ECS1601 – ASSESSMENT 3 – EXPECTED QUESTIONS AND ANSWERS - 2024
Started on Saturday, 16 September 2023,
State Finished
Completed on Saturday, 16 September 2023,
Time taken
Grade 19.00 out of 20.00 (95%)
Question 1
Which of the following statements is/are correct about what influences South
African exports?
a) Changes in exchange rates do have an influence on South African exports.
b) Changes in economic conditions in the rest of the world.
c) Changes in the demand for exports.
e) International competitiveness does not influence exports.
a and b
a and c
a, b and e
a, b and c
a, c and e
Feedback
SA exports are influenced by economic conditions in the rest of the world,
international competitiveness, exchange rates, and the demand for exports does not
depend on the income level in SA; therefore, export spending is exogenous.
Question 2
If the government increases its expenditure, but keeps the tax rate constant,
we will find that consumption expenditure______, total tax revenue_____, and
investment spending______.
a.
stays the same, stays the same, stays the same
b.
increases, stays the same, stays the same
c.
1
, ECS1601 – ASSESSMENT 3 – EXPECTED QUESTIONS AND ANSWERS - 2024
increases, increases, stays the same
d.
increases, increases, increases
Feedback
Remember that our frame of reference is the simple Keynesian model. An increase
in G leads to an increase in income (Y) as the increase in expenditure has to be
received by some factors of production as income. The increase in income will result
in an increase in induced consumption and also an increase in the amount of tax that
has to be paid by the receivers of the higher income. Investment spending, however,
is autonomous and does not depend on the income level and will therefore not be
affected. Therefore, the sentence should read as follows: “If the government
increases its expenditure, but keeps the tax rate constant, we find that consumption
expenditure increases, total tax revenue increases, and investment spending stays
the same.
Question 3
Which of the following is correct about taxes in the economy?
a.
A tax rate of 0.15 means that 15 per cent of income is consumed on goods and
services.
b.
Taxes are a function of income.
c.
Taxes increase income available to spend on goods and services.
d.
The introduction of taxes in the economy increases the slope of the consumption
function.
Feedback
Taxes are a function of income because a portion of income goes to tax. There is a
negative relationship between taxes and disposable income. As the tax rate
increases, disposable income falls, vice versa.
Firstly, A tax rate of 0.15 implies that 15 per cent of income is paid to tax. Secondly,
2
Started on Saturday, 16 September 2023,
State Finished
Completed on Saturday, 16 September 2023,
Time taken
Grade 19.00 out of 20.00 (95%)
Question 1
Which of the following statements is/are correct about what influences South
African exports?
a) Changes in exchange rates do have an influence on South African exports.
b) Changes in economic conditions in the rest of the world.
c) Changes in the demand for exports.
e) International competitiveness does not influence exports.
a and b
a and c
a, b and e
a, b and c
a, c and e
Feedback
SA exports are influenced by economic conditions in the rest of the world,
international competitiveness, exchange rates, and the demand for exports does not
depend on the income level in SA; therefore, export spending is exogenous.
Question 2
If the government increases its expenditure, but keeps the tax rate constant,
we will find that consumption expenditure______, total tax revenue_____, and
investment spending______.
a.
stays the same, stays the same, stays the same
b.
increases, stays the same, stays the same
c.
1
, ECS1601 – ASSESSMENT 3 – EXPECTED QUESTIONS AND ANSWERS - 2024
increases, increases, stays the same
d.
increases, increases, increases
Feedback
Remember that our frame of reference is the simple Keynesian model. An increase
in G leads to an increase in income (Y) as the increase in expenditure has to be
received by some factors of production as income. The increase in income will result
in an increase in induced consumption and also an increase in the amount of tax that
has to be paid by the receivers of the higher income. Investment spending, however,
is autonomous and does not depend on the income level and will therefore not be
affected. Therefore, the sentence should read as follows: “If the government
increases its expenditure, but keeps the tax rate constant, we find that consumption
expenditure increases, total tax revenue increases, and investment spending stays
the same.
Question 3
Which of the following is correct about taxes in the economy?
a.
A tax rate of 0.15 means that 15 per cent of income is consumed on goods and
services.
b.
Taxes are a function of income.
c.
Taxes increase income available to spend on goods and services.
d.
The introduction of taxes in the economy increases the slope of the consumption
function.
Feedback
Taxes are a function of income because a portion of income goes to tax. There is a
negative relationship between taxes and disposable income. As the tax rate
increases, disposable income falls, vice versa.
Firstly, A tax rate of 0.15 implies that 15 per cent of income is paid to tax. Secondly,
2
