Grade 11 Economics Exam
June 2015.
Time: 120 Minutes
Marks: 150
INSTRUCTIONS
1
Answer FOUR questions as follows:
SECTION A: COMPULSORY QUESTION
SECTION B: TWO QUESTIONS OUT OF THREE
Question 2 is compulsory
Choose ONE of either question 3 or 4
SECTION C: ONE QUESTION OUT OF TWO
Choose ONE of either question 5 or 6
2
Write the number of the question next to each answer.
3
Number the answers according to the system used in this question paper.
4
Start each question on a NEW AND SEPARATE SHEET OF PAPER. Leave one
to two lines open between sub-sections of each question.
5
Read each question carefully.
6
Answer in full sentences.
7
A neat and systematic presentation of facts is required.
8
Do not answer more than the required number of questions. Only the required
number of questions, in the order in which they have been handed in, will be marked.
9
Use a black or blue pen only (graphs / diagrams may be done in pencil).
10
Non – programmable calculators may be used.
THIS QUESTION PAPER CONSISTS OF 10 PAGES AND 1 ANSWER SHEET
Grade 11 Economics June 2015
SECTION A: SHORT ANSWER QUESTIONS
QUESTION 1
1.1
For each question, there are four possible answers: A, B, C or D. Choose the
one you consider correct and record your choice in the appropriate space on
the ANSWER SHEET attached to the question paper.
1.1.1 The table gives information about two countries in 1994 and 2004.
country
1
2
GDP
(local currencies)
1994
2004
5 000
18 000
10 000
20 000
population
(thousands)
1994
2004
5 000
5 500
3 000
3 300
prices
(1994 = 100)
2004
300
200
From the data in the table, what can be concluded about the real GDP per head?
A.
B.
C.
D.
It fell in country 2 only.
It fell in countries 1 and 2.
It rose in countries 1 and 2.
It rose in country 2 only.
1.1.2 An Indian multinational company receives profits from its factories based in the UK.
It then buys a US-owned firm based in the UK.
How will these transactions appear in India’s balance of payments?
A.
B.
C.
D.
the remittance of profit
a credit (+) item in the current account
a credit (+) item in the financial account
a debit (-) item in the current account
a debit (-) item in the financial account
the purchase of the US-owned firm
a debit (-) item in the financial account
a debit (-) item in the current account
a credit (+) item in the financial account
a credit (+) item in the current account
1.1.3 The chart shows the rates of economic growth and unemployment in a country for
the period 2007 to 2010.
2
Grade 11 Economics June 2015
What does the chart show?
A.
B.
C.
D.
Real GDP was lowest in 2010.
The standard of living fell between 2009 and 2010.
The total labour force declined between 2007 and 2009.
The unemployment rate fell when the growth rate increased.
1.1.4 According to Keynesian theory, in which circumstance will there always be an
increase in the demand for money?
A.
B.
C.
D.
real income
constant
constant
increase
increase
price level
decrease
increase
decrease
increase
interest rates
increase
decrease
decrease
increase
1.1.5 In an economy, the volume of output rises by 2 % in a year, while the quantity of
money rises by 5 %.
If the velocity of circulation of money remains the same, what will be the approximate
increases in the price level and the money value of national income?
increase in price level
A.
B.
C.
D.
2%
2%
3%
3%
increase in money value
of national income
5%
7%
5%
7%
1.1.6 Other things being equal, what will result in a decrease in aggregate demand?
A.
B.
C.
D.
a decrease in interest rates
a decrease in the balance of trade deficit
a decrease in the government’s budget deficit
a decrease in the household saving ratio
1.1.7 The table shows the annual percentage change in an index of prices.
Country
China
Pakistan
Saudi Arabia
United States
2008
6.3
24.3
10.9
5.6
2009
–1.2
11.2
10.7
–1.4
What can be concluded from the table?
A. Prices were lowest in the United States in both 2008 and 2009.
B. Prices were most stable in Saudi Arabia.
C. The fall in inflation between 2008 and 2009 was greater in China than Saudi
Arabia.
D. The price of all products sold by Chinese firms fell in 2009.
3
Grade 11 Economics June 2015
1.1.8 What would be classified as a supply side policy measure?
A.
B.
C.
D.
1.2
1.2.1
1.2.2
1.2.3
1.2.4
1.2.5
1.2.6
1.2.7
additional legislation to restrict the power of trade unions
a reduction in the government’s fiscal deficit
an open market sale of securities
the imposition of a tariff on imported goods
(8 x 2 = 16)
Choose a description from COLUMN B that matches the item in COLUMN A.
Write only the letter (A – J) next to the question number (1.2.1 – 1.2.7) on your
ANSWER SHEET.
COLUMN A
Consumption of
fixed capital
COLUMN B
a type of capital transaction that is recorded in the financial
A
account of the balance of payments.
when the government reduces government expenditure and
Inflation targeting B
increases taxes to cool off the economy.
Portfolio
a market on which securities with a term of longer than three
C
investment
years are traded.
Contractionary
inflation that is caused by increases in the input costs of
D
fiscal policy
production.
the fraction or percentage of the population that makes up the
Cost-push inflation E
labour force or economically active population.
Accommodation
the adjustment of the repo rate and the quantity of money lent
F
policy
by the SARB to other banks.
a tool to influence general expectations about future price
Capital market G
changes.
H the wear and tear of fixed capital goods.
when the SARB buys or sells bonds to influence the money
suppy.
inflation that is caused by increases in total expenditure in the
J
economy
(7 x 1 = 7)
I
1.3
Indicate, with an X in the appropriate space on your ANSWER SHEET, which of
the following statements are TRUE or FALSE
1.3.1 The objective of price stability means that the inflation rate should be kept as low as
possible.
1.3.2 The value of computers manufactured in South Africa by a Japanese firm does not
form part of the South African GDP.
1.3.3 When a German company invests in a vehicle manufacturing operation in South
Africa, the amount concerned is entered as an inflow in the financial account of the
South African balance of payments.
1.3.4 When a person deposits cash in a cheque account there is no immediate change in
the quantity of money.
1.3.5 There is an inverse relationship between the interest rate and the quantity of money
demanded for speculative purposes.
1.3.6 When the AS curve is very steep, an increase in aggregate demand leads to an
increase in production with little or no increase in the price level.
1.3.7 The CPI is an inflation rate.
(7 x 1 = 7)
Total Section A: /30/
4
Grade 11 Economics June 2015
SECTION B: DIRECT QUESTIONS
QUESTION 2: MEASURING THE PERFORMANCE OF THE ECONOMY
THIS QUESTION IS COMPULSORY
Start this question on a new and separate sheet of paper.
2.1
List TWO Macroeconomic goals of government
2.2
Study the infographic below and answer the questions that follow:
(2 x 2 = 4)
2.2.1 Which two industries shrunk in the 1st quarter of 2015?
(2)
st
2.2.2 Why do you think the primary sector was the best performing sector in the 1 quarter
of 2015?
(4)
2.2.3 Comment on South Africa’s quarter-on quarter growth for the last four years.
(4)
Please turn over the page
5
Grade 11 Economics June 2015
2.3
Study the information below and answer the questions which follow:
2.3.1 Define “Gini Co-efficient”.
(2)
2.3.2 Which country has the most uneven distribution of income before government
involvement?
(2)
2.3.3 Which country’s distribution of income improves the most as a result of government
involvement?
(2)
2.3.4 Explain how governments use “taxes and transfers” to improve income inequality.
(4)
2.4
Explain how the Balance on the Current Account is calculated.
(8)
2.5
Discuss how the Consumer Price Index is constructed in South Africa.
(8)
/40/
Please turn over the page
6
Grade 11 Economics June 2015
CHOOSE EITHER QUESTION 3 OR QUESTION 4:
QUESTION 3: MONETARY SECTOR
Start this question on a new and separate sheet of paper.
Note that if you have completed question 4 you should NOT complete question 3
3.1
List TWO characteristics of a good form of money.
(2 x 2 = 4)
3.2
Study the table below and answer the questions that follow:
R (million)
2010
Banknotes
and coin
65 079
862 876
1 678 417
2 084 202
2011
75 396
947 269
1 798 932
2 256 727
2012
81 042
1 035 142
1 869 050
2 373 439
2013
87 014
1 132 039
2 049 694
2 512 251
2014
94 193
1 242 750
2 228 355
2 696 862
Year
M1
M2
M3
3.2.1 Define “M1”.
(2)
3.2.2 Which function of money becomes more important in the progression from M1 to M3?
(2)
3.2.3 Calculate the growth in M1 from 2010 to 2014
(2)
3.2.4 What explains this growth?
(4)
3.3.
Study the diagram below and answer the questions that follow:
3.3.1 Keynes identified two motives for holding money. What are they?
(2)
3.3.2 What is the determinant for each of those motives?
(2)
3.3.3 Explain the relationship between the interest rate and the quantity of money
demanded. In your answer, mention should be made of the role of bond prices. (6)
3.4.
Identify and briefly explain TWO functions of the SARB.
(2 x 4 = 8)
3.5
Briefly explain accommodation policy and open market policy.
(2 x 4 = 8)
/40/
7
Grade 11 Economics June 2015
QUESTION 4: MACROECONOMIC THEORY AND INFLATION
Start this question on a new sheet of paper.
Note that if you have completed question 3 you should NOT complete question 4
4.1
List TWO negative consequences of inflation.
4.2
Read the following extract and answer the questions that follow:
(2 x 2 = 4)
THE Reserve Bank’s monetary policy committee (MPC) has left the repo interest rate unchanged
at 5.75%, as expected.
Although the committee left rates unchanged following its three-day meeting on Thursday, it noted
concern over a deteriorating inflation outlook on higher oil prices and a weak rand.
Economists expect interest rates to rise before year-end and have forecast inflation to be at the
upper end of the A to B target band by September or November.
Four members of the MPC favoured an unchanged stance while two favoured a 25 basis point
increase. The deteriorating inflation outlook, however, suggests that this unchanged stance cannot
be maintained indefinitely.
Source: Business Day 21 May 2015
4.2.1 What is the “repo rate”?
(2)
4.2.2 Identify the percentages “A” and “B” in the third paragraph of the text.
(2)
4.2.3 Explain why “higher oil prices and a weak rand” contribute to a “deteriorating inflation
outlook”.
(4)
4.2.3 What do you expect to happen with regard to interest rates in South Africa in the near
future?
(2)
4.3.
Study the diagram below and answer the questions that follow:
4.3.1 Give ONE example of a potential supply-shock in an economy.
(2)
4.3.2 Explain the shape of the AS curve illustrated above.
(4)
4.3.3 Assuming the economy is operating at Y1, what will occur if the government
implemented an expansionary fiscal policy?
(4)
8
Grade 11 Economics June 2015
4.4
Identify and explain TWO reasons why the Aggregate Demand curve slopes
downward
(2 x 4 = 8)
4.5.
Discuss how Monetarists use the Quantity Theory of Money to explain inflation.
(8)
/40/
Total Section B: /80/
Please turn over the page
9
Grade 11 Economics June 2015
SECTION C: ESSAY
QUESTION 5:
Answer ONE of the following essays:
MARK
ALLOCATION:
Max. 2
STRUCTURE OF THE ESSAY:
Introduction
Body:
Main part: Discuss in detail/In-depth discussion / Examine /
Critically discuss / Analyse / Compare / Evaluate / Distinguish /
Explain / Assess / Debate
Additional part: Give own opinion / Critically discuss/ Evaluate /
Critically evaluate /Draw a graph and explain / Use the graph given
and explain / Complete the given graph / Calculate / Deduce /
Compare / Explain / Distinguish / Interpret / Briefly debate
Conclusion
TOTAL
5.
Max. 26
Max. 10
Max. 2
40
The first and arguably most important macroeconomic objective is economic growth.
Discuss the three methods of measuring output in an economy.
(26)
Explain the importance of having tools available to measure the performance of an
economy.
(10)
6.
One of the basic difficulties associated with attempts to stabilise the economy using
monetary and/or fiscal policy is the existence of lags.
Describe the various lags associated with monetary and fiscal policy.
(26)
Explain why the timing of policy decisions and actions is so important.
(10)
Total Section C: /40/
TOTAL: /150/
END OF PAPER
10
Grade 11 Economics June 2015
Grade 11 Economics Exam
June 2015
ANSWER SHEET
Name: _______________________
Set: _____
1.1.1
A
B
C
D
1.1.2
A
B
C
D
1.1.3
A
B
C
D
1.1.4
A
B
C
D
1.1.5
A
B
C
D
1.1.6
A
B
C
D
1.1.7
A
B
C
D
1.1.8
A
B
C
D
Teacher: _____
1.2.1
1.2.2
1.2.3
1.2.4
1.2.5
1.2.6
1.2.7
1.3.1
TRUE
FALSE
1.3.2
TRUE
FALSE
1.3.3
TRUE
FALSE
1.3.4
TRUE
FALSE
1.3.5
TRUE
FALSE
1.3.6
TRUE
FALSE
1.3.7
TRUE
FALSE
11