ECS1500
EXAM PACK
FOR ASSISTANCE WITH THIS MODULE +27 67 171 1739
,ECS1500 OCTOBER NOVEMBER 2025 EXAM MEMO
SET 1
Question 1
“Market failure” can be described as a situation in which ____________.
Select one:
a. one company decides to buy all available coal in a country, resulting in a scarcity of this
resource for other buyers.
b. government imposes progressive taxes in order to indirectly redistribute income.
c. the price of agricultural goods falls due to excess supply when harvests are good.
d. the free market outcome is not efficient.
Explanation: Market failure occurs when the free market does not allocate resources
efficiently, for example due to externalities, public goods, market power, or information
problems. Therefore, the correct option is that the free market outcome is not efficient.
Question 2 (Workings)
Mr B earns R500 000 per year. The tax bracket is: R93 135 + 36% of taxable income above
R393 200.
Mr B’s average tax rate (rounded to two decimals) is:
Select one:
a. 26.32%
b. 36.00%
c. 7.69%
d. Not possible to calculate
Explanation: Tax = 93 135 + 0.36(500 000 − 393 200) = 93 135 + 0.36(106 800) = 93 135 +
38 448 = 131 583. Average tax rate = 131 000 = 0.263166 = 26.32%.
,Question 3
If South Africa has a comparative advantage over Zimbabwe in producing blankets, it means
that South Africa ____________.
Select one:
a. can produce more blankets than Zimbabwe.
b. consumes more blankets than Zimbabwe.
c. can produce blankets at a lower opportunity cost than Zimbabwe.
d. can sell more blankets than Zimbabwe.
Explanation: Comparative advantage is based on opportunity cost, not absolute output. A
country has comparative advantage if it gives up less of another good to produce the item.
Question 4 (Graph)
The diagram below describes which type of financing?
Surplus unit ---> Funds ---> Financial intermediary ---> Funds --->
Deficit unit
Surplus unit <--- Claim --- Financial intermediary <--- Claim --- Deficit
unit
Select one:
a. direct financing
b. monetary policy
c. fiscal policy
d. indirect financing
Explanation: Funds flow from surplus to deficit through a financial intermediary, not
directly. That is indirect financing.
Question 5
Suppose South Africa’s imports of good X from Botswana increase. What happens in the
foreign exchange market?
, Select one:
a. supply of Botswana pula increases and the rand appreciates.
b. demand for Botswana pula increases and the rand appreciates.
c. demand for Botswana pula increases and the rand depreciates.
d. supply of Botswana pula increases and the rand depreciates.
Explanation: Higher imports require more foreign currency, increasing demand for pula.
More demand for foreign currency increases its price in rand terms, meaning the rand
depreciates.
Question 6
When government expenditure exceeds government revenue in a year, which outcomes
occur?
(1) budget surplus
(2) budget deficit
(3) balanced budget
(4) an increase in government debt
Select one:
a. only 2
b. only 4
c. only 3
d. only 1
e. both 2 and 4
Explanation: Expenditure > revenue implies a budget deficit. Deficits are financed by
borrowing, which increases government debt.
Question 7
Financial instruments are sold by surplus units to deficit units.
Select one:
a. True
EXAM PACK
FOR ASSISTANCE WITH THIS MODULE +27 67 171 1739
,ECS1500 OCTOBER NOVEMBER 2025 EXAM MEMO
SET 1
Question 1
“Market failure” can be described as a situation in which ____________.
Select one:
a. one company decides to buy all available coal in a country, resulting in a scarcity of this
resource for other buyers.
b. government imposes progressive taxes in order to indirectly redistribute income.
c. the price of agricultural goods falls due to excess supply when harvests are good.
d. the free market outcome is not efficient.
Explanation: Market failure occurs when the free market does not allocate resources
efficiently, for example due to externalities, public goods, market power, or information
problems. Therefore, the correct option is that the free market outcome is not efficient.
Question 2 (Workings)
Mr B earns R500 000 per year. The tax bracket is: R93 135 + 36% of taxable income above
R393 200.
Mr B’s average tax rate (rounded to two decimals) is:
Select one:
a. 26.32%
b. 36.00%
c. 7.69%
d. Not possible to calculate
Explanation: Tax = 93 135 + 0.36(500 000 − 393 200) = 93 135 + 0.36(106 800) = 93 135 +
38 448 = 131 583. Average tax rate = 131 000 = 0.263166 = 26.32%.
,Question 3
If South Africa has a comparative advantage over Zimbabwe in producing blankets, it means
that South Africa ____________.
Select one:
a. can produce more blankets than Zimbabwe.
b. consumes more blankets than Zimbabwe.
c. can produce blankets at a lower opportunity cost than Zimbabwe.
d. can sell more blankets than Zimbabwe.
Explanation: Comparative advantage is based on opportunity cost, not absolute output. A
country has comparative advantage if it gives up less of another good to produce the item.
Question 4 (Graph)
The diagram below describes which type of financing?
Surplus unit ---> Funds ---> Financial intermediary ---> Funds --->
Deficit unit
Surplus unit <--- Claim --- Financial intermediary <--- Claim --- Deficit
unit
Select one:
a. direct financing
b. monetary policy
c. fiscal policy
d. indirect financing
Explanation: Funds flow from surplus to deficit through a financial intermediary, not
directly. That is indirect financing.
Question 5
Suppose South Africa’s imports of good X from Botswana increase. What happens in the
foreign exchange market?
, Select one:
a. supply of Botswana pula increases and the rand appreciates.
b. demand for Botswana pula increases and the rand appreciates.
c. demand for Botswana pula increases and the rand depreciates.
d. supply of Botswana pula increases and the rand depreciates.
Explanation: Higher imports require more foreign currency, increasing demand for pula.
More demand for foreign currency increases its price in rand terms, meaning the rand
depreciates.
Question 6
When government expenditure exceeds government revenue in a year, which outcomes
occur?
(1) budget surplus
(2) budget deficit
(3) balanced budget
(4) an increase in government debt
Select one:
a. only 2
b. only 4
c. only 3
d. only 1
e. both 2 and 4
Explanation: Expenditure > revenue implies a budget deficit. Deficits are financed by
borrowing, which increases government debt.
Question 7
Financial instruments are sold by surplus units to deficit units.
Select one:
a. True
