ECS2603 Assignment 4 Semester 2 2023

ECS2603 Assignment 4 Semester 2 2023.100% CORRECT questions, answers, workings and explanations. Question 1 Answer saved Marked out of 3.00 Flag question Question text Which of the following statements with regards to inflation are correct? Inflation is defined as a sustained increase in the general price level. This implies that for inflation to occur, it is sufficient for only the price of oil to increase. Inflation is a sustained increase in the general price level. This means that there is an overall increase in the prices of most goods and services. Inflation is a sustained increase in the general price level. This implies that for inflation to occur, all prices must increase. To measure inflation, a yardstick is needed of the general price level and an appropriate period for measuring changes in the yardstick. Question 2 Answer saved Marked out of 3.00 Flag question Question text Year Price of lamb per kg Index value (2012 = 100) 2014 124 What is the index value (one decimal point) for 2013? Answer: 97.6 Question 3 Answer saved Marked out of 12.00 Flag question Question text Complete the following table (one decimal point) and answer the questions: Year Price of lamb per kg Index value (2012 = 100) 2014 130 An index number is the ratio of the value of a variable or group of variables at a given time or during a specified period to its value at a base time or during a base period. True False The frequency of the index numbers is yearly. True False The index is an example of a specific index. True False The index value (one decimal point) for 2014 is Answer 103.2 In the year that the index value was the highest the price of lamb per kg was the highest. True False The biggest percentage increase in the price of lamb was in Answer 3.28 Question 4 Answer saved Marked out of 2.00 Flag question Question text Deflation is a decrease in the general price level of goods and services True False Clear my choice Question 5 Answer saved Marked out of 2.00 Flag question Question text The CPI is an index of prices of all consumer goods and services. True False Clear my choice Question 6 Answer saved Marked out of 2.00 Flag question Question text Calculating the rate of inflation using the CPI involves calculating the rate of change in the CPI. True False Clear my choice Question 7 Answer saved Marked out of 2.00 Flag question Question text If the general price level decreases, then inflation occurs. True False Clear my choice Question 8 Not yet answered Marked out of 16.00 Flag question Question text The questions in this part are based on Statistical Release P0141 Consumer Price Index March 2023 What is the base year (year only)? Answer What is the value of headline CPI for all urban areas for March 2022? Answer The CPI for all goods for February 2023 was Answer The percentage change for CPI for all goods was greater than that for services for March 2023 compared to March 2022. True False Comparing March 2023 with February 2023 the percentage change for CPI for durable goods was Answer while for non-durable goods was Answer . The total weight of all goods is more than the total weight of services. True False What is the weight (two decimal points) for non-durable goods? Answer (two decimal points) Question 9 Answer saved Marked out of 3.00 Flag question Question text Use the following information to calculate the inflation rate (one decimal point) for 2020. CPI index 2019: 113.2 CPI index 2020: 116.2 Answer: 2.7 Question 10 Not yet answered Marked out of 9.00 Flag question Question text The questions in this part are based on KBP7170J Yearly total consumer prices index (All urban areas) and KBP7170N Monthly total consumer prices (All urban areas). What is the yearly inflation rate for 2011? Answer What is the inflation rate for November 2011? Answer What is the annualised inflation rate for December 2020 based on a month on previous month. Answer Question 11 Answer saved Marked out of 3.00 Flag question Question text Which of the following statements with regards to the PPI is correct? The PPI measures the cost of production rather than the cost of living. Only one PPI, namely the headline PPI, is compiled and published. The PPI excludes the prices of services ─ only goods are included in the PPI basket. Changes in exchange rates have a less direct and less rapid impact on the PPI Since PPI measures the cost of production, it does provide some indication of what might happen to the price of final goods and services. The PPI excludes the prices of imported goods. Question 12 Answer saved Marked out of 4.00 Flag question Question text The question is based on the following data: Year GDE at current prices GDE at constant prices GDE deflator % change in GDE deflator What is the percentage change (one decimal point) in the GDE deflator for 2013? Answer: 3.9 Question 13 Answer saved Marked out of 2.00 Flag question Question text The balance of payments uses a double-entry accounting system. True False Clear my choice Question 14 Answer saved Marked out of 2.00 Flag question Question text The balance of payments is a balance sheet which represents the total international assets and liabilities of a country. True False Clear my choice Question 15 Answer