ECS1500
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,ECS1500 OCTOBER NOVEMBER 2025 EXAM MEMO
SET 1
Question 1
“Market failure” can be described as a situation in which ____________.
Select one:
a. one company decides to buy all available coal in a country, resulting in a scarcity of this
resource for other buyers.
b. government imposes progressive taxes in order to indirectly redistribute income.
c. the price of agricultural goods falls due to excess supply when harvests are good.
d. the free market outcome is not efficient.
Explanation: Market failure occurs when the free market does not allocate resources
efficiently, for example due to externalities, public goods, market power, or information
problems. Therefore, the correct option is that the free market outcome is not efficient.
Question 2 (Workings)
Mr B earns R500 000 per year. The tax bracket is: R93 135 + 36% of taxable income above
R393 200.
Mr B’s average tax rate (rounded to two decimals) is:
Select one:
a. 26.32%
b. 36.00%
c. 7.69%
d. Not possible to calculate
Explanation: Tax = 93 135 + 0.36(500 000 − 393 200) = 93 135 + 0.36(106 800) = 93 135 +
38 448 = 131 583. Average tax rate = 131 000 = 0.263166 = 26.32%.
,Question 3
If South Africa has a comparative advantage over Zimbabwe in producing blankets, it means
that South Africa ____________.
Select one:
a. can produce more blankets than Zimbabwe.
b. consumes more blankets than Zimbabwe.
c. can produce blankets at a lower opportunity cost than Zimbabwe.
d. can sell more blankets than Zimbabwe.
Explanation: Comparative advantage is based on opportunity cost, not absolute output. A
country has comparative advantage if it gives up less of another good to produce the item.
Question 4 (Graph)
The diagram below describes which type of financing?
Surplus unit ---> Funds ---> Financial intermediary ---> Funds --->
Deficit unit
Surplus unit <--- Claim --- Financial intermediary <--- Claim --- Deficit
unit
Select one:
a. direct financing
b. monetary policy
c. fiscal policy
d. indirect financing
Explanation: Funds flow from surplus to deficit through a financial intermediary, not
directly. That is indirect financing.
Question 5
Suppose South Africa’s imports of good X from Botswana increase. What happens in the
foreign exchange market?
, Select one:
a. supply of Botswana pula increases and the rand appreciates.
b. demand for Botswana pula increases and the rand appreciates.
c. demand for Botswana pula increases and the rand depreciates.
d. supply of Botswana pula increases and the rand depreciates.
Explanation: Higher imports require more foreign currency, increasing demand for pula.
More demand for foreign currency increases its price in rand terms, meaning the rand
depreciates.
Question 6
When government expenditure exceeds government revenue in a year, which outcomes
occur?
(1) budget surplus
(2) budget deficit
(3) balanced budget
(4) an increase in government debt
Select one:
a. only 2
b. only 4
c. only 3
d. only 1
e. both 2 and 4
Explanation: Expenditure > revenue implies a budget deficit. Deficits are financed by
borrowing, which increases government debt.
Question 7
Financial instruments are sold by surplus units to deficit units.
Select one:
a. True
EXAM PACK
Recent exam questions and answers
Summarised study notes
Exam tips and guidelines
+27 81 278 3372
DISCLAIMER & TERMS OF USE
Educational Aid: These study notes are intended to be used as educational resources and should not be seen as a
replacement for individual research, critical analysis, or professional consultation. Students are encouraged to perform
their own research and seek advice from their instructors or academic advisors for specific assignment guidelines.
Personal Responsibility: While every effort has been made to ensure the accuracy and reliability of the information in
these study notes, the seller does not guarantee the completeness or correctness of all content. The buyer is
responsible for verifying the accuracy of the information and exercising their own judgment when applying it to their
assignments.
Academic Integrity: It is essential for students to maintain academic integrity and follow their institution's policies
regarding plagiarism, citation, and referencing. These study notes should be used as learning tools and sources of
inspiration. Any direct reproduction of the content without proper citation and acknowledgment may be considered
academic misconduct.
Limited Liability: The seller shall not be liable for any direct or indirect damages, losses, or consequences arising from
the use of these notes. This includes, but is not limited to, poor academic performance, penalties, or any other negative
consequences resulting from the application or misuse of the information provided.
,ECS1500 OCTOBER NOVEMBER 2025 EXAM MEMO
SET 1
Question 1
“Market failure” can be described as a situation in which ____________.
Select one:
a. one company decides to buy all available coal in a country, resulting in a scarcity of this
resource for other buyers.
b. government imposes progressive taxes in order to indirectly redistribute income.
c. the price of agricultural goods falls due to excess supply when harvests are good.
d. the free market outcome is not efficient.
Explanation: Market failure occurs when the free market does not allocate resources
efficiently, for example due to externalities, public goods, market power, or information
problems. Therefore, the correct option is that the free market outcome is not efficient.
Question 2 (Workings)
Mr B earns R500 000 per year. The tax bracket is: R93 135 + 36% of taxable income above
R393 200.
Mr B’s average tax rate (rounded to two decimals) is:
Select one:
a. 26.32%
b. 36.00%
c. 7.69%
d. Not possible to calculate
Explanation: Tax = 93 135 + 0.36(500 000 − 393 200) = 93 135 + 0.36(106 800) = 93 135 +
38 448 = 131 583. Average tax rate = 131 000 = 0.263166 = 26.32%.
,Question 3
If South Africa has a comparative advantage over Zimbabwe in producing blankets, it means
that South Africa ____________.
Select one:
a. can produce more blankets than Zimbabwe.
b. consumes more blankets than Zimbabwe.
c. can produce blankets at a lower opportunity cost than Zimbabwe.
d. can sell more blankets than Zimbabwe.
Explanation: Comparative advantage is based on opportunity cost, not absolute output. A
country has comparative advantage if it gives up less of another good to produce the item.
Question 4 (Graph)
The diagram below describes which type of financing?
Surplus unit ---> Funds ---> Financial intermediary ---> Funds --->
Deficit unit
Surplus unit <--- Claim --- Financial intermediary <--- Claim --- Deficit
unit
Select one:
a. direct financing
b. monetary policy
c. fiscal policy
d. indirect financing
Explanation: Funds flow from surplus to deficit through a financial intermediary, not
directly. That is indirect financing.
Question 5
Suppose South Africa’s imports of good X from Botswana increase. What happens in the
foreign exchange market?
, Select one:
a. supply of Botswana pula increases and the rand appreciates.
b. demand for Botswana pula increases and the rand appreciates.
c. demand for Botswana pula increases and the rand depreciates.
d. supply of Botswana pula increases and the rand depreciates.
Explanation: Higher imports require more foreign currency, increasing demand for pula.
More demand for foreign currency increases its price in rand terms, meaning the rand
depreciates.
Question 6
When government expenditure exceeds government revenue in a year, which outcomes
occur?
(1) budget surplus
(2) budget deficit
(3) balanced budget
(4) an increase in government debt
Select one:
a. only 2
b. only 4
c. only 3
d. only 1
e. both 2 and 4
Explanation: Expenditure > revenue implies a budget deficit. Deficits are financed by
borrowing, which increases government debt.
Question 7
Financial instruments are sold by surplus units to deficit units.
Select one:
a. True
