2025 – S1 – ECS2602 – ASSESSMENT 2 – Q&A
QUIZ
Assessment 2
Started on Monday, 7 April 2025,
State Finished
Completed on Monday, 7 April 2025,
Time taken
Marks 30.00/30.00
Grade 100.00 out of 100.00
Question 1
Which one of the following statements is INCORRECT?
Select one:
A.
The nominal value of a good is its value in terms of money, while the real value is its
value in terms of some other good, service, or bundle of goods.
B.
Given the price level, the nominal quantity of money divided by the price level
defines the real quantity of money.
C.
If the nominal quantity of money is R500 and the price level is R20, then the real
quantity of money is 25.
D.
A decline in the general price level results in a decrease in the real quantity of
money, and fewer goods and services can be bought.
This statement is the only INCORRECT statement. A decline in the general price
level results in an increase in the real quantity of money, and more goods and
services can be bought.
Feedback
Your answer is correct.
The correct answer is:
1
,2025 – S1 – ECS2602 – ASSESSMENT 2 – Q&A
A decline in the general price level results in a decrease in the real quantity of
money, and fewer goods and services can be bought.
Question 2
Which one of the following statements is correct?
Any movement along the LM curve will cause a change in the ___
Select one:
A.
marginal propensity to consume.
B.
actual prices.
C.
level of output and income.
D.
interest rate.
Feedback
Your answer is incorrect. Any movement along the LM curve will cause the level of
output and income to change. A movement to the right will cause Y to increase, and
a movement to the left will cause Y to decrease.
The correct answer is:
level of output and income.
Question 3
This question is based on the following comparison between the impact of
an expansionary fiscal policy with a contractionary monetary policy in the IS-LM
model:
2
,2025 – S1 – ECS2602 – ASSESSMENT 2 – Q&A
Expansionary Contractionary
fiscal policy monetary policy
The demand for goods Higher Lower
The level of output and income Higher Lower
The interest rate Unchanged Higher
Investment spending Higher Lower
Money demand and the quantity of money Higher Lower
Budget deficit Higher Unchanged
The reason for the higher quantity of money demand and the quantity of money for
an expansionary fiscal policy is that the _______ while for a contractionary monetary
policy, it is lower since the ________.
Select one:
A.
level of output and income is higher; level of output and income is lower
B.
interest rate is unchanged; interest rate is higher
C.
investment spending is higher; investment spending is lower
D.
level of output and income is lower; level of output and income is higher
Feedback
Your answer is correct. A positive relationship exists between the level of output and
income and the quantity demand for money and the quantity for money. In the case
of an expansionary fiscal policy, the level of output and income is higher (Y↑ → M d↑
→ M↑). In the case of contractionary monetary policy, the level of output and income
is lower (Y↓ → Md↓ → M↓).
The correct answer is:
3
, 2025 – S1 – ECS2602 – ASSESSMENT 2 – Q&A
level of output and income is higher; level of output and income is lower
Question 4
Which one of the following factors will NOT cause a shift of the IS curve to the left?
Select one:
A.
A decrease in government spending.
B.
A decrease in the interest rate.
This factor will not shift the IS curve to the left. A decrease in the interest rate causes
a downward movement along the IS curve.
C.
An increase in taxes.
D.
A decrease in autonomous investment.
Feedback
Your answer is correct.
The correct answer is:
A decrease in the interest rate.
Question 5
This question deals with the derivation of the IS curve and is based on the following
information and diagrams:
The autonomous spending at an interest rate of 10% is 3 000.
A decrease in the interest rate from 10% to 8% increases investment spending by
1 000.
4
QUIZ
Assessment 2
Started on Monday, 7 April 2025,
State Finished
Completed on Monday, 7 April 2025,
Time taken
Marks 30.00/30.00
Grade 100.00 out of 100.00
Question 1
Which one of the following statements is INCORRECT?
Select one:
A.
The nominal value of a good is its value in terms of money, while the real value is its
value in terms of some other good, service, or bundle of goods.
B.
Given the price level, the nominal quantity of money divided by the price level
defines the real quantity of money.
C.
If the nominal quantity of money is R500 and the price level is R20, then the real
quantity of money is 25.
D.
A decline in the general price level results in a decrease in the real quantity of
money, and fewer goods and services can be bought.
This statement is the only INCORRECT statement. A decline in the general price
level results in an increase in the real quantity of money, and more goods and
services can be bought.
Feedback
Your answer is correct.
The correct answer is:
1
,2025 – S1 – ECS2602 – ASSESSMENT 2 – Q&A
A decline in the general price level results in a decrease in the real quantity of
money, and fewer goods and services can be bought.
Question 2
Which one of the following statements is correct?
Any movement along the LM curve will cause a change in the ___
Select one:
A.
marginal propensity to consume.
B.
actual prices.
C.
level of output and income.
D.
interest rate.
Feedback
Your answer is incorrect. Any movement along the LM curve will cause the level of
output and income to change. A movement to the right will cause Y to increase, and
a movement to the left will cause Y to decrease.
The correct answer is:
level of output and income.
Question 3
This question is based on the following comparison between the impact of
an expansionary fiscal policy with a contractionary monetary policy in the IS-LM
model:
2
,2025 – S1 – ECS2602 – ASSESSMENT 2 – Q&A
Expansionary Contractionary
fiscal policy monetary policy
The demand for goods Higher Lower
The level of output and income Higher Lower
The interest rate Unchanged Higher
Investment spending Higher Lower
Money demand and the quantity of money Higher Lower
Budget deficit Higher Unchanged
The reason for the higher quantity of money demand and the quantity of money for
an expansionary fiscal policy is that the _______ while for a contractionary monetary
policy, it is lower since the ________.
Select one:
A.
level of output and income is higher; level of output and income is lower
B.
interest rate is unchanged; interest rate is higher
C.
investment spending is higher; investment spending is lower
D.
level of output and income is lower; level of output and income is higher
Feedback
Your answer is correct. A positive relationship exists between the level of output and
income and the quantity demand for money and the quantity for money. In the case
of an expansionary fiscal policy, the level of output and income is higher (Y↑ → M d↑
→ M↑). In the case of contractionary monetary policy, the level of output and income
is lower (Y↓ → Md↓ → M↓).
The correct answer is:
3
, 2025 – S1 – ECS2602 – ASSESSMENT 2 – Q&A
level of output and income is higher; level of output and income is lower
Question 4
Which one of the following factors will NOT cause a shift of the IS curve to the left?
Select one:
A.
A decrease in government spending.
B.
A decrease in the interest rate.
This factor will not shift the IS curve to the left. A decrease in the interest rate causes
a downward movement along the IS curve.
C.
An increase in taxes.
D.
A decrease in autonomous investment.
Feedback
Your answer is correct.
The correct answer is:
A decrease in the interest rate.
Question 5
This question deals with the derivation of the IS curve and is based on the following
information and diagrams:
The autonomous spending at an interest rate of 10% is 3 000.
A decrease in the interest rate from 10% to 8% increases investment spending by
1 000.
4
