Exam 2013 with memo.pdf

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UNIVERSITY OF THE FREE STATE/ UNIVERSITEIT VAN DIE VRYSTAAT

MAIN CAMPUS / HOOFKAMPUS

EECF62306

DEPARTMENT: ECONOMICS DEPARTEMENT: EKONOMIE

CONTACT NUMBER: KONTAKNOMMER: 401 3406/ 9196 MAIN YEAR-END EXAMINATION: NOVEMBER 2013

HOOFJAAREINDEKSAMEN: NOVEMBER 2013

ASSESSOR(E): Mrs/Mev. C. Campher; Mrs/ Mev. C. Duvenhage ASSESSOR(S): Mr/ Mnr. S. Guvuriro; Mr./ Mnr. C. Mudzingiri

MODERATOR: Mr/ Mnr N. Keyser

TIME / TYD: 2 hours/ ure MARKS / PUNTE: 100 INSTRUCTIONS:

• This paper consists of 5 questions on 6 pages. • Answer all the questions. • Read each question carefully and please write legibly. • For questions 2 to 5, show all necessary calculations and label all graphs clearly.

QUESTION 1 (2 x 22 = 44) Answer Question 1 on the answer sheet attached to the back of the question paper. 1.1 The transactions demand for money is the demand for money by households for

A. rainy day spending. B. predictable spending purposes. C. liquidity purposes. D. investing purposes.

1.2 GDP includes

A. the negative attributes in our quest for more goods and services, such as soil erosion and deforested landscape.

B. all quality improvements resulting from higher-quality goods replacing inferior goods. C. the cleanup expenses associated with pollution. D. the value of leisure.

1.3 Suppose a German bank purchases a South African Treasury bond. This transaction

would be recorded in the……… and is considered a ………… in South Africa. A. current account ; factor payment B. current account ; factor receipt C. financial account ; capital inflow D. financial account ; capital outflow

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1.4 Suppose the net export function is given as NX = 40 – 0.08Y and exports increase by R40

billion. Ceteris paribus, what will be the income level that gives a balanced trade? A. R500 billion B. R750 billion C. R1000 billion D. Its undefined

1.5 When the required reserve ratio ……., the money multiplier …….such that the money

supply …………… and it is a(an) ………monetary policy. A. increases; increases; increases; contractionary B. increases; decreases; decreases; expansionary C. increases; increases; increases; expansionary D. increases; decreases; decreases; contractionary

1.6 People react to an excess demand for money by

A. selling bonds, thus driving up the interest rate. B. selling bonds, thus driving down the interest rate. C. buying bonds, thus driving up the interest rate. D. buying bonds, thus driving down the interest rate.

1.7 If a country’s population grows at the same rate as its real GDP, then real per capita GDP

A. grows at an increasing rate. B. grows at a constant rate. C. doesn’t change. D. decreases at a decreasing rate.

1.8 The graph below illustrates the foreign exchange market for US$ and South African Rand

Which of the following could cause the dollar – rand exchange rate to change as shown above? A. American goods become more popular in South Africa. B. South African income rise, while U.S. incomes remain unchanged. C. The U.S. price level rises, while the South African price level remains unchanged. D. The U.S. real interest rate rises, while the South African real interest rate remains

unchanged.

Quantity of US$ (millions per day) 300 100

7.46

7.80

8.34

D2

S1

S2

D1

Rands per dollar

500

E2

E1

3

1.9 Based on the circular flow model, money flows from households to businesses in A. the factor market. B. both the factor and product market. C. the product market. D. neither the factor nor product market.

1.10 If the underground economy is sizable, GDP will

A. understate the economy’s performance. B. overstate the economy’s performance. C. fluctuate unpredictably. D. accurately reflect this subterranean activity.

1.11 The Lorenz curve

A. shows the ideal mix between direct and indirect taxes for a country. B. shows how income is distributed among citizens of a country. C. matches the level of tax collections of a government to tax levels of a country. D. matches government spending to government income.

1.12 Which of the following can create demand-pull inflation?

A. Excessive aggregate spending B. Sharply rising oil prices C. Higher labour costs D. Recessions and depressions

1.13 In year 1, the prices of goods X, Y, and Z are R2, R4, and R6 per unit, respectively. In

year 2, the prices of goods X, Y, and Z are R3, R4, and R7, respectively. In year 2, twice as many units of each good are produced as in year 1. In year 1, 20 units of X, 40 units of Y, and 60 units of Z are produced. If year 1 is the base year, what does real GDP equal in year 2?

A. 640 B. 1120 C. 1180 D. 1280

1.14 Danielle, a BCom Economics student at UFS spends all his pocket money on beer and

cigarettes. In 2011, he bought 60 beers and 20 packets of cigarettes. Using the information in the table below, what is the approximate inflation rate faced by Danielle?

Year Beer Cigarettes

2011 R2.50 R7.00

2012 R3.00 R8.00

4

A. 16.24% B. 17.24% C. 18.24% D. 19.24%

1.15 If the savings function is S = -200 + 0.25Y in a closed economy with no government

and there is an increase in autonomous expenditure of 100, then the final increase in GDP will be A. 75 B. 100 C. 400 D. 200

1.16 Suppose the economy is initially operating in a recession. In order to tackle the

recession, the South African Reserve Bank can ………… the repo rate, which will result in other short term interest rates ………. and the AD curve shifting……………. A. lower; falling, rightwards B. raise; rising; leftwards C. raise, rising; rightwards D. lower; rising; rightwards

1.17 Unemployment insurance payments A. rise during a recession and thus reduce the impact of the recession. B. rise during a recession and thus increase the impact of the recession. C. rise during inflationary episodes and thus reduce the impact of the inflation. D. fall during a recession and thus increase the impact of the recession.

1.18 Unemployment that is of short duration to allow a person time to find a new job is

A. structural unemployment. B. cyclical unemployment. C. frictional unemployment. D. under-employment.

1.19 Assume a simplified banking system subject to a 20 percent required reserve ratio. If

there is an initial increase in deposits of R100 000, the money supply A. increases by R100 000. B. increases by R500 000. C. increases by R600 000. D. decreases by R500 000.

1.20 The ease with which an asset can be converted into a medium of exchange is known

as A. volatility. B. liquidity. C. currency. D. speculative exchange.

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1.21 A closed and private economy has its expenditure information presented in the figure

below:

At equilibrium, income equals ……. and savings equal……. A. R5 000; R0 B. R6 000; R200 C. R10 000; R1 000 D. R10 000; R2 000

1.22 Which of the following is a problem when comparing GDP per capita between

nations? A. GDP per capita fails to measure income distribution. B. Fluctuations in exchange rates affect differences in GDP per capita. C. GDP per capita is subject to different measurement errors in different nations. D. All of the above answers are correct.

QUESTION 2 [12]

2.1 Assume that price level is flexible and that the economy is currently operating at its full employment output. Holding other things constant and on separate graphs, show how each of the following events affect the equilibrium price level and equilibrium level of output in the short run.

