exam paper or your answer book, please inform your invigilator immediately. If you do not inform your invigilator about a problem, the College will not be able to rectify it afterwards, and your marks cannot be adjusted to allow for the problem. 12. This paper may be removed from the examination hall after the examination has taken place. NOTE: YOU WILL NEED A PENCIL, RULER AND A NON-PROGRAMMABLE CALCULATOR. DAMELIN CORRESPONDENCE COLLEGE JUNE 2013 PAGE 1 OF 9

2 SECTION A (30 MARKS) (i) MULTIPLE-CHOICE QUESTIONS Choose the correct option for each of the following. Write only the question number and your chosen answer. For instance, if you think that the correct answer for number 1 is, then write it as The attempt to control inflation and moderate the business cycle by changing the quantity of money in circulation and adjusting interest rates is called: fiscal policy. bank policy. monetary policy. economic policy. 2. Which one of the following would not result in gains from international trade? specialisation economies of scale increased competition increased self-sufficiency 3. Which of the following circumstances will cause a firm to leave the industry in the long run? Price does not cover at least average total cost. Price is not equal to marginal cost. Price is higher than average variable cost. Price is not at least equal to the minimum of the marginal cost curve. 4. The current account on the balance of payments (BoP) records which of the following? change in gold reserves exports but not imports imports but not exports sales of goods/services and income flows to and from the ret of the world 5. Which of the following applies to the South African income tax system? regressive proportional progressive indirect DAMELIN CORRESPONDENCE COLLEGE JUNE 2013 PAGE 2 OF 9

3 6. Which statement describes an expansionary fiscal policy? an increase in the money supply an increase in government spending an increase in government taxes an increase in VAT 7. Which is the largest component of total domestic expenditure? consumer expenditure investment expenditure government expenditure export expenditure 8. Which characteristic of capitalism is incorrect? There is little government intervention. The system operates fast. Consumers have limited choices. The price mechanism divides the resources. 9. Excess demand occurs when: the price is above the equilibrium price. the price is below the equilibrium price. the price is equal to the equilibrium price. supply increases. 10. Which area on a Production Possibility Curve would indicate efficiency? to the right of the curve to the left of the curve nowhere on the curve anywhere on the curve [10] (ii) TRUE OR FALSE QUESTIONS Indicate whether the following statements are True or False. Motivate all your answers. 1. An increase in South African imports from the USA will give rise to an appreciation of the rand against the US dollar. 2. A perfectly inelastic demand curve is a straight vertical line. 3. VAT is a direct tax. 4. Coins are more cost-effective than bank notes. 5. Microeconomic equilibrium occurs when aggregate demand (AD) equals aggregate supply (AS). [5 2 = 10] DAMELIN CORRESPONDENCE COLLEGE JUNE 2013 PAGE 3 OF 9

4 (iii) MATCHING-STATEMENT QUESTIONS Match the terms in Column B to the statements in Column A. Write down the answers only, for example 1.. COLUMN A 1. sacrificing a need to satisfy another need 2. developing the rural areas monopoly COLUMN B government spending 3. products serving similar needs elasticity of demand 4. sensitivity of demand with regard to price changes 5. the price of one currency in terms of another currency (e) inflation substitutes 6. means of exchange (f) employment 7. levies on imported products (g) opportunity cost 8. providing public goods and services (h) protection 9. imperfect competition (i) exchange rate 10. decrease in the value of money (j) money [10] [30] DAMELIN CORRESPONDENCE COLLEGE JUNE 2013 PAGE 4 OF 9

5 SECTION B: SHORT QUESTIONS (10 MARKS) QUESTION 1 How is the trade balance on the Balance of Payments (BoP) account calculated? [2] QUESTION 2 Under what circumstances would trade between two countries not be mutually advantageous? (2) What would happen to the demand curve for South African rands if there was a decrease in the demand for South African exports? (2) [4] QUESTION 3 Briefly explain your understanding of the Production Possibility Curve (PPC). [2] QUESTION 4 Who is currently the Governor of the South African Reserve Bank? (1) Which South African icon appears on the new South African bank notes? (1) [2] [10] DAMELIN CORRESPONDENCE COLLEGE JUNE 2013 PAGE 5 OF 9

