Classification: UNCLASSIFIED
MULTIPLE CHOICE QUESTIONS UNIT 4
Answer the following questions by selecting the appropriate answer from the list below.
Question 1
South Africa has a comparative (relative) advantage over France in the production of maize if it:
a)
b)
c)
d)
e)
produces maize with fewer material inputs than France.
can match France’s output of maize and have resources left over.
can produce maize with the same resources as France but faster.
has an absolute advantage over France.
produces maize at a lower opportunity cost than France.
Question 2
Australia has an absolute advantage over South Africa in wool production if, during a year, Australia:
a)
b)
c)
d)
a)
can produce more wool than South Africa.
specialises in wool production.
can produce less wool than South Africa
can produce more wool than South Africa with a given number of resources.
consumes more wool than South Africa on average.
Question 3
If two countries have differing opportunity costs of production for two goods, then:
a) each country should specialise in the good for which it has a higher opportunity cost of
production.
b) only the country with an absolute advantage in the production of both goods stands to gain
from trade.
c) each country should purchase inputs from the other country in order to gain an absolute
advantage.
d) each country should specialise in the production of the good for which it has a relative
advantage.
e) each country should import all goods instead of producing them domestically
Classification: UNCLASSIFIED
Question 4
Consider the case of two countries, Afghanistan and the US, both producing carpets and fighter
aircraft. The tale below shows output rates per day in the two countries if all resources are fully and
efficiently employed. Use this information to answer Question (a), (b) and (c).
Question (a)
Based on this information:
a)
b)
c)
d)
e)
there is no opportunity for mutually beneficial trade between the two countries.
Afghanistan has an absolute advantage in the production of both goods.
Afghanistan should import carpets from the US.
Afghanistan has a comparative advantage in the production of aircraft.
the US should export fighter aircraft to Afghanistan.
Question (b)
An appropriate international exchange ratio that would allow mutually advantageous trade to take
place would be:
a)
b)
c)
d)
e)
1 aircraft = 25 carpets.
1 aircraft = 20 carpets.
1 carpet = 4 aircraft.
1 carpet = 0,04 aircraft.
1 aircraft = 22 carpets.
Question (c)
If Afghanistan raised its aircraft productivity to 5 units per day, then:
a)
b)
c)
d)
e)
mutually beneficial trade would no longer be possible.
Afghanistan would continue to import fighter aircraft from the US.
Afghanistan should switch from the export of carpets to the export of aircraft.
the US would retain its comparative advantage in carpet manufacture.
the US would retain its absolute disadvantage in the manufacture of both goods.
Classification: UNCLASSIFIED
Question 5
The foreign exchange rate is the rate at which:
a)
b)
c)
d)
e)
one country’s goods trade for those of another country.
the currency of one country trades for the goods of another country.
currencies of different countries are exchanged.
one country’s currency trades for silver provided by another country.
the services of one country trade for the currency of another country.
Question 6
The figure below shows the demand and supply curves for dollars (in terms of the South African
rand) in the foreign exchange market. Use this information to the answer the question below
In this case, an increase in American tourists to South African game reserves would cause the:
a)
b)
c)
d)
e)
supply curve to shift to the right.
demand curve to shift to the left.
supply curve and demand curve to remain unchanged.
demand curve to shift to the right.
supply curve to shift to the left.
Question 7
As a result of more Americans visiting South Africa, we can expect, ceteris paribus
a)
b)
c)
d)
an appreciation of the rand relative to the dollar.
a depreciation of the rand relative to the dollar.
an appreciation of the dollar relative to the rand.
that it will cost South Africans more to visit the United States.
Classification: UNCLASSIFIED
e) an appreciation of the dollar relative to all major currencies.
Question 8
A monetary system where exchange rates are freely determined in response to the demand and
supply for foreign currencies may best be described as a:
a)
b)
c)
d)
e)
fixed exchange rate system.
managed float.
floating exchange rate system.
pegged exchange rate.
purchasing power parity system.
Question 9
Suppose that the euro/US dollar exchange rate changes from 1,3 dollar per euro to 1,1 dollar per
euro. Then:
a)
b)
c)
d)
e)
the euro has depreciated against the dollar.
this will decrease the demand for Eurozone goods by the United States.
this will lead to a rise in exports by the United States to the Eurozone.
the euro has appreciated against the dollar.
the dollar has depreciated against the euro.
Question 10
The exchange rate is $0,50 = R5,00. If a car sells for $16 000, then its cost in rands would be:
a)
b)
c)
d)
e)
R80 000
R16 000
R12 800
R160 000
R64 000
Question 11
The exchange rate between the euro (€) and the US dollar ($) is $1,20 per euro. If an American
tourist in Paris purchases a good valued at 60 euros, then in his own currency this would cost:
a)
b)
c)
d)
e)
$50
$72
$48
$720
$18
Question 12
A tariff is:
a)
b)
c)
d)
e)
a tax on exported goods.
a source of revenue to the exporting nation.
a tax on imported goods.
a tax on foreign property.
a form of quota
Classification: UNCLASSIFIED
Question 11
The index that measures the change in prices of a typical basket of consumer goods is
a)
b)
c)
d)
e)
the GDP deflator.
the consumer price index.
nominal GDP.
real GDP.
the producer price index.
CPI measures prices of goods consumed by SA households. Most of these goods are produced in SA
but some are imported. GDP measures only goods produced in SA. Some of these are exported and
not consumed locally. PPI measures goods produced locally and imported by includes exports. Only
the CPI measures the basket of goods consumed.
Question 12
Gross domestic product includes
a)
b)
c)
d)
e)
all intermediate and final goods and services produced.
the current production of final goods and services within a country’s borders.
the current production of final goods and services by a country’s citizens.
All of the above.
Value added of all good produced for domestic consumption.
Important to avoid double-counting so only measure final goods. Also, measure only goods
produced with a country’s borders
Question 13
The most volatile component of GDP over the business cycle is
a)
b)
c)
d)
e)
consumption.
net exports.
investment.
government purchases.
imports.
Because investment depends upon “animal spirits” (confidence) it is more volatile than the other
components of GDP.
Question 14
Overseas earnings by South Africans would be included in
a)
b)
c)
d)
e)
gross domestic product and gross national product.
gross national product but not in gross domestic product.
gross domestic product but not in gross national product
neither gross domestic product nor gross national product.
none of the above.
GNP includes overseas earnings by South Africans. GDP measures only goods produced locally. So
(a) & (c) are incorrect. (d) and (e) are incorrect because GNP does measure overseas earnings.
Classification: UNCLASSIFIED
Question 16
Which of the following statements is an example of normative economics?
a)
b)
c)
d)
e)
South Africa has budgeted for a reduced budget deficit in 2017/18.
b. South Africa is one of the most unequal countries in the world.
Inflation is forecast by most economists to fall this year.
It is better to reduce inequality rather than poverty.
Business cycles exist in both fast-growing and slow-growing economies.
Normative implies passing judgment. Positive states things as they are without passing judgement.
(a), (b), (c) and (e) are all statement of facts without passing judgement. (d) is a matter of judgement
so is normative.
Question 17
Investment and the fixed capital stock are:
a)
b)
c)
d)
e)
Stock and flow variables respectively.
Flow and stock variables respectively.
Both stock variables.
Both flow variables
Neither stock nor flow variables.
Flows are measure over time e.g., a year. Stocks are measured at a point in time. Investment is the
amount spent on investment over a period of time such as a year so is a flow. Capital stock is the
amount of capital available at a point in time so is a stock. So (b) is correct.
Question 18
A South African company pays consulting fees to an IT specialist resident in another country. How do
we record this transaction in the South African Balance of Payments (BOP) accounts?
a)
b)
c)
d)
e)
Inflow in the current account.
Inflow in the financial account.
Outflow in the current account.
Outflow in the financial account.
Not recorded at all since the money was earned outside South Africa.
Current account represents payments abroad (outflow) or receipts from abroad (inflow) for goods
and services. Payment for this service is an outflow in the current account.
Classification: UNCLASSIFIED
Question 19
If the Marginal Propensity to Consume is 0.60, and taxes increase by R400 million, then income will
a)
b)
c)
d)
e)
fall by R400 million
rise by R400 million
fall by R600 million *
rise by R600 million
fall by R1 000 million
ΔY = ΔT * -mpc/(1-mpc)
= R400 million * -0.6/ (1-0.6) = R400 million * -1.5 = -R600 millionAnswer is (c)
The ratio between the change in consumption (ΔC) and the change in income (ΔY) is one of the most
important ratios in macroeconomics. It is called the marginal propensity to consume, and it is usually
indicated by the symbol c. Note that it is equal to the slope of the consumption function. In symbols
the marginal propensity to consume may be expressed as:
𝑐 =∆𝐶 /∆𝑌
The marginal propensity (or tendency) to consume indicates the proportion of an increase in income
that will be used for consumption
Question 20
If the Marginal Propensity to Consume is 0.80, and investment increases by R500 million, then
savings will
a)
b)
c)
d)
e)
be unchanged
rise by R500 million *
rise by R2 000 million
rise by R2 500 million
we have insufficient information to calculate the answer.
Note the question asks for savings not ΔY
Savings are the leakage in the multiplier which continues until all the initial injection (ΔI) has leaked
out of the system. So ΔS =ΔI=R500 million.
Question 21
Which of the following statements is correct?
a)
b)
c)
d)
e)
Smaller countries tend to be more open to foreign trade than larger countries. *
There is no difference in the degree of openness of small and large countries.
Degree of openness is calculated as the ratio of exports to GDP.
Degree of openness is calculated as the ratio of exports to GNP.
None of the above is correct.
Openness is measures by exports plus imports as % GDP. So (c) and (d) are incorrect. Openness is
greater in small countries than large countries (this was shown in a lecture slide). (a) is correct.
Classification: UNCLASSIFIED
Question 22
In the following diagram, Y1 is income today; Y2 is income tomorrow; r is the real interest rate. If
income today rises as a result of the household winning the lottery, the budget line
a)
b)
c)
d)
e)
will rotate counter clockwise around point A.
will rotate clockwise around point A.
will rotate clockwise around point B.
will shift to the right. *
Segment AB will be steeper than segment DA.
The result of winning the lottery is maximum income today OB increases, maximum income tomorrow
increases, and all the points in between allow higher combinations of consumption today and
tomorrow. The slope of the budget line is unchanged. The budget line therefore shifts to the right.
Answer is (d).
Question 23
If in the diagram in question 22 the real interest rate rises, then the budget line:
a)
b)
c)
d)
e)
will rotate clockwise around point A. *
will rotate counter-clockwise around point A.
will shift to the right.
will shift to the left.
only the section AB will be steeper, as the household is a borrower.
Point A is unaffected by the change in interest rate as at A the household is neither a borrower or a
saver. At all points along AD the household is a saver and benefits from higher interest rates so
possible consumption choices tomorrow increase. At all points along AB the household is a borrower
and pays the higher interest rate so possible consumption choices today decrease. So OD increases,
OB decreases and A is unchanged. The budget line has rotated clockwise around point A.
Classification: UNCLASSIFIED
Question 24
Consumption can best be explained as a function of
a)
b)
c)
d)
e)
Income only.
Wealth only.
After-tax income and wealth. *
After-tax income only.
Interest rates.
Households can consume only their after-tax income so consumption is a function of after-tax income.
It is also a function of wealth: the higher household wealth the more it can consume both today and
tomorrow. So, consumption is a function of after-tax income and wealth. Answer is (c).
Question 25
a) A household which has income today of Y1 and income tomorrow of Y2 is a borrower at the
current real rate of interest. If the real rate of interest increases, what would we expect this
household to do? To decrease its saving today.
b) To decrease both its saving and its consumption today.
c) To decrease its consumption today. *
d) To neither decrease nor increase its consumption today.
e) To increase its saving today.
The household is borrowing to increase consumption today. Because the interest rate has risen it will
be able to consume less after borrowing. Consumption today will fall. Answer is (c).
Question 26
Study the diagram below and answer the question.
Which one of the following statements is false? (4 marks)
a)
b)
c)
d)
Y1 represents the equilibrium level of income.
The curve labelled A = C + I show the total of consumption and investment spending.
The curve labelled C shows the total of autonomous and induced consumption spending.
The point labelled D shows where savings equal investment.
Classification: UNCLASSIFIED
Question 27
In macroeconomic theory, total or aggregate spending is denoted by A and total or aggregate
production of income by Y. Which one of the following statements is incorrect? (4 marks)
a)
b)
c)
d)
When A is greater than Y, there is disequilibrium and Y will tend to increase.
When A is equal to Y, there is equilibrium and Y will remain unchanged.
When A is less than Y, there is disequilibrium and Y will decrease.
When A is greater than Y, there is disequilibrium and A will decrease.
Question 28
Simon borrowed R10 000 from the bank at the end of 2011 at a fixed interest rate of 20%. At the end
of 2012, the inflation rate was 25%. Inflation has been ________ to Simon; the real value of his loan
plus interest payments changed to ________.
a)
b)
c)
d)
Beneficial; R9 600
Beneficial; R4