2.1.1 An increase in labour costs [4] 2.1.2 An increase in aggregate demand [4] 2.1.3 A significant increase in net exports [4]

QUESTION 3 [15]

3.1 Suppose your market basket for a college education consisted of only the four items listed in the following table:

Item 2012 2013 Tuition and fees for two semesters Room and board for nine months Payment for 10 textbooks Soft drinks: 20 bottles of coca-colas

R45 000 R60 000 R10 000 R1 500

R50 000 R62 000 R12 000 R2 000

Consumption, Investment

Income(Y)

Consumption

Investment

450

1 000

5 000

6

Using 2012 as the base year: 3.1.1 Calculate the college education Price Index for 2013. [2] 3.1.2 Calculate the college education inflation rate in the period given. [2] 3.1.3 Suppose the answer in 3.1.2 was equal to an inflation rate of 6.9% in South Africa and

SARB has repo rate as an instrument to use. State the action to take and show its impact on the money market using a graph. [4]

3.1.4 Suppose the inflation rate was 1.2% and the SARB has the repo rate as its only instrument, classify the action it can take in terms of discretionary or non-discretionary; expansionary or contractionary, and fiscal or monetary? [3]

3.2 In point form, describe the four relevant criteria used to determine whether a person is

officially unemployed. [4] QUESTION 4 [14]

4.1 A summary of the expenditures for a hypothetical economy are given as: C = 850 + 0.6Y I = 750 NX = 750 – 0.1Y G = 1000 T = 0.25Y 4.1.1 What level of income gives neither a budget surplus nor budget deficit? [2] 4.1.2 Plot the net export function showing clearly its values when there is trade balance.

[3] 4.1.3 Calculate the spending multiplier for this economy. [3]

4.2 Suppose the marginal propensity to consume is given as 0.75 and the size of the

autonomous spending is 3380. Using the Keynesian model, graphically show the impact of an increase in investment by 50. [6]

QUESTION 5 [15] 5.1 Suppose the South African Reserve Bank purchases government bonds. Use a complete

Keynesian Transmission Mechanism chain reaction, as well as all necessary graphs, to explain and illustrate the impact of this action on monetary and real sectors of the economy. [10]

5.2 What is the term that refers to the price of one currency expressed in terms of the other? [1]

5.3 Assume Japan is the only trading partner of South Africa, show how a rise of income in South Africa will impact the market for South African rand and state whether that results in the appreciation or depreciation of the rand [4]

End

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EECF62306




ASSESSOR(E): Mrs/Mev. C. Campher; Mrs/ Mev. C. Duvenhage ASSESSOR(S): Mr/ Mnr. S. Guvuriro; Mr./ Mnr. C. Mudzingiri

MODERATOR: Mr/ Mnr N. Keyser

TIME / TYD: 2 hours/ ure MARKS / PUNTE: 100 INSTRUKSIES

• Hierdie vraestel bestaan uit 5 vrae op 6 bladsye. • Beantwoord al die vrae • Lees elke vraag sorgvuldig deur en skryf asseblief leesbaar. • Vir vrae 2 tot 5, toon alle nodige berekeninge en etiketteer alle grafieke duidelik.

VRAAG 1 (2 x 22 = 44) Beantwoord Vraag 1 op die antwoordblad wat aan die vraestel geheg is. 1.1 Die transaksievraag na geld is die vraag na geld van huishoudings vir

A. spandering op ŉ reënerige dag. B. spandering op voorspelbare doeleindes. C. likiditeitsdoeleindes. D. investeringsdoeleindes.

1.2 BBP sluit in

A. die negatiewe kenmerke van ons soeke na meer goedere en dienste, soos gronderosie en ontbosde landskappe.

B. alle kwaliteit verbeterings as gevolg van hoër kwaliteit goedere wat minderwaardige goedere vervang.

C. die skoonmaakkostes verbonde aan besoedeling. D. die waarde van vryetyd.

1.3 Veronderstel ŉ Duitse bank koop ŉ Suid-Afrikaanse Skatkiswissel. Die transaksie sal

aangeteken word in die …………. en word ŉ …………… geag in Suid-Afrika. A. lopende rekening ; faktorbetaling B. lopende rekening ; faktorontvangste C. finansiële rekening ; kapitale invloei.

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D. finansiële rekening ; kapitale uitvloei. 1.4 Veronderstel die netto uivoerfunksie word gegee as NX = 40 – 0.08Y en uitvoere verhoog

met R40 miljard. Ceteris paribus, wat sal die inkomstevlak wees waar handel gebalanseerd is? A. R500 miljard B. R750 miljard C. R1000 miljard D. Dit is ongedefinieerd.

1.5 Wanneer die vereistereserwe verhouding ……., sal die kredietvermenigvuldiger ……..

sodat die geldaanbod ………… en dit is ’n …………….. monetêre beleid. A. styg; styg; styg; beperkende. B. styg; daal; daal; ekspansionistiese. C. styg; styg; styg; ekspasnionistiese. D. styg; daal; daal; beperkende.

1.6 Mense reageer op ‘’n oorskotvraag na geld deur

A. effekte te verkoop en dryf dus die rentekoers op. B. effekte te verkoop en dryf dus die rentekoers af. C. effekte te koop en dryf dus die rentekoers op. D. effekte te koop en dryf dus die rentekoers af.

1.7 As ’n land se bevolking teen dieselfde koers as die reële BBP-groei, dan sal die reële per

capita BBP A. teen ’n stygende koers groei. B. teen ’n konstante koers groei. C. nie verander nie. D. daal teen ’n dalende koers.

1.8 Die grafiek hieronder illustreer die buitelandse valutamarkte vir VSA $ en die Suid-

Afrikaanse Rand. Watter van die volgende kan veroorsaak dat die dollar-rand wisselkoers verander soos hierbo aangetoon?

A. Amerikaanse goedere word meer gewild in Suid-Afrika. B. Suid-Afrikaanse inkomste styg, terwyl VSA inkomste onveranderd bly. C. Die VSA prysvlak styg, terwyl die Suid-Afrikaanse prysvlak onveranderd bly.

Hoeveelheid VSA$ (miljoene per dag) 300 100

7.46

7.80

8.34

D2

S1

S2

D1

Rand per dollar

500

E2

E1

9

D. Die VSA se reële rentekoerse styg, terwyl die Suid-Afrikaanse rentekoerse onveranderd bly.

1.9 Gebaseer op die sirkulêrevloeimodel, vloei geld van huishoudings na besighede in

A. die faktormark. B. beide die faktormark en die produktemark. C. die produktemark. D. nie die faktormark of die produktemark nie.

1.10 Indien die onwettige ekonomie groot is, sal BBP die

A. ekonomie se prestasie onderskat. B. ekonomie se prestasie oorskat. C. onvoorspelbaar fluktueer. D. die ondergrondse aktiwiteite akkuraat reflekteer.

1.11 Die Lorenz kurwe

A. toon die ideale mengsel tussen direkte en indirekte belastings vir ’n land aan. B. toon hoe inkomste verdeel is onder die burgers van ’n land. C. pas die vlak van belastinginvorderings van die regering by die belastingvlakke van ’n

land. D. pas regeringsbesteding by regeringsinkomste.

1.12 Watter van die volgende kan vraagtrek-inflasie skep?

A. Oordadige totale besteding. B. Skerp stygende oliepryse. C. Hoë arbeidskostes. D. Resessies en depressies.

1.13 In jaar 1 is die pryse van goedere X, Y en Z, R2, R4 en R6 per eenheid,

onderskeidelik. In jaar 2 is die pryse van goedere X, Y en Z, R3, R4 en R7, onderskeidelik. In jaar 2 word dubbel soveel eenhede van elke produk geproduseer as in jaar 1. In jaar 1 is 20 eenhede van X, 40 eenhede van Y, en 60 eenhede van Z geproduseer. As jaar 1 die basisjaar is, waaraan is die reële BBP gelyk in jaar 2? A. 640 B. 1120 C. 1180 D. 1280

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1.14 Danielle, ’n B.Com. Ekonomiestudent aan die UVS spandeer al sy sakgeld op bier en sigarette. In 2011 het hy 60 biere en 20 pakkies sigarette gekoop. Deur gebruik te maak van die inligting in die onderstaande tabel, wat is die beraamde inflasiekoers wat Danelle in die gesig staar.

Jaar Bier Sigarette

2011 R2.50 R7.00

2012 R3.00 R8.00

A. 16.24% B. 17.24% C. 18.24% D. 19.24%

1.15 As die spaarfunksie S = -200 + 0.25Y is in ’n geslote ekonomie met geen owerheid

nie en daar is ’n styging in die outonome besteding van 100, dan sal die finale styging in BBP…….. wees. A. 75 B. 100 C. 400 D. 200

1.16 Veronderstel die ekonomie opereer aanvanklik in ’n resessie. Om die resessie aan te

spreek, kan die Suid-Afrikaanse Reserwebank die repokoers……………..wat sal veroorsaak dat rentekoerse oor die korttermyn ……………… en die AD kurwe na…………. skuif. A. verlaag; daal; regs B. verhoog; styg; links C. verhoog; styg; regs D. verlaag; styg; regs

1.17 Werkloosheidsversekeringbetalings

A. styg gedurende ’n resessie en dus verminder dit dus die impak van die resessie. B. styg gedurende ’n resessie en verhoog dit dus die impak van die resessie. C. styg gedurende inflasionêre episodes en dus verminder die impak van die resessie. D. daal gedurende ’n resessie en dus verhoog die impak van die resessie.

1.18 Werkloosheid wat van korte duur is om ’n persoon tyd te gee om nuwe werk te kry, is

A. strukturele werkloosheid. B. sikliese werkloosheid. C. wrywingswerkloosheid D. onder-indiensname.

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1.19 Neem ’n vereenvoudigde bankstelsel aan, wat onderhewig is aan ’n 20 persent reserwevereiste. Indien daar oorspronklik ’n styging van R100 000 in deposito’s is, sal die geldaanbod A. styg met R100 000. B. styg met R500 000. C. styg met R600 000. D. daal met R500 000.

1.20 Die gemak waarmee ’n bate omgesit kan word in ’n medium van verruiling, staan

bekend as A. volatiliteit B. likiditeit C. geldeenheid. D. spekulatiewe verruiling.

1.21 ’n Geslote en privaat ekonomie se bestedingsinligting word uitgebeeld in die figuur

hieronder. By ewewig, is inkomste gelyk aan……….. en spaar gelyk aan……..

A. R5 000; R0 B. R6 000; R200 C. R10 000; R1 000 D. R10 000; R2 000

1.22 Watter van die volgende is ’n probleem wanneer die BBP per capita tussen nasies

vergelyk word? A. BBP per capita misluk om inkomsteverdeling te meet. B. Fluktuasies in wisselkoerse affekteer verskille in BBP per capita. C. BBP per capita is onderhewig aan verskillende metingsfoute in verskillende nasies. D. Al die bogenoemde antwoorde is korrek.

Verbruik, Investering

Inkomste(Y)

Verbruik

Investering

450

1 000

5 000

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VRAAG 2 [12] 2.1 Neem aan dat die prysvlak buigsaam is en dat die ekonomie tans by sy volle

indiensnamevlak opereer. Hou alle ander dinge konstant en toon op aparte grafieke aan hoe elk van die volgende gebeure die ewewigsprysvlak en ewewigsuitsetvlak oor die korttermyn affekteer.

2.1.1 ’n styging in arbeidskostes [4] 2.1.2 ’n styging in totale vraag [4] 2.1.3 ’n aansienlike styging in netto uitvoere. [4] VRAAG 3 [15] 3.1 Veronderstel jou markmandjie vir kollege opleiding bestaan uit slegs vier items wat in die

volgende tabel gelys word. Item 2012 2013 Inskrywing en fooie vir twee semesters Kamer en losies vir nege maande Betaling vir 10 handboeke Koeldranke: 20 bottels Coca-Cola

R45 000 R60 000 R10 000 R1 500

R50 000 R62 000 R12 000 R2 000

Gebruik 2012 as die basisjaar: 3.1.1 Bereken die kollege opleiding Prysindeks vir 2013 [2] 3.1.2 Bereken die kollege opleiding inflasiekoers gedurende die periode wat gegee is. [2] 3.1.3 Veronderstel die antwoord in 3.1.2 was gelyk aan die inflasiekoers van 6.9% in Suid-

Afrika en die SARB het die repokoers as ’n instrument om te gebruik. Stel die aksie wat geneem moet word voor en toon die impak op die geldmark aan deur van ’n grafiek gebruik te maak. [4]

3.1.4 Veronderstel die inflasiekoers was 1.2% en die SARB het slegs die repokoers as ‘n instrument, klassifiseer die aksie wat die SARB kan neem in terme van diskresionêre en nie- diskresionêre; ekspansionisties of beperkend en fiskaal of monetêre? [3]

3.2 Puntsgewys, beskryf die vier relevante kriteria wat gebruik word om te bepaal of ’n

persoon amptelik werkloos is. [4] VRAAG 4 [14] 4.1 ’n Opsomming van die besteding vir ’n hipotetiese ekonomie word gegee as: C = 850 + 0.6Y I = 750 NX = 750 – 0.1Y G = 1000 T = 0.25Y 4.1.1 Watter vlak van inkomste sal nie ŉ begrotingsurplus of -tekort gee nie? [2]

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4.1.2 Teken die netto uitvoer funksie en toon duidelik die waardes indien daar handelsbalans/ewewig is. [3]

4.1.3 Bereken die bestedingsvermenigvuldiger vir hierdie ekonomie. [3] 4.2 Veronderstel die marginale verbruiksgeneigdheid word gegee as 0.75 en die grootte van

die outonome besteding is 3380. Deur gebruik te maak van die Keynesiaanse model, toon grafies die impak van ŉ styging in investering van 50 aan. [6]

VRAAG 5 [15] 5.1 Veronderstel die Suid-Afrikaanse Reserwebank koop staatseffekte. Gebruik ŉ volledige

Keynesiaanse Transmissiemeganisme kettingreaksie, asook die nodige grafieke, om die impak van hierdie aksie op die monetêre en reële sektore van die ekonomie te verduidelik en te illustreer. [10]

5.2 Wat is die term wat verwys na die prys van een geldeenheid wat uitgedruk word in terme

van ŉ ander. [1] 5.3 Veronderstel Japan is die enigste handelsvennoot van Suid-Afrika, toon aan wat die

impak van ŉ styging in inkomste in Suid-Afrika op die mark vir Suid-Afrikaanse rand sal wees en noem of dit ŉ appresiasie of depresiasie van die rand sal veroorsaak. [4]

Einde

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EECF62306 MEMO




MEMO TIME / TYD: 2 hours/ ure MARKS / PUNTE: 100 INSTRUCTIONS:

• This paper consists of 5 questions on 7 pages. • Answer all the questions. • Read each question carefully and please write legibly. • For questions 2 to 5, show all necessary calculations and label all graphs clearly.

