NOVEMBER 2012 EXAMINATION DATE: 15 NOVEMBER 2012 DURATION: 3 HOURS PASS MARK: 40% (BUS-EC) ECONOMICS

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1 ECOBUS NOVEMBER 2012 EXAMINATION DATE: 15 NOVEMBER 2012 TIME: 09H00 12H00 TOTAL: 100 MARKS DURATION: 3 HOURS PASS MARK: 40% (BUS-EC) ECONOMICS THIS EXAMINATION PAPER CONSISTS OF 2 SECTIONS: SECTION A: SECTION B: CONSISTS OF 25 MULTIPLE-CHOICE QUESTIONS ANSWER ALL THE QUESTIONS CONSISTS OF 4 QUESTIONS ANSWER ANY THREE OF THE QUESTIONS (25 MARKS) (75 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 MAY USE A NON-PROGRAMMABLE CALCULATOR AND A RULER Examiner: D Linnegar-Whyte DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2012 PAGE 1 OF 7

2 SECTION A (25 MARKS) ANSWER ALL THE QUESTIONS 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 Economic growth is dependent mainly on which following factor of production? natural resources labour capital entrepreneurship 2. What type of inflation would result when real GDP decreases while inflation increases rapidly? hyper-inflation creeping inflation stagflation deflation 3. Which area on a Production Possibility Curve would indicate efficiency? to the right of the curve to the left of the curve anywhere on the curve nowhere on the curve 4. Which of the following would be the most effective counter-inflationary measure? increase in productivity reduction of taxation increase in the money supply All of the above. 5. The market in which the currency of one country is exchanged for the currency of another is the: capital market. money market. foreign exchange market. futures market. DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2012 PAGE 2 OF 7

3 6. Which of the following is NOT a characteristic of monetary policy? open market transactions credit policy aim of external equilibrium general acceptance medium of exchange 7. Which of the following is not a protectionist measure? tariffs quotas export subsidies privatisation 8. The balance on the current account of the BOP reflects: all the sales and purchases of goods and services in and out of the country. sales of goods and services to other countries. purchases of goods and services from other countries. the net gold and foreign reserves. 9. The price elasticity of demand would be more elastic for: a luxury. a necessity. a good / service which has few subsidies. an inferior good. 10. Which one of the following would NOT shift the demand curve for a product? a change in tastes a change in price a change in income a change in the population 11. Which is the fairest form of taxation on personal income? proportional progressive regressive None of the above. 12. What type of unemployment will always be present in the economy, even with full employment? seasonal cyclical structural frictional 13. Profit is maximised where marginal revenue is equal to: average cost. total cost. marginal cost. average revenue. DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2012 PAGE 3 OF 7

4 14. Which of the following would NOT describe the consequences of a decrease in the interest rate? an increase in disposable income an increase in the money supply an increase in lending an increase in saving 15. VAT is a tax. proportional progressive regressive toll 16. Which statement would NOT apply to GDP? production of all final goods / services within the borders of SA a measurement of economic growth it includes exports but does not include imports production of all final goods / services by permanent residents 17. Which form of government revenue would NOT fall under administrative income? income from court fees income from licences income from permits income from fines 18. If the price of grain increases due to a scarcity, what will happen regarding the laws of demand and supply of bread? the demand curve for bread will shift to the left the supply curve will shift to the left the demand curve will shift to the right the supply curve will shift to the right 19. Which statement would describe the cross elasticity of demand (XED)? the responsiveness of quantity demanded to changes on households' real income the responsiveness of quantity demanded to changes in price the responsiveness of the quantity demanded of a commodity to changes in the price of some related commodity the responsiveness of quantity supplied to changes in price DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2012 PAGE 4 OF 7

5 20. Which statement is incorrect with regard to money? it should be relatively scarce it should be easily recognisable it should be durable it should not be similar in form 21. Which statement would NOT constitute a remedy should the cause of inflation be an increase in the money supply? control the supply of money raise interest rates reduce bank credit increase productivity 22. Which statement does NOT apply to fiscal policy? balanced annual budget obtain funds for providing services government spending a method of controlling the money supply 23. If an increase in the price of tea causes the demand curve for coffee to shift to the right, then: tea and coffee are complements. tea and coffee are substitutes. coffee must be a normal product. coffee must be a superior product. 24. Which statement describes the SARB quantitative credit policy? It aims to influence the amount of credit that is given by banks. It emphasises the evaluation of individual credit to meet the requirements of liquidity. It controls institutions with regard to the kind of credit given. None of the above. 25. Which statement describes an embargo on an imported good? the number of products to be imported is restricted taxes are imposed on the imported good there is a ban on the imported good deposits are required prior to the importation of the good [25] [25] DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2012 PAGE 5 OF 7

6 SECTION B (75 MARKS) ANSWER ANY THREE OF THE QUESTIONS QUESTION 1 Explain your understanding of microeconomics compared with macroeconomics. (4) Define your understanding of utility. (2) Define your understanding of total utility. (2) Define your understanding of the law of diminishing marginal utility. (4) (e) Suppose you enjoy playing soccer and tennis. The table below shows the total utility you receive from the two sports. Hours per week Total utility (TU) Total utility (TU) from tennis from soccer i. Draw a graph showing your total utility from tennis and soccer. (5) ii. Draw a graph showing your marginal utility from tennis and soccer. (5) iii. What is your conclusion about the choice between soccer and tennis? (3) [25] AND / OR QUESTION 2 Identify eight factors that influence the productivity of labour. (8) Identify four factors affecting aggregate demand (AD) and three factors affecting aggregate supply (AS). (7) Briefly discuss the instruments of fiscal policy, namely the income policy (taxation), investment policy (government spending) and public debt policy. (10) [25] AND / OR DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2012 PAGE 6 OF 7

7 QUESTION 3 Using the table below answer the following questions: Rate of Exchange ($ per rand) Quantity demanded (R millions) Quantity supplied (R millions) 7, , , , , i. Use the information given in the table to construct the demand and supply curves for SA rands. (2) ii. Calculate the surplus on the market if the rate of exchange of the rand is 9,00. (1) iii. Determine the equilibrium price. (2) iv. Should the rand increase in value from R8,00 to R8,50 and the quantity demanded decrease from 60 to 40, calculate the price elasticity of demand for the rand. (5) Outline your understanding of what would happen to our currency (the rand) if the demand for imports increased. (5) Discuss five reasons why inflation is a problem. (5 2 = 10) [25] AND / OR QUESTION 4 Identify the goals of the SA government. (10) Outline the expenditure formula used to calculate National Income (NI) (8) List the factors influencing the economic development of a country. (4) Long-term economic growth has fundamental sources which are grouped into two categories, namely supply factors and demand factors. Identify the demand factors. (3) [25] [75] Section A: 25 marks Section B: 75 marks TOTAL: 100 MARKS DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2012 PAGE 7 OF 7