6 SECTION C: LONG ANSWER QUESTIONS (40 MARKS) QUESTION 1 The Green Thirteen shop sells personalised fun coffee mugs. The following table shows the quantity demanded and supplied at various prices for their fun green coffee mugs. Price Quantity Demanded Quantity Supplied R R R R R R R i. Draw a graph and show the equilibrium price and quantity (E1). (3) ii. iii. Due to the number 13 appearing on all the mugs, word of mouth quickly gets around and the demand increases by an extra 100 at each price level. What is the new equilibrium price and quantity(e2)? Show this on your graph. (2) Calculate the price elasticity of demand between the first equilibrium price (E1) and the second equilibrium price (E2). (5) [10] QUESTION 2 Explain your understanding of GDP (gross domestic product). (2) Identify the three methods for measuring GDP. (3) Select the figures (quoted in billions) in the following table and calculate the National Income using the Expenditure Formula. Net factor payments 10,000 Indirect taxes 18,000 Investment 40,000 Exports 15,000 Depreciation 8,000 Consumption 50,000 Government spending 35,000 Subsidies 10,000 Imports 8,000 (8) [13] DAMELIN CORRESPONDENCE COLLEGE JUNE 2013 PAGE 6 OF 9

7 QUESTION 3 Differentiate between economic growth and economic development. (4) Identify the demand factors of economic growth. (3) [7] QUESTION 4 Briefly outline the different types of economic systems. (9) Explain your understanding of a mixed economy. (1) [10] [40] DAMELIN CORRESPONDENCE COLLEGE JUNE 2013 PAGE 7 OF 9

8 SECTION D: INTERPRETATIVE QUESTIONS (20 MARKS) ANSWER ANY ONE OF THE QUESTIONS QUESTION 1 In order to produce goods or services, factors of production are required. Although the most volatile, perhaps the most important factor of production is labour. Skills are required as well as manual labour in any economy. Increases in the cost of living and shortages of skilled labour can push up wage rates. Thus the cost of labour is the largest cost factor in the economy. Discuss the economic importance of labour as a factor of production. (3 2 = 6) Labour is classified into four categories. Name these categories. (4) Identify the four main types of unemployment. (4) Increasing the demand for labour and strengthening the employability of labour would be included in an employment strategy. Discuss how the employability of labour can be strengthened. (6) [20] OR QUESTION 2 Changes in monetary or fiscal policies have a profound impact on the economy as a whole. Monetary policy plays a vital role in the stabilisation of the economy. Unlike changes to fiscal policy, when changes in monetary policy are decided upon and implemented, the effects are swift and relatively immediate. Bearing this statement in mind, answer the following questions. Identify three ways in which the SARB could decrease credit in the South African economy. (3) Name five types of inflation. (5) South Africa has a controlled floating exchange rate. Briefly discuss this statement. (5) Briefly explain your understanding of the following newspaper headlines: i. Balance of payments allows rand to fall (3) ii. Imported costs fuel flames of inflation (2) iii. Interest rates reach record level as rand drops (2) [20] OR DAMELIN CORRESPONDENCE COLLEGE JUNE 2013 PAGE 8 OF 9

9 QUESTION 3 Taxation is the most emotional of all economic issues. People do not like to pay taxes and all taxpayers feel as if they are carrying the brunt of the tax burden! Taxes are compulsory and are the largest form of government revenue, which is needed for government spending such as providing new hospitals and clinics. Explain your understanding of progressive and regressive taxes. In your answer give examples of each. (6) List four examples of indirect taxes. (4) The Minister of Finance announces the building and equipping of additional hospitals, resulting in an increase in government spending (G), during his annual Budget speech. Illustrate the effect this would have on the income level by means of an AD-AS diagram. (10) [20] [20] Section A: 30 marks Section B: 10 marks Section C: 40 marks Section D: 20 marks TOTAL: 100 MARKS DAMELIN CORRESPONDENCE COLLEGE JUNE 2013 PAGE 9 OF 9