October/November 2017 Exam
Section A
Question 1
a) List the three withdrawals from the circular flow if income and spending.
b) Price stability is one of the macroeconomic objectives. List four other objectives.
c) Explain the difference between gross domestic product (GDP) and gross national income (GNI).
d) In the table below, provide any three differences between the consumer price index and the producer
price index.
Consumer Price Index Producer Price Index
Question 2
a) Use examples to explain the difference between contractionary fiscal policy and expansionary fiscal
policy.
b) Consider the following statement and answer the questions that follow:
In 2007, the US economy entered into the worst recession since the Great Depression. Real GDP
declined by 5,1% and the unemployment rate rose from 4,4% to 10,1%.
Use the AD-AS framework to explain how monetary policy can be used to address the problem of
declining output and rising unemployment.
c) Illustrate and explain, by using a diagram, what will happen to the exchange rate between the rand
and the US Dollar if South African tourists to the United States increase.
Question 3
a) Explain why the simple Keynesian multiplier tends to be bigger than the multiplier derived after the
introduction of the government sector.
b) Suppose you are given the following information about the South African economy. Use the
information to answer questions (i), (ii), and (iii).
Income Consumption expenditure Saving
(Billions in rand) (billions in rand) (billions in rand)
0 260 -260
1 100 1 140 -40
1 200 1 220 -20
1 300 1 300 -
1 400 1 380 20
1 500 1 460 -
Pg. 4
© 2018Together We Pass. All rights reserved.
, (i) Calculate the marginal propensity to consume and the marginal propensity to save.
(ii) Calculate the multiplier.
(iii) Indicate on the table, the value of saving at income levels 1300 and 1500.
c) Explain how a 1% decrease in the repo rate could affect the general price level in the economy.
Question 4
a) Write a paragraph in which you explain two supply-side policies and two demand-side policies that
can be used to reduce unemployment.
b) Name any two policies that can be used to combat each of the following:
(i) Cost-push inflation
(ii) Demand-pull inflation
c) Define the following concepts:
(i) Economic growth
(ii) Unrecorded activity
(iii) Business cycle
(iv) Capital deepening
(v) Domestic demand.
Pg. 5
© 2018Together We Pass. All rights reserved.
,Section B
Pg. 6
© 2018Together We Pass. All rights reserved.
, Pg. 7
© 2018Together We Pass. All rights reserved.
Section A
Question 1
a) List the three withdrawals from the circular flow if income and spending.
b) Price stability is one of the macroeconomic objectives. List four other objectives.
c) Explain the difference between gross domestic product (GDP) and gross national income (GNI).
d) In the table below, provide any three differences between the consumer price index and the producer
price index.
Consumer Price Index Producer Price Index
Question 2
a) Use examples to explain the difference between contractionary fiscal policy and expansionary fiscal
policy.
b) Consider the following statement and answer the questions that follow:
In 2007, the US economy entered into the worst recession since the Great Depression. Real GDP
declined by 5,1% and the unemployment rate rose from 4,4% to 10,1%.
Use the AD-AS framework to explain how monetary policy can be used to address the problem of
declining output and rising unemployment.
c) Illustrate and explain, by using a diagram, what will happen to the exchange rate between the rand
and the US Dollar if South African tourists to the United States increase.
Question 3
a) Explain why the simple Keynesian multiplier tends to be bigger than the multiplier derived after the
introduction of the government sector.
b) Suppose you are given the following information about the South African economy. Use the
information to answer questions (i), (ii), and (iii).
Income Consumption expenditure Saving
(Billions in rand) (billions in rand) (billions in rand)
0 260 -260
1 100 1 140 -40
1 200 1 220 -20
1 300 1 300 -
1 400 1 380 20
1 500 1 460 -
Pg. 4
© 2018Together We Pass. All rights reserved.
, (i) Calculate the marginal propensity to consume and the marginal propensity to save.
(ii) Calculate the multiplier.
(iii) Indicate on the table, the value of saving at income levels 1300 and 1500.
c) Explain how a 1% decrease in the repo rate could affect the general price level in the economy.
Question 4
a) Write a paragraph in which you explain two supply-side policies and two demand-side policies that
can be used to reduce unemployment.
b) Name any two policies that can be used to combat each of the following:
(i) Cost-push inflation
(ii) Demand-pull inflation
c) Define the following concepts:
(i) Economic growth
(ii) Unrecorded activity
(iii) Business cycle
(iv) Capital deepening
(v) Domestic demand.
Pg. 5
© 2018Together We Pass. All rights reserved.
,Section B
Pg. 6
© 2018Together We Pass. All rights reserved.
, Pg. 7
© 2018Together We Pass. All rights reserved.
