ECS2602 ASSIGNMENT 01 SEMESTER 1 & 2 2021:ANSWERS WITH EXPLANATIONS

ECS2602 ASSIGNMENT 1 SEMESTER 1&2: RANGA 061 844 1387/




1. The main focus of this macroeconomics module is the study of ….

1. The determinants of the short, medium and long-term growth potential of the
economy.
2. Only the interaction between the goods market and the financial market.
3. Different theories on the determination of output in a closed economy in the short
term only.
4. Only the determination of the level of output and income and fiscal and monetary
policy impact on the financial, labour and foreign exchange markets.
5. The determination of output and the impact of fiscal and monetary policy on the level
of output.



Explanation: The correct option is 5. Only statements b, c and e are correct Statement a is
incorrect. Microeconomics focuses mainly on the behavior and decisions of individual consumers,
Households, business enterprises and other organizations. It also studies the demand for and
Supply of individual goods and services and the determination of their prices. The aggregate
output level and employment level are also areas on which macroeconomics focuses (not the
focus of microeconomics). Statement d is incorrect. Inflation is defined as a continuous and
considerable rise in the prices in general and not only in the price of meat (e.g. the price of one
good).


2. Which of the following would be included in calculating the gross domestic product (GDP)
of South Africa?

a. A citizen from Zimbabwe (foreign country) earns a wage at a gold mine in South
Africa.
b. A farmer from Gauteng (South Africa) buys his neighbor’s tractor.
c. Ford Motor Company of America builds an assembly plant in the Eastern Cape
(South Africa).
d. Exports of agricultural products to Britain.
e. Imports of motorcars from Japan to South Africa.

1. a, b, c, d and e
2. Only a, c and d
3. Only b, c and e
4. Only a and c
5. Only b and e




Explanation: The GDP is the total value of all final goods and services produced within the
boundaries of a country in a particular period and therefore exclude imports of goods and services
and includes exports. Statement a is incorrect since it refers to all goods and services and not
only final goods and services. Statement d is incorrect. The GDP refers to goods and services
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, ECS2602 ASSIGNMENT 1 SEMESTER 1&2: RANGA 061 844 1387/

ECS2602/001/3/2021

produced within the boundaries of a country and therefore imports are excluded, and exports
included.




3. Which of the following are endogenous variables in the goods market model?

1. The level of output and income and investment spending.
2. Marginal propensity to consume and the level of output and income.
3. The level of output and income.
4. Investment spending.


4. The difference between expenditure on the gross domestic product (GDP) and gross
domestic expenditure (GDE) is that …

1. expenditure on the GDP includes both imports and exports, while GDE includes
exports and excludes imports.
2. expenditure on the GDP includes exports and excludes imports, while GDE includes
both imports and exports.
3. expenditure on the GDP includes exports and excludes imports, while GDE includes
imports and excludes exports.
4. expenditure on the GDP includes imports and excludes exports, while GDE includes
exports and excludes imports.


The correct option is 3. Expenditure on the GDP is the total value of spending on final goods and
Services within the borders of a country, excluding imports but including exports. Expenditure
on the GDP is the total value of spending on South African produced goods and services;
Therefore, it represents the demand for domestic goods.


5. Which of the following are correct in terms of the goods market model?

a. G↑ → Z↑ → Y↑ → YD↑ → C↑
b. I↑ → Z↑ → Y↑ → YD↑ → C↑
c. T↓ → Z↑ → Y↑ → YD↑ → C↑
d. c0↑ → Z↑ → Y↑ → YD↑ → C↑

1. Only a, b and c
2. Only a, b and d
3. Only b, c and d
4. Only a, c and d
5. a, b, c and d


Question 6 is based on the following diagram:

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