saved Marked out of 2.00 Flag question Question text For every credit transaction there is a debit transaction and for every debit transaction there is a credit transaction. True False Clear my choice Question 16 Answer saved Marked out of 2.00 Flag question Question text The interest payments on foreign loans by South African firms are recorded under the item income payments in the current account. True False Clear my choice Question 17 Answer saved Marked out of 2.00 Flag question Question text The interest payments on foreign loans by South African firms are under current transfers. True False Clear my choice Question 18 Answer saved Marked out of 2.00 Flag question Question text The decline in foreign tourists during the COVID-19 pandemic will have a negative effect on payments for services on the balance of payments. True False Question 19 Answer saved Marked out of 2.00 Flag question Question text If a South African farmer sells a second-hand tractor to a Nigerian farmer, this transaction is not recorded since only goods produced during the current year are recorded in the balance of payments True False Clear my choice Question 20 Answer saved Marked out of 2.00 Flag question Question text The decline in foreign tourists during the COVID-19 pandemic will have a positive effect on services receipts on the balance of payments. True False Clear my choice Question 21 Answer saved Marked out of 3.00 Flag question Question text Use the following information from a hypothetical country to calculate the trade balance. Item Value (R millions ) Merchandise exports, free on board 1 102 Merchandise imports, free on board 967 Net god exports 66 Service receipts 210 Payments for services 215 Income receipts 81 Income payments 221 Current transfers (net receipts +) -38 Capital transfer account (net receipts +) 2 Net direct investment -71 Net portfolio investment 219 Net financial derivatives -4 Net other investment -8 Reserve Assets -25 Answer: 135 Question 22 Answer saved Marked out of 4.00 Flag question Question text Use the following information to calculate the current account balance. Item Value (R millions ) Merchandise exports, free on board 1 102 Merchandise imports, free on board 881 Net god exports 66 Service receipts 210 Payments for services 215 Income receipts 81 Income payments 221 Current transfers (net receipts +) -38 Capital transfer account (net receipts +) 2 Net direct investment -71 Net portfolio investment 219 Net financial derivatives -4 Net other investment -8 Reserve Assets -25 Answer: 99 Question 23 Answer saved Marked out of 3.00 Flag question Question text The question is based on the following information: R million GDP 2650 Trade balance 65 Deficit on current account 123 The current account deficit as a percentage (one decimal place) of GDP is Answer: 4.6 Question 24 Incomplete answer Marked out of 12.00 Flag question Question text The questions are based on the Balance of Payments from the SARB Quarterly Bulletin, March 2023 (S-84). For the period 2015 to 2022 both deficits and surpluses were recorded on the balance on the current account. True False If a country records a trade surplus, it follows that the export of goods as a percentage of GDP is ______ than the import of goods as a percentage of GDP. smaller greater The trade balance as a percentage (%) of nominal GDP in 2017 was ____ %. Answer % The current account balance as a percentage (%) of nominal GDP in 2021 was ____ %. -Answer % Please answer all parts of the question. Question 25 Answer saved Marked out of 2.00 Flag question Question text Dividends received by South Africa from owning shares in foreign companies are not recorded in the financial account. True False Clear my choice Question 26 Answer saved Marked out of 2.00 Flag question Question text Interest payments on foreign loans are recorded in the financial account of the balance of payments. True False Clear my choice Question 27 Answer saved Marked out of 2.00 Flag question Question text In the financial account, portfolio investment (purchases of financial assets) is recorded. This figure is a flow figure as it does not reflect the level of assets or liabilities. True False Clear my choice Question 28 Answer saved Marked out of 2.00 Flag question Question text If exports increase, ceteris paribus, the reserve assets will increase. True False Clear my choice Question 29 Answer saved Marked out of 2.00 Flag question Question text Reserve assets are those external assets that are readily available and include foreign exchange reserves. True False Clear my choice Question 30 Answer saved Marked out of 2.00 Flag question Question text If portfolio investment by foreigners in South African assets exceeds portfolio investment by South Africans in foreign assets, net portfolio investment will be negative. True False Clear my choice Question 31 Incomplete answer Marked out of 12.00 Flag question Question text The questions are based on the Balance of Payments from the SARB Quarterly Bulletin, March 2023 (S-84). For how many years in the period 2015 to 2022 were net direct investments positive? Answer How much net foreign direct investment did the South African economy received in 2020? Answer How much were the foreign direct investment from South Africa in 2022? -Answer In 2019 both direct investment and net portfolio investment recorded net inflows. True False The reserve assets for South Africa has declined in 2015. True False Both the balance on the financial account and the balance on the financial account excluding reserve assets were in a deficit in 2021. True False Please answer all parts of the question. Question 32 Answer saved Marked out of 2.00 Flag question Question text If the price of imports increases relative to the price of exports, the terms of trade is unchanged. True False Clear my choice Question 33 Answer saved Marked out of 2.00 Flag question Question text The terms of trade and the trade balance are the same thing. True False Clear my choice Question 34 Answer saved Marked out of 2.00 Flag question Question text If the price of imports increases relative to the price of exports, the terms of trade decreases. True False Clear my choice Question 35 Answer saved Marked out of 2.00 Flag question Question text A change in the terms of trade index from 120 to 132 means that a given volume of exports will purchase a greater quantity of imports than before and the country is better off. True False Clear my choice Question 36 Incomplete answer Marked out of 8.00 Flag question Question text The questions in this part are based on the following terms of trade data. The terms of trade excluding gold changed from 116.0 in 2020 to Answer in 2021. The terms of trade including gold changed from 108,4 in 2019 to Answer in 2020. The change in the terms of trade (including gold) from 2018 to 2019 might be the result of an increase in the price of gold. True False The change in the terms of trade (including gold and excluding gold) from 2015 to 2016 indicates that a smaller quantity of imported goods can be obtained per unit of goods exported. True False Question 37 Answer saved Marked out of 2.00 Flag question Question text An exchange rate is the price of one country’s currency in terms of another country’s currency. True False Clear my choice Question 38 Answer saved Marked out of 2.00 Flag question Question text The middle rate is difference between the buying rate and the selling rate. True False Clear my choice Question 39 Answer saved Marked out of 2.00 Flag question Question text The following quoting of the exchange rate between the South African rand and the US dollar R15 = $1 is the direct method of quoting. True False Clear my choice Question 40 Answer saved Marked out of 3.00 Flag question Question text ff the exchange rate is quoted as R14.8 = $1, the indirect quote (two decimal points) is R1 = Answer: 0.07 Question 41 Answer saved Marked out of 2.00 Flag question Question text A real exchange rate is the rate that you actually have to pay when purchasing a foreign currency at the local branch of your bank. True False Clear my choice Question 42 Answer saved Marked out of 2.00 Flag question Question text If Country A's inflation rate is lower than Country B's inflation rate, Country A's exports to Country B will become more competitive, True False Clear my choice Question 43 Answer saved Marked out of 2.00 Flag question Question text If Country A's inflation rate is higher than Country B's inflation rate, Country A's exports to Country B will become more competitive, ceteris paribus. True False Clear my choice Question 44 Answer saved Marked out of 2.00 Flag question Question text The real exchange rate takes the inflation differentials between the countries into account True False Clear my choice Question 45 Answer saved Marked out of 2.00 Flag question Question text An effective exchange rate is also called a trade-weighted exchange rate. True False Clear my choice Question 46 Answer saved Marked out of 2.00 Flag question Question text The Big Mac index shows what exchange rates ought to be to equate the domestic price of a Big Mac with its price in other countries. True False Clear my choice Question 47 Answer saved Marked out of 2.00 Flag question Question text By comparing the relative PPP exchange rate with the nominal exchange rate, you can conclude whether the domestic currency is undervalued or overvalued in PPP terms compared to the situation in the base year. True False Clear my choice Question 48 Answer saved Marked out of 2.00 Flag question Question text Purchasing power parity between South Africa and the USA is measured by the amount of rands which gives the holder the same purchasing power as $1. True False Clear my choice The questions in this part are based on Exchange Rates in the SARB Quarterly Bulletin, March 2023, S-112. The questions in this part are based on Exchange Rates in the SARB Quarterly Bulletin, March 2023, S-112. In 2022 the rand depreciated against the Botswana Pula, Chinese Yuan, EU Euro, UK Pound and US Dollar. True False In June 2022 the rand/india rupee was Answer In 2020 the Rand/Euro exchange rate was Answer In June 2022 the South African rand _____ against the Euro compared to April 2022. appreciated depreciated Question 50 Answer saved Marked out of 3.00 Flag question Question text If a Big Mac costs R48.36 in South Africa and $7.2 in the US, then purchasing power parity requires the rand/dollar exchange rate to be R (2 decimal places). Answer: