ECS1601 Assessment 7 - Alternative 2024 – DUE 2 November 2024 ;100 % TRUSTED workings, Expert Solved, Explanations and Solutions.

ECS1601 Assessment 7 - Alternative 2024 – DUE 2 November 2024 ;100 % TRUSTED workings, Expert Solved, Explanations and Solutions. Question 1 (5 marks) Maximum word count: 100 words 1.1 Suppose you live in South Africa and have the option to buy proudly South African products or international brands. With reference to the circular flow of goods and services and the circular flow of income and spending between households, firms, government and the foreign sector, provide an explanation as to why it is better to purchase the proudly South African products and also explain the opportunity costs of buying international items instead of those produced locally. (5 marks) Question 2 (10 marks) Maximum word count: 150 words 2.1 The following question is based on the passage below: Mauritius’ economy has proven otherwise resilient to global economic shocks, including those stemming from the war in Ukraine, which has affected revenues from tourism arrivals. GDP growth rebounded by a relatively modest 3.5% in 2021 and accelerated to an estimated 8.3% in 2022, supported by a strong recovery in tourism despite headwinds from the war in Ukraine. GDP growth is projected to moderate to around 5.0% in 2023 as economic activities gradually return to normal. With the aid of a diagram, explain how the money market in Maurituius will be affected by the country’s change in economic growth in 2023. The direction of any changes should be clearly indicated by using arrows. (4 marks) Page 4 of 7 ECS1601 | Assessment 07 | Year 2024 2.2 • What effect will a change in the price of copper, as described in Extract 2A, have on the foreign exchange market of Zambia where the same quantity of copper is exported regardless of price change? Include a diagram in your answer. (6 marks) Question 3 (10 marks) Maximum word count: 200 words 3.1 Read the following news clip and answer the question. News extract 3A Africa’s Inflation Among Region’s Most Urgent Challenges In sub-Saharan Africa, inflation has been driven less by domestic activity than in advanced economies. Instead, external developments have shaped the path of inflation since the start of the pandemic. They include the sharp spike in global commodity prices, swings in the exchange rate, global supply chain disruptions, and natural disasters. In the case of food, the prices of key staples such as maize and wheat have increased since 2019, contributing two-thirds of overall inflation in fragile states News extract 2B Zambia’s recovery is expected to strengthen, with GDP growing by around 4.5% annually over 2023–25. Firmer copper demand from China and commencement of fertilizer production at a newly established domestic plant will broaden the base of GDP growth. Completion of reforms to agricultural policies, business regulations, and the energy sector will boost fiscal sustainability and promote private sector-led growth. However, the Bank of Zambia expects inflation to rise and remain above its target band of 6–8% over the next two years on account of inflationary pressure from sustained exchange rate depreciation, increase in energy costs, and lingering external headwinds. For full article visit website: Access date on 10 October 2023 Page 5 of 7 ECS1601 | Assessment 07 | Year 2024 and one-half elsewhere in the region. Higher global energy prices and the strong dollar have also fed through to inflation indirectly, via transportation and tradable goods like household products. Source: International Monetary Fund You're an economic adviser to the Central Bank and National Treasury and you're asked to advise both on: (i) With reference to news reported in Extract 3A, explain what type of inflation is likely to be triggered by rising commodity prices for Sub-Saharan countries that are commodity exporters and why. Also, explain the influence of this inflation on the distribution of income and wealth among economic participants. (ii) the appropriate steps to address the inflation mentioned above. (8 marks) 3.2 Refer to the following table of Botswana CPI to answer the question Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2019 149,,,94 155,38 160,33 165,04 165,90 163,68 164,99 165,14 165,89 167,38 167,34 167,,31 171,84 172,22 177,39 181,95 184,40 188,64 189,25 188,76 189,23 189,23 188,46 Source: International Monetary Fund • Calculate the annual inflation rate in Botswana in July 2022. Show all calculation steps. (2 marks) Question 4 (15 marks) 4.1 Page 6 of 7 ECS1601 | Assessment 07 | Year 2024 Have a look at the following diagram and answer questions 4.1 (i) and 4.1 (ii) that follow: 4.1 (i) With reference to the above diagram, calculate the equilibrium level of income before the introduction of government spending and proportional income tax. Show all calculation steps. (5) 4.1 (ii) With reference to the above diagram, if national income (Y) is R462 million, calculate the induced consumption after the introduction of government spending and proportional income tax. Show all calculation steps. (3) Y = AE