QUESTION 1 (2 x 22 = 44) 1.1 B 1.2 C 1.3 C 1.4 C 1.5 D 1.6 A 1.7 C 1.8 C 1.9 C 1.10 A 1.11 B 1.12 A 1.13 B 1.14 B 1.15 C 1.16 A 1.17 A 1.18 C 1.19 B 1.20 B 1.21 C 1.22 D

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QUESTION 2 [12]

2.2 Assume that price level is flexible and that the economy is currently operating at its full employment output. Holding other things constant and on separate graphs, show how each of the following events affect the equilibrium price level and equilibrium level of output in the short run.

2.2.1 An increase in labour costs [4]

2.2.2 An increase in aggregate demand [4]

2.2.3 A significant increase in net exports [4]

Price

level

Output

SAS

AD0

AD1 ��

��

��

LAS

�� for labels of all curves

Price

level

Output

SAS

AD0

AD1 ��

��

��

LAS


Price

level

Output

SAS

AD0

SAS1

��

��

��

LAS


16

QUESTION 3 [15]

3.3 Suppose your market basket for a college education consisted of only the four items listed in the following table:

Item 2012 2013 Tuition and fees for two semesters Room and board for nine months Payment for 10 textbooks Soft drinks: 20 bottles of coca-colas

R45 000 R60 000 R10 000 R1 500

R50 000 R62 000 R12 000 R2 000

Using 2012 as the base year: 3.3.1 Calculate the college education Price Index for 2013. [2]

Price index for 2013 = [(50 000 + 62 000 + 12 000 + 2 000)/(45 000 + 60 000 + 10 000 + 1 500)] x 100% �� = (126 000/116 500) x 100% = 108.1545% ��

3.3.2 Calculate the college education inflation rate in the period given. [2]

Inflation rate = [(CPI 2013 – CPI2012)/CPI2012] x 100% = [(108.1545 – 100)/100] x 100% �� = 8.1545% ��

3.3.3 Suppose the answer in 3.1.2 was equal to an inflation rate of 6.9% in South Africa and SARB has repo rate as an instrument to use. State the action to take and show its impact on the money market using a graph. [4] Action: Increase / Raise the repo rate ��

3.3.4 Suppose the inflation rate was 1.2% and the SARB has the repo rate as its only instrument, classify the action it can take in terms of discretionary or non-discretionary; expansionary or contractionary, and fiscal or monetary? [3] Discrectionary ��, contractionary ��, monetary �� policy

3.4 In point form, describe the relevant criteria used to determine whether a person is

officially unemployed. [4] - Within the working age group �� e.g. (15 – 64 years) - Does not work �� - Willing and able to work �� - Actively searching / has taken some actions to try to get a job. ��

MD

Money balances

MS0 MS1 Interest rate

��

�� labels of curves and axes

17

QUESTION 4 [14]

4.3 A summary of the expenditures for a hypothetical economy are given as: C = 850 + 0.6Y I = 750 NX = 750 – 0.1Y G = 1000 T = 0.25Y 4.3.1 What level of income gives neither a budget surplus nor budget deficit? [2]

At G = T, 1000 = 0.25Y �� <=> Y = 4000��

4.3.2 Plot the net export function showing clearly its value when there is trade balance. [3]

4.3.3 Calculate the spending multiplier for this economy. [3] Marginal propensity to spent = c(1-t) – m = 0.6(1 – 0.25) – 0.1 = 0.35 �� Spending multiplier = 1 / (1 – marginal propensity to spend) = 1 / (1 – 0.35) = 1.54 ��

4.4 Suppose the marginal propensity to consume is given as 0.75 and the size of the autonomous spending is 3380. Using the Keynesian model, graphically show the impact of an increase in investment by 50. [6]

Minus 1 mark if axes are not labelled correctly.

NX

750 ��

NX = 750 – 0.1Y ��

7 500

��

0 Y

3380��

3430��

450

TE1 = 3380 + 0.75Y��

TE2 = 3430 + 0.75Y��

13 520�� 13 720�� Y

TE

18

QUESTION 5 [11]

5.4 Suppose the South African Reserve Bank purchases government bonds. Use a complete Keynesian Transmission Mechanism chain reaction, as well as all necessary graphs, to explain and illustrate the impact of this action on monetary and real sectors of the economy. [10]

SARB purchases bonds => MS ↑�� => i ↓ �� => I ↑�� => TE↑ ��=> AD↑ => stocks↓ => Prices ↑�� => production ↑ => GDP or Y↑��

5.5 What is the term that refers to the price of one currency expressed in terms of the other?

[1] Exchange rate ��

MD

Money balances

MS1 MS0 Interest rate

Investment

I

Interest rate

Auto TE0

Auto TE1

450

TE1

TE2

Y0 Y1 Y

TE

Y or GDP

AD0 AD1

AS

CPI

��

��

��

19

5.6 Assume Japan is the only trading partner of South Africa, show how a rise of income in South Africa will impact the market for South African rand and state whether that results in the appreciation or depreciation of the rand [4]

Depreciation of the rand ��

End

Yen

per

rand

Quantity of rands

SS of rand1

Demand for rand

SS of rand0

��

��

��

20

UNIVERSITEIT VAN DIE VRYSTAAT UNIVERSITY OF THE FREE STATE

MAIN CAMPUS/ HOOFKAMPUS

EECF62306

DEPARTEMENT EKONOMIE

DEPARTMENT OF ECONOMICS

CONTACT NUMBER: KONTAKNOMMER: 401 3406/ 9196/ 5069

ADDITIONAL YEAR-END EXAMINATION: NOVEMBER 2013 BYKOMENDE JAAREIND EKSAMEN: NOVEMBER 2013

ASSESSOR(S): Mrs/Mev. C. Campher; Mrs/ Mev. C. Duvenhage ASSESSOR(E): Mr/ Mnr. S. Guvuriro; Mr./ Mnr. C. Mudzingiri

MODERATOR: Mr/ Mnr. N. Keyser TYD/TIME: 2 uur/hours PUNTE/MARKS: 100 INSTRUCTIONS • This paper consists of 5 questions on 8 pages. • Answer all the questions.

• Read the questions carefully and please write legibly. • Graphs should be clearly drawn and labelled

• Show all calculations where necessary and all calculations should be rounded off to 2 decimal places.

QUESTION 1 [25 x2 =50] Answer Question 1 on the answer sheet attached to the back of the question paper.

1.1 If nominal GDP increased by 8.5% during 2012 and inflation for 2012 were to equal 4.9%, we can conclude that during 2012

A. Real GDP decreased B. Prices decreased C. Real GDP increased D. Nominal GDP is likely to decrease to 3.6% in future

1.2 If real GDP is greater than potential GDP, we can conclude that in the long run

A. real GDP will equal potential GDP. B. the quantity supplied will increase. C. inflation will definitely decrease. D. unemployment will decrease.

1.3 The production method of measuring GDP is calculated by summing up the

A. income earned at each point of production. B. value added at each level of production.

21

C. profit made at each level of production. D. value of all production.

1.4 If South Africa is maintaining a current account surplus then it is likely that it is A. importing more than it is exporting. B. overvaluing its currency. C. exporting more than it is importing. D. all of the above.

1.5 If the required reserve ratio held by commercial banks is 10%, and there is an additional

deposit of R4 000 into the banking system, then the maximum total new A. money created is R36 000. B. money created is R40 000. C. loans created will be R40 000. D. deposits into the banking system is R36 000.

1.6 If the demand for money increases we can expect that

(i) Money supply will increase (ii) Price of bonds will decrease (iii)Output will increase (iv) Interest rate will increase

A. (i), (ii) (iii) and (iv) B. (ii) and (iv) C. (i), (ii) and (iii) D. (ii), (iii) and (iV)

1.7 In a circular flow model including government, which of the following statements is

FALSE? A. Businesses provide the government with taxes, goods and services. B. Businesses provide households with income, goods and services. C. Businesses receives services and payments from the government. D. Households provide businesses with services and income.

1.8 Gross domestic product estimated on the basis of prevailing prices is known as

A. Net national product at current prices. B. GDP at constant prices. C. GDP at basic prices. D. GDP at market prices.

1.9 Which of the following is an example of a final good or service? A. Wheat purchased by a bakery to make bread with. B. Coffee bean purchased to make coffee at home. C. Bricks purchased by a construction company to be used in construction of

houses. D. Fertiliser purchased by a farmer to fertilise his crops.

22

1.10 Jonathan receives a 5% wage increase in year 2012. During 2012, his real wage falls by 1%. The price level in 2012 thus rose by

A. 4% B. 6% C. 5% D. It is impossible to say

1.11 Assume the nominal GDP was R524 000 in 2011 and R 578 000 in 2012. If we treat 2011 as our base year and assume that real GDP growth was 4% in 2012, the GDP deflator for 2012 is

A. 110.31 B. 106.06 C. 104.00 D. 90.66

1.12 The cost of a representative basket of goods and services in any year divided by the

cost in an earlier base year is A. the unemployment rate. B. the inflation rate. C. the consumer price index. D. economic growth index.

1.13 The labour force participation rate measures

A. the percentage of people of working age who have jobs. B. the extent to which people want jobs but can’t find them. C. the percentage of people of working age who are members of the labour force. D. the percentage of people in the labour force who are unemployed.

1.14 Autonomous consumption is

A. the portion of consumption that is dependent upon the level of income B. the portion of consumption that is independent of the level of income C. the steady increase in the consumption of goods and services that

automatically occurs as a nation develops D. total consumption divided by total national income

1.15 In the short run, a decrease in wage rates, ceteris paribus, shifts the

A. SRAS curve to the right, causing equilibrium price level to fall and equilibrium real GDP to increase.

B. SRAS curve to the right, causing the equilibrium price level to fall and equilibrium real GDP to decrease.

C. AD curve to the right, causing equilibrium price level to rise and equilibrium real GDP to increase.

D. AD curve to the right, causing equilibrium price level to rise and equilibrium real GDP to decrease.

23

1.16 If the SARB increases the quantity of required reserves, the interest rate ________ and the quantity of money .

A. falls; increases. B. falls; decreases. C. rises; increases. D. rise; decreases.

1.17 If South Africa’s GDP is less than its GNP, then the income earned by foreign owners

of companies and foreign workers in South Africa is …………….. the income earned by South Africans who have invested abroad, or who are working abroad.

A. greater than B. added to C. subtracted from D. less than

1.18 If South Africans dramatically increase exports to the UK, we would expect the

A. supply of Pound Sterling to increase and the Rand to appreciate. B. demand for Pound Sterling to increase and the Rand to appreciate. C. supply of Pound Sterling to increase and the Rand to depreciate. D. demand for Pound Sterling to increase and the Rand to depreciate.

1.19 The graph below illustrates the consumption expenditure in the Keynesian Model

In the graph above, if income is say 800, then consumption equals...... and saving equals .........

A. 800; 0 B. 500; 50 C. 770; 30 D. 550; 250

1.20 A Gini coefficient of 0.9 means

A. income is equally distributed. B. white citizens are richer than Indians. C. income is unequally distributed. D. fewer people have income and everyone else has none.

24

1.21 The difference between wealth and income is that

A. wealth does not include money. B. income is measured in monetary values. C. rich people have wealth while poor people have income only. D. wealth is a stock of assets while income is a flow of earnings that results from

stock of wealth.

1.22 The ratio of the change in GDP to an initial autonomous change in aggregate spending is the:

A. spending multiplier B. permanent income rate C. marginal expenditure rate D. marginal propensity to consume

1.23 In the table below, when the exchange rate is 3 rands per pound,

Quantity Demanded

Rand per Pound

Quantity Supplied

200 5 600 240 4 480 300 3 410 360 2 360 390 1 330

A. there is an excess supply of 110 pounds. B. there is an excess demand of 110 pounds. C. there is an excess supply of 110 rands. D. there is an excess demand of 110 rands.

1.24 The graph below shows the Money market curves

Starting from an equilibrium at E1, a leftward shift of the money supply curve from MS1 to MS2 would cause an excess:

A. demand for money, leading people to sell bonds. B. demand for money, leading people to buy bonds. C. supply of money, leading people to sell bonds. D. supply of money, leading people to buy bonds.

25

1.25 Fiat money is money:

A. accepted by law regardless of its intrinsic value. B. that is not included as part of the M1 money supply. C. that is backed by gold or silver held on reserve by the government. D. such as coins that are made from metal.

QUESTION 2 [13] 2.1 You are given the following information about the economy of Zululand in 2012, all

monetary figures are in billions of rands;

Autonomous consumption 400 Marginal propensity to consume 0.69 Investment 300 Government spending 500 Tax rate 0.14 Exports 350 Autonomous imports 320 Marginal propensity to import ? Equilibrium income (output) 2209.85 2.1.1 Construct a saving function for this economy. (2) 2.1.2 What is the value of total consumption at the equilibrium level of output? (3) 2.1.3 What is the value of the marginal propensity to import? (3) 2.1.4 At what level of output is the government budget balanced? (2) 2.1.5 Calculate the spending multiplier for Zululand if the economy is (i) a two sector

economy (without government and foreign sector) (ii) a three sector economy (with government and no foreign sector) (3)

QUESTION 3 [10] 3.1 If inflation increases above the stipulated target of 3-6% set by the SARB. The SARB will be forced to increase the repo rate. Use the necessary graphical representation to show Keynesian Transmission changes that will take place in the monetary and real sectors after the action by SARB. Explain the changes that will materialize in the monetary and real sector in full. (10)

26

QUESTION 4 [13]

The information below relates to the inhabitants of Robben Island between the ages of 15 to 64.

4.1 If the strict unemployment is 10%, how many people are; 4.1.1 unemployed? 4.1.2 employed? (3)

4.2 Furthermore, use the information to calculate, 4.2.1 the unemployment rate according to the expanded definition? (2) 4.2.2 the labour force? (2)

4.3 A windstorm hit Robben Island damaging industrial buildings and leaving 300 people

unemployed. By making use of the AD/AS (short-run) curves show the effect of the windstorm on the Robben Island economy. (4)

4.4 The government of Robben Island would like to adopt the Socialist ideology, where income will be shared equally amongst citizens. Draw a Lorenz Curve showing income distribution of Robben Island after implementing the socialistic ideology. [2]

Working age population

10 000

Formally employed

????

Self employed

2600

Unemployed

???

(Available to work

and have taken

active steps)

Not economically

active

1900

In the labour force/ economically active

???

Not Available

to work

1300

Discouraged

workers

???

27

QUESTION 5 [14] 5.1 The table below shows information for Kovsies Commercial Bank. % cash reserve requirement ratio

Deposit Total reserves Excess reserves

W 20 000 5500 0 8 X 32 000 8000 10 600 000 1000 Z

5.1.1 Make use of the information in the table above to calculate the values of W, X and Z. (6)

5.2 Consider the South African rand/ US dollar exchange rate, and focus on the market for dollar. Using the demand and supply curves, explain whether the dollar would appreciate or depreciate against the rand, and whether that rand would appreciate or depreciate against the dollar in the following scenarios:

Hint: Assume US is the only trading partner of South Africa 5.2.1 GM motors a US Company opens a car production plant in Mpumalanga in South

Africa [4] 5.2.2 Due to a poorly thought economic policy in South Africa, US companies in South

Africa disinvest and move to Mozambique. [4] The End

28


MAIN CAMPUS/ HOOFKAMPUS

EECF62306





ASSESSOR(S): Mrs/Mev. C. Campher; Mrs/ Mev. C. Duvenhage ASSESSOR(E): Mr/ Mnr. S. Guvuriro; Mr./ Mnr. C. Mudzingiri

MODERATOR: Mr/ Mnr. N. Keyser TYD/TIME: 2 uur/hours PUNTE/MARKS: 100 INSTRUKSIES • Hierdie vraestel bestaan uit 5 vrae op 8 bladsye. • Beantwoord al die vrae.

• Lees die vrae deeglik en skryf asseblief leesbaar. • Grafieke moet duidelik geteken en benoem word.

• Wys al die berekeninge waar nodig en alle berekeninge moet tot 2 desimale plekke afgerond word.

VRAAG 1 __ [25 x2 =50] Beantwoord Vraag 1 op die antwoordblad wat aan die vraestel geheg is.

1.1 Indien nominale BBP met 8.5% gedurende 2012 toegeneem het en inflasie vir 2012 gelykstaande aan 4.9% was, kan ons tot die gevolgtrekking kom dat in 2012

A. reële BBP afgeneem het. B. pryse afgeneem het C. reële BBP toegeneem het. D. nominale BBP heel moontlik in die toekoms met 3.6% kan afneem.

1.2 Indien reële BBP groter is as die potensiële BBP, kan ons die gevolgtrekking maak dat

in die lang termyn A. reële BBP gelyk aan potensiële BBP sal wees. B. die hoeveelheid aangebied sal toeneem. C. inflasie definitief sal afneem. D. werkloosheid sal afneem.

1.3 Die produksiemetode van meting van BBP word bereken deur die optelling van die:

A. inkomste verdien by elke punt van produksie. B. waarde toegevoeg by elke vlak van produksie.

29

C. winste gemaak by elke vlak van produksie. D. waarde van al die produksie.

1.4 As Suid-Afrika ‘n lopende rekening surplus handhaaf, dan is dit moontlik dat die A. invoere die uitvoere oorskry. B. Rand oorwaardeer is. C. uitvoere die invoere oorskry. D. Al die bogenoemde is korrek.

1.5 As die vereistereserwekoers wat by kommersiële banke gehou word 10% is, en daar is

‘n addisionele deposito van R4 000 in die banksisteem, dan is die maksimum totale nuwe

A. geld geskep R36 000. B. geld geskep R40 000. C. verbande geskep R40 000. D. depositos in die bank sisteem R36 000.

1.6 As die vraag na geld toeneem dan kan ons verwag dat die

(i) aanbod van geld sal toeneem. (ii) pryse van lenings sal afneem. (iii) uitset sal toeneem. (iv) rentekoerse sal toeneem.

A. (i), (ii) (iii) en (iv) B. (ii) en (iv) C. (i), (ii) en (iii) D. (ii), (iii) en (iv)

1.7 In ‘n sirkulêrevloeimodel insluitende die regering, watter van die volgende stellings is

VALS? A. Besighede verskaf aan die regering belasting, goedere en dienste B. Besighede verskaf aan die huishoudings inkomste, goedere en dienste. C. Besighede ontvang dienste en betalings van die regering. D. Huishoudings verskaf aan besighede dienste en inkomstes.

1.8 Bruto binnelandse produk wat geskat word op die basis van heersende pryse word

genoem A. Netto nasional produk teen huidige pryse. B. BBP teen konstante pryse. C. BBP teen basiese pryse. D. BBP teen markpryse.

1.9 Watter van die volgende is ‘n voorbeeld van finale goedere of dienste?

A. Koring gekoop deur die bakkery om brood te maak. B. Koffiebone gekoop om koffie by die huis te maak. C. Stene gekoop deur ‘n konstruksiemaatskappy om te gebruik in die bou van

huise. D. Kunsmis gekoop deur die boer om oeste te bemes.

30

1.10 Jonathan ontvang a 5% loonverhoging in die jaar 2012. Gedurende 2012, neem sy

reële loon met 1% af. Dus het die prysvlakke in 2012 gestyg met A. 4% B. 6% C. 5% D. Onmoontlik om te sê

1.11 Gestel die nominale BBP was R524 000 in 2011 en R578 000 in 2012. Indien ons 2011 as die basisjaar neem en aanneem dat die reële BBP groei in 2012 4% was, sal die BBP deflator vir 2012________gewees.

A. 110.31 B. 106.06 C. 104.00 D. 90.66

1.12 Die koste van ‘n verteenwoordigende mandjie goedere en dienste in enige gegewe

jaar gedeel deur die koste in ‘n vorige basis jaar is die: A. werkloosheidskoers. B. inflasiekoers. C. verbruikdersprysindeks. D. ekonomiese groei-indeks.

1.13 Die arbeidsmagdeelnamekoers meet

A. die persentasie van mense van werkende ouderdom wat werk het. B. die mate waarin mense werk soek maar nie kan vind nie. C. die persentasie van mense van werkende ouderdom wat deel uitmaak van die

werksmag. D. die persentasie van mense in die werkersmag wat werkloos is.

1.14 Outonome verbruik is

A. die deel van verbruik wat afhanklik van die inkomstevlak is. B. die deel van verbruik wat onafhanklik van die inkomstevlak is. C. die bestendige toename in verbruik van goedere en dienste wat outomaties

gebeur soos die volk ontwikkel. D. totale verbruik gedeel deur totale nasionale inkomste.

1.15 In die korttermyn, ‘n afname in die loonkoerse, ceteris paribus, skuif die

A. SRAS kurwe na regs, en veroorsaak dat die ewewigsprys afneem en reële BBP toeneem.

B. SRAS kurwe na regs, en veroorsaak dat die ewewigsprys afneem en reële BBP afneem.

C. AD kurwe na regs, en veroorsaak dat die ewewigsprys toeneem en reële BBP toeneem.

D. AD kurwe na regs, en veroorsaak dat die ewewigsprys toeneem en reële BBP afneem.

31

1.16 As die SARB die vereistereserwes verhoog, sal die rentekoers_______ en die hoeveelheid geld ________

A. afneem: toeneem. B. afneem; afneem. C. toeneem; toeneem. D. toeneem; afneem.

1.17 Indien Suid-Afrika se BBP minder is as sy BNP, dan is die inkomste wat deur

buitelandse eienaars van besighede en buitelanders in Suid-Afrika verdien word_________ die inkomste verdien deur Suid-Afrikaners wat oorsee geinvesteer het, of wat oorsee werk.

A. groter as B. bygetel tot C. afgetrek van D. minder as

1.18 Indien Suid-Afrikaners drasties uitvoer na die Verenigde Koningkryk verhoog, kan ons

verwag dat die A. aanbod van Pond sterling verhoog en die Rand sal appresieer. B. vraag na Pond Sterling verhoog en die Rand sal appresieer. C. aanbod van Pond sterling verhoog en die Rand sal depresieer. D. vraag na Pond Sterling verhoog en die Rand sal depresieer.

1.19 Die onderstaande grafiek illustreer die verbruiksbesteding in die Keynisiaanse Model.

In die bostaande grafiek, indien inkomste 800 is, sal verbruik gelyk wees aan _____ en besparing gelykstaande aan__________

A. 800; 0 B. 500; 50 C. 770; 30 D. 550; 250

1.20 ‘n Gini koëffisiënt van 0.9 beteken

A. dat inkomste gelyk verdeel is.

32

B. wit burgers ryker as Indiërs is. C. dat inkomste ongelyk verdeel is. D. minder mense inkomstes het en al die ander het geen.

1.21 Die verskil tussen rykdom en inkomste is dat A. rykdom nie geld insluit nie. B. inkomste gemeet word in monetêre waarde. C. ryk mense rykdom het terwyl arm mense slegs inkomste het. D. rykdom is ‘n voorraad bates terwyl inkomste ‘n vloei van verdienste is wat uit

rykdom spruit.

1.22 Die koers van die verandering in BBP teenoor die oorspronklike verandering in totale besteding is die:

A. bestedingsvermenigvuldiger B. permanente inkomstekoers C. marginale bestedingskoers D. marginale verbruiksgeneigdheid

1.23 In die onderstaande tabel, indien die wisselkoers 3 Rand per pond is,

Hoeveelheid Gevra

Rand per Pond

Hoeveelheid Aangebied

200 5 600 240 4 480 300 3 410 360 2 360 390 1 330

A. is daar ‘n oorskot aanbod van 110 pond. B. is daar ‘n oorskot vraag na 110 pond. C. is daar ‘n oorskot aanbod van 110 Rand. D. is daar ‘n oorskot vraag na 110 Rand.

1.24 Die onderstaande grafiek wys die Geldmarkkurwes

Begin by ewewig van E1. ‘n Skuif na links van die aanbodkurwe van geld vanaf MS1 na MS2 sal lei tot ‘n oorskot:

33

A. vraag na geld, wat daartoe lei dat mense effekte verkoop. B. vraag na geld, wat daartoe lei dat mense effekte koop. C. aanbod van geld, wat daartoe lei dat mense effekte verkoop. D. aanbod van geld, wat daartoe lei dat mense effekte koop.

1.25 Magtigings (Fiat) geld is geld:

A. wat aanvaar word deur die wet ongeag hulle intrinsieke/egte waarde. B. wat nie ingesluit word as deel van die M1 aanbod van geld nie. C. wat deur goud of silver wat deur die regering as reserwes gehou word

gedek word. D. soos munte wat gemaak word van metal.

VRAAG 2 _ [13] 2.1 Jy word die volgende inligting gegee rakende die ekonomie van Zululand in 2012, al die

monetêre syfers is in miljard rand;

Outonome verbruik 400 Marginale verbruiksgeneigdheid 0.69 Investering 300 Regeringsbesteding 500 Belastingskoers 0.14 Uitvoere 350 Outonome Invoere 320 Marginale invoergeneigdheid ? Ewewigsinkomste (-uitset) 2209.85 2.1.1 Bepaal die besparingsfunksie vir die ekonomie. (2) 2.1.2 Wat is die waarde van totale verbruiksbesteding teen die ewewigsvlak van uitset? (3) 2.1.3 Wat is die waarde van die marginale invoergeneigdheid? (3) 2.1.4 Teen watter vlak van uitset is die regeringsbegroting gebalanseerd? (2) 2.1.5 Bereken die bestedingsvermenigvuldiger vir Zululand as die ekonomie (i) ‘n twee

sektor ekonomie is (sonder regerings- en buitelandse sektor) (ii) a drie sektor ekonomie (met die regering en geen buitelandse sektor) (3)

VRAAG 3 __ [10] 3.1 Indien die inflasie bo die gestipuleerde mikpunte van 3-6% -wat deur die SARB gestel is- styg, sal die SARB verplig wees om die terugkoop/repokoers te verhoog. Gebruik die nodige grafiese voorstelling om die Keynesiaanse Transmissioemeganisme veranderinge te wys wat sal plaasvind in die monetêre en reële sektore na die aksie van die SARB. Verduidelik die veranderinge wat in die sektore plaasvind volledig.

34

VRAAG 4 __ [13]

Die onderstaande inligting verwys na die inwoners van Robbeneiland tussen die ouderdom van 15 en 64 jaar.

4.1 As die streng werkloosheid 10% is, hoeveel mense is; 4.1.1 werkloos? 4.1.2 werkend? (3)

4.2 Gebuik die inligting verder om die volgende te bereken; 4.2.1 Die werkloosheidskoers volgens die uitgebreide definisie. (2) 4.2.2 Die arbeidsmag. (2)

4.3 ‘n Windstorm het Robbeneiland getref en het skade aan industriële gebou aangerig en 300

mense werkloos gelaat. Deur gebruik te maak van die AD/AS (korttermyn) kurwes wys die effek wat die windstorm op Robbeneiland se ekonomie gehad het. (4)

4.4 Die regering van Robbeneiland wil die Sosialistiese ideologie aanneem, waar inkomstes gelyk tussen al die inwoners verdeel word. Teken die Lorenz Kurwe wat die inkomsteverdeling van Robbeneidland wys na die implementering van dié ideologie. (2)

Werkende- ouderdom

populasie

10 000

Formele indiensname

????

Selfindiensname

2600

Werkloos

???

Beskikbaar vir werk

en het aktiewe

stappe geneem

Nie ekonomies aktief

1900

In die arbeidsmag/ ekonomies aktief

???

Nie beskikbaar

vir werk

1300

Ontmoedigde

werkers

???

35

VRAAG 5 [14] 5.1 Die onderstaande table wys inligting vir Kovsies Kommersiële Bank. % kontantreserwe vereiste koers

Depositos Totale reserwes Oorskot reserwes

W 20 000 5500 0 8 X 32 000 8000 10 600 000 1010 Z

5.1. Maak gebruik van die inligting in die bostaande table om die waardes van W, X en Z te bereken. (6) 5.2 Skenk oorweging aan die Suid-Afrikaanse Rand/VSA dollar wisselkoers en fokus op die

mark vir dollar. Deur gebruik te maak van vraag- en aanbod kurwes, verduidelik of die dollar appresieer

of depresieer teen die Rand, en of die rand sal appresieer of depresieer teen die dollar gegewe die volgende senarios:

Leidraad: Neem aan dat VSA die enigste handelsvenoot van Suid-Afrika is. 5.2.1 GM motors, ‘n VSA Besigheid, open a motorproduksieaanleg in Mpumalanga in

Suid-Afrika. [4] 5.2.3 As gevolg van swak deurdagte ekonomiese beleid in Suid-Afrika, het VSA besighede

in Suid-Afrika onttrek en beweeg na Mosambiek. [4] Die einde

36


HOOFKAMPUS/MAIN CAMPUS & QWAQWA CAMPUS

EECF62306





ASSESSOR(E)/ 1. Mrs C.Campher

ASSESSOR(S): 2. Mnr. / Mr. S. Guvuriro 3. Mr C. Mudzingiri

MODERATOR: Mr. N. Keyser

TYD/TIME: 2 uur/hours PUNTE/MARKS: 100

INSTRUCTIONS • This paper consists of 5 questions • Answer all the questions.

• Read the questions carefully and please write legibly. • Graphs should be clearly drawn and labelled

• Show all calculations where necessary and all calculations should be rounded off to 2 decimal places.

Question 1 [25 x2 =50 marks]

1.1 C 1.2 A 1.3 B 1.4 C 1.5 B 1.6 B 1.7 C 1.8 D 1.9 B 1.10 B 1.11 B 1.12 C 1.13 C 1.14 B 1.15 A 1.16 D 1.17 D 1.18 A 1.19 C 1.20 D 1.21 D 1.22 A 1.23 A 1.24 A 1.25 A

Question 2 [13 marks]

3.0 You are given the following information about the economy of Zululand in 2012, all monetary figures are in billions of rands;

Autonomous consumption 400 Marginal propensity to consume 0.69 Investment 300 Government spending 500 Tax rate 0.14 Exports 350 Autonomous Imports 320

37

Marginal propensity to import ? Equilibrium income (output) 2209.85 3.1.1 Construct a saving function for this economy. (2)

S= -C+ sYd

S= -400+ (1-0.69)(1-014)Y S= -400 +0.27Y��

3.1.2 What is the value of total consumption at the equilibrium level of output? (3)

C=400+(0.69)(1-0.14)Y

C=400 + 0.59Y��

C=400+ 0.59(2209.85)= 1703.81��

3.1.3 What is the value of the marginal propensity to import? (3)

Y=C+I+G+X-M 2209.85= 1703.81 +300+500+350-320-2209.85m�� -323.46 = -2209.85m�� m=0.14637 m=0.15�

3.1.4 At what level of output is the government budget balanced? (2) T=0.14Y; G=500 T=G�� 0.14Y=500 Y=3571.429 Y=3571.43��

3.1.5 Calculate the spending multiplier for Zululand if the economy is (i) a two sector

economy (without government and foreign sector) (ii) a three sector economy (with government and no foreign sector) (3)

(i) M= 1/mps= 1/0.31=3.225806452=3.23 �� (ii) M=1/1-c(1-t)=1/ 0.41= 2.459419577=2.439024=2.44��

38

Question 3 [10 Marks] 3.1 If inflation increases above the stipulated target of 3-6% set by the SARB. The SARB will be forced to increase the repo rate. Use the necessary graphical representation to show Keynesian Transmission changes that will take place in the monetary and real sectors after the action by SARB. Explain the changes that will materialize in the monetary and real sector in full. (10) ��

�� Monetary Sector : r�� Ms��

Real sector: r I�� TE�� P Y��

r

MS1 MS2

interest

rate

I Md

Quantity of

money

investment

Interest rate

GDP

GDP

TE Price

level

39

Question 4 [13Marks]

4.1 The information below relates to the inhabitants of Robben Island between the ages of 15 to 64.

4.5 If the strict unemployment is 10%, how many people are; 4.5.1 unemployed? 4.5.2 employed? (3)

unemployed = 0.1x (10 000- 1900) =810�� employed = 8100-810= 7290 �� [3]

4.6 Furthermore, use the information to calculate, 4.6.1 the unemployment rate according to the expanded definition? (2) 4.6.2 the labour force? (2)

(i) the expanded definition unemployment rate=(810+600)/8700 x 100= 16.21%��

(ii) labour force= 8100 +600=8700�� [3]

Working age population

10 000

Formally employed

????

Self employed

2600

Unemployed

???

(Available to work

and have taken

active steps)

Not economically

active

1900

In the labour force/ economically active

???

Not Available

to work

1300

Discouraged

workers

???

40

4.7 A windstorm hit Robben Island damaging industrial buildings and leaving 300 people unemployed. By making use of the AD/AS (short-run) curves show the effect of the windstorm on the Robben Island economy. (4)

�� 1 mark�� for correct labelling

4.8 The government of Robben Island would like to adopt the Socialist ideology, where income will be shared equally amongst citizens. Draw a Lorenz Curve showing income distribution of Robben Island after implementing the socialistic ideology. [2]

��

�� for correct labeling

CPI/AP/

Price

level

GDP

AS0

AS1

GDP

Y1 Y0

CPI0

CPI1

��

Income

percentage

Population percentage

41

Question 5 [14Marks]

5.2 The table below shows information for Kovsies Commercial Bank.

% cash reserve requirement ratio

Deposit Total reserves Excess reserves

W 20 000 5500 0 8 X 32 000 8000 10 600 000 1020 Z

% cash reserve requirement ratio

Deposit Actual reserves Excess reserves

W=27.5%�� 20 000 5500 0 8 X=300000�� 32 000 8000 10 600 000 1000 Z= -59000��

Note: the Total Reserves on part three are supposed to be 100 000 instead of 1000. Since it is an error on our part we should award marks for the impractical Z= -59 000.

3.2 What are the values of W, X and Z in the Table above? (6)

5.2 Consider the South African rand/ US dollar exchange rate, and focus on the market for dollar. Using the demand and supply curves, explain whether the dollar would appreciate or depreciate against the rand, and whether that rand would appreciate or depreciate against the dollar in the following scenarios:

Hint: Assume US is the only trading partner of South Africa 5.2.4 GM motors a US Company opens a car production plant in Mpumalanga in South

Africa [4] �� Rand appreciates/dollar depreciates ��

Rands

per

dollar

Quantity of dollars

D

S2

S1

42

5.2.5 Due to a poorly thought economic policy in South Africa, US companies in South Africa disinvest and move to Mozambique. [4]

�� Rand depreciates /dollar appreciates ��

The End

Rands

per

dollar

Quantity of dollars

D

S2

Documents

Exam 2013 with memo.pdf