1.1 Which of the following is/are correct?
a) Households are confronted with unlimited wants, but with limited
resources with which to satisfy those wants
b) The scarcity of resources necessitate households to make choices
[1] a is incorrect, b is correct
[2] both a and b are incorrect
[3] only a is correct
[4] both a and b are correct
Economic theory suggests that households possess unlimited wants, yet they
are faced with limited resources hence the need to make rational choices.
1.2 Which of the following is/are correct regarding the distinction between
macroeconomics and microeconomics?
a) The price of apples at the supermarket is an example of a
macroeconomic variable.
b) An increase in the general price level (inflation) in the economy is an
example of a macroeconomic variable.
[1] only b is correct
[2] a and b are both incorrect
[3] only a is correct
[4] both a and b are correct
The study guide and textbook clearly states that Inflation is a Macroeconomic
objective/problem because it affects the aggregate economy. The supermarket is a
microeconomic phenomenon.
1.3 A flow variable is defined as a variable that is measured over a period. Which
one of the following variables is not an example of a flow variable?
[1] National income
[2] The balance on Sibahle’s savings account
[3] Budget deficit
[4] Total production
A stock has no time dimension and can only be measured at a specific
moment. The balance on Sibahle’s savings account can only be checked at
a given point in time (See Philip mohr Pg 41)
1.4 Which of the following is not an acceptable intervention by the public sector in
a mixed economy?
[1] the provision of funds for public goods such as parks and streetlights
, [2] regulation of the pricing behaviour of monopoly industries
[3] stabilisation of the economy during periods of economic instability
[4] regulation of the price increases that result from changes in patterns of
demand and supply in the competitive market
The regulation of the ‘Market forces’ has a distortionary effect in such a case
it leads to shortages because the price will be artificially gazetted lower than
the market clearing price.
1.5 The factors of production in an economy are …
[1] households, capital, land, entrepreneurship
[2] government, household, firms, natural resources
[3] natural resources (land), labour, capital, and entrepreneurship
[4] human capital, land, natural resources, technology
These are the four factors of production (See main text)/ study guide.
1.6 Which of the following are the remuneration of the factors of production?
[1] natural resources, rent, interest, labour
[2] rent, salaries and wages, interest, profit
[3] households, land, profit, capital
[4] entrepreneur, firms, capital, labour
These are the corresponding Rewards of factors of production
Factors of Production Reward
Land (Natural resources) Rent
Labour Salaries and wages
Capital Interest
Entrepreneur Profit
1.7 In the circular flow of income and spending …
[1] savings, imports, taxes are leakages, while investment, government
spending, exports are injections.
a) Households are confronted with unlimited wants, but with limited
resources with which to satisfy those wants
b) The scarcity of resources necessitate households to make choices
[1] a is incorrect, b is correct
[2] both a and b are incorrect
[3] only a is correct
[4] both a and b are correct
Economic theory suggests that households possess unlimited wants, yet they
are faced with limited resources hence the need to make rational choices.
1.2 Which of the following is/are correct regarding the distinction between
macroeconomics and microeconomics?
a) The price of apples at the supermarket is an example of a
macroeconomic variable.
b) An increase in the general price level (inflation) in the economy is an
example of a macroeconomic variable.
[1] only b is correct
[2] a and b are both incorrect
[3] only a is correct
[4] both a and b are correct
The study guide and textbook clearly states that Inflation is a Macroeconomic
objective/problem because it affects the aggregate economy. The supermarket is a
microeconomic phenomenon.
1.3 A flow variable is defined as a variable that is measured over a period. Which
one of the following variables is not an example of a flow variable?
[1] National income
[2] The balance on Sibahle’s savings account
[3] Budget deficit
[4] Total production
A stock has no time dimension and can only be measured at a specific
moment. The balance on Sibahle’s savings account can only be checked at
a given point in time (See Philip mohr Pg 41)
1.4 Which of the following is not an acceptable intervention by the public sector in
a mixed economy?
[1] the provision of funds for public goods such as parks and streetlights
, [2] regulation of the pricing behaviour of monopoly industries
[3] stabilisation of the economy during periods of economic instability
[4] regulation of the price increases that result from changes in patterns of
demand and supply in the competitive market
The regulation of the ‘Market forces’ has a distortionary effect in such a case
it leads to shortages because the price will be artificially gazetted lower than
the market clearing price.
1.5 The factors of production in an economy are …
[1] households, capital, land, entrepreneurship
[2] government, household, firms, natural resources
[3] natural resources (land), labour, capital, and entrepreneurship
[4] human capital, land, natural resources, technology
These are the four factors of production (See main text)/ study guide.
1.6 Which of the following are the remuneration of the factors of production?
[1] natural resources, rent, interest, labour
[2] rent, salaries and wages, interest, profit
[3] households, land, profit, capital
[4] entrepreneur, firms, capital, labour
These are the corresponding Rewards of factors of production
Factors of Production Reward
Land (Natural resources) Rent
Labour Salaries and wages
Capital Interest
Entrepreneur Profit
1.7 In the circular flow of income and spending …
[1] savings, imports, taxes are leakages, while investment, government
spending, exports are injections.
