ECS1601
ASSIGNMENT 5 FOR 2ND SEMESTER 2024
FEND TUTORIALS
, Started on Friday, 20 September 2024, 2:20 PM
State Finished
Completed on Friday, 20 September 2024, 2:46 PM
Time taken 25 mins 36 secs
Marks 17.00/20.00
Grade 85.00 out of 100.00
Question 1
Correct
Mark 1.00 out of 1.00
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Question text
Which of the following is correct regarding the effects of expansionary fiscal policy?
a.
The size of the multiplier will increase.
b.
Autonomous spending and the level of income will decrease.
c.
The slope of the consumption function will decrease due to a rise in the tax rate.
d.
There will be a leakage of money out of the circular flow of income, spending and production.
Feedback
An expansionary fiscal policy occurs when government spending is increased and taxes decreased.
Since taxes affect the slope of the consumption function, a reduction in taxes increases the slope of
the consumption function, thus causing the size of the multiplier to increase. Autonomous spending
and equilibrium income will increase due to the injection of money in the circular flow of income,
spending, and production.
Question 2
Correct
Mark 1.00 out of 1.00
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Question text
Which of the following is correct about the introduction of tax in the economy?
a.
Taxes influence aggregate spending and income in a direct way by increasing spending and
disposable income.
Whatsapp Marlvin @ +2763 173 8181
,b.
Disposable income is equal to c(1-t)Y.
c.
In South Africa as your personal income increases the tax rate also increases.
d.
When the government raises the tax rate, the size of the multiplier remains unchanged.
Feedback
Your answer is correct.
In South Africa, progressive tax is used where an individual pays more tax as their income increases.
High-income earners pay a larger percentage of tax compared to low-income earners. (See page 59
on prescribed book.)
Firstly, taxes represent a leakage, as money is withdrawn from the economy. For example, when the
minister of finance announces that taxes are to increase during a budget speech. This will cause
people’s income after tax (disposable income) to decrease. That is, they will have less money
available for spending. Hence, aggregate spending decreases. Secondly, disposable income is taxable
income minus tax. Yd= Y-T, of which T=t*Y or Yd= Y-tY. Thirdly, the multiplier is affected by the
tax rate. This is because the tax rate reduces the slope of the consumption function, which causes the
multiplier to be small after the introduction of tax rate.
Question 3
Correct
Mark 1.00 out of 1.00
Flag question
Question text
Which of the following is correct regarding the effect of expansionary monetary policy in the
Keynesian model?
a.
The consumption function swivels downward showing a fall in aggregate spending and income.
b.
The aggregate spending curve will shift downward showing a fall in aggregate spending and income.
c.
Investment spending will increase, which is shown by an upward shift of the aggregate
spending curve.
d.
Whatsapp Marlvin @ +2763 173 8181
, Firms will choose to invest less.
Feedback
An expansionary monetary policy occurs when the monetary authorities reduce the repo rate, thereby
reducing the interest rate. As the interest rate (cost of borrowing) falls, investment spending
increases. The increase in investment spending will be shown by an upward shift of the aggregate
spending curve.
Firstly, a downward swivel of the consumption function is caused by an increase in tax rate and not
interest rate, which then results in a fall in aggregate spending and income. Secondly, firms will
invest more due to the fall in cost of borrowing.
Question 4
Correct
Mark 1.00 out of 1.00
Flag question
Question text
Which of the following has/have a major impact on the level of net exports (X – Z)?
a) the growth rate of GDP in South Africa relative to the growth rates of GDP in other countries
b) the price level in South Africa relative to the price levels in other countries
c) the exchange rate between the rand and other currencies.
a.
c
b.
a and b
c.
a and c
d.
b and c
e.
a, b and c
Feedback
The growth rate of South Africa relative to other countries will affect the level of imports that South
Africa receives, relative to the exports that it sends abroad. The differences in growth will have an
impact on net exports. The relative prices of South Africa affect the competitiveness of South
African goods relative to other countries; thus has an impact on net exports, similarly the exchange
rate affects the competitiveness of South African goods to other countries.
Question 5
Whatsapp Marlvin @ +2763 173 8181
ASSIGNMENT 5 FOR 2ND SEMESTER 2024
FEND TUTORIALS
, Started on Friday, 20 September 2024, 2:20 PM
State Finished
Completed on Friday, 20 September 2024, 2:46 PM
Time taken 25 mins 36 secs
Marks 17.00/20.00
Grade 85.00 out of 100.00
Question 1
Correct
Mark 1.00 out of 1.00
Flag question
Question text
Which of the following is correct regarding the effects of expansionary fiscal policy?
a.
The size of the multiplier will increase.
b.
Autonomous spending and the level of income will decrease.
c.
The slope of the consumption function will decrease due to a rise in the tax rate.
d.
There will be a leakage of money out of the circular flow of income, spending and production.
Feedback
An expansionary fiscal policy occurs when government spending is increased and taxes decreased.
Since taxes affect the slope of the consumption function, a reduction in taxes increases the slope of
the consumption function, thus causing the size of the multiplier to increase. Autonomous spending
and equilibrium income will increase due to the injection of money in the circular flow of income,
spending, and production.
Question 2
Correct
Mark 1.00 out of 1.00
Flag question
Question text
Which of the following is correct about the introduction of tax in the economy?
a.
Taxes influence aggregate spending and income in a direct way by increasing spending and
disposable income.
Whatsapp Marlvin @ +2763 173 8181
,b.
Disposable income is equal to c(1-t)Y.
c.
In South Africa as your personal income increases the tax rate also increases.
d.
When the government raises the tax rate, the size of the multiplier remains unchanged.
Feedback
Your answer is correct.
In South Africa, progressive tax is used where an individual pays more tax as their income increases.
High-income earners pay a larger percentage of tax compared to low-income earners. (See page 59
on prescribed book.)
Firstly, taxes represent a leakage, as money is withdrawn from the economy. For example, when the
minister of finance announces that taxes are to increase during a budget speech. This will cause
people’s income after tax (disposable income) to decrease. That is, they will have less money
available for spending. Hence, aggregate spending decreases. Secondly, disposable income is taxable
income minus tax. Yd= Y-T, of which T=t*Y or Yd= Y-tY. Thirdly, the multiplier is affected by the
tax rate. This is because the tax rate reduces the slope of the consumption function, which causes the
multiplier to be small after the introduction of tax rate.
Question 3
Correct
Mark 1.00 out of 1.00
Flag question
Question text
Which of the following is correct regarding the effect of expansionary monetary policy in the
Keynesian model?
a.
The consumption function swivels downward showing a fall in aggregate spending and income.
b.
The aggregate spending curve will shift downward showing a fall in aggregate spending and income.
c.
Investment spending will increase, which is shown by an upward shift of the aggregate
spending curve.
d.
Whatsapp Marlvin @ +2763 173 8181
, Firms will choose to invest less.
Feedback
An expansionary monetary policy occurs when the monetary authorities reduce the repo rate, thereby
reducing the interest rate. As the interest rate (cost of borrowing) falls, investment spending
increases. The increase in investment spending will be shown by an upward shift of the aggregate
spending curve.
Firstly, a downward swivel of the consumption function is caused by an increase in tax rate and not
interest rate, which then results in a fall in aggregate spending and income. Secondly, firms will
invest more due to the fall in cost of borrowing.
Question 4
Correct
Mark 1.00 out of 1.00
Flag question
Question text
Which of the following has/have a major impact on the level of net exports (X – Z)?
a) the growth rate of GDP in South Africa relative to the growth rates of GDP in other countries
b) the price level in South Africa relative to the price levels in other countries
c) the exchange rate between the rand and other currencies.
a.
c
b.
a and b
c.
a and c
d.
b and c
e.
a, b and c
Feedback
The growth rate of South Africa relative to other countries will affect the level of imports that South
Africa receives, relative to the exports that it sends abroad. The differences in growth will have an
impact on net exports. The relative prices of South Africa affect the competitiveness of South
African goods relative to other countries; thus has an impact on net exports, similarly the exchange
rate affects the competitiveness of South African goods to other countries.
Question 5
Whatsapp Marlvin @ +2763 173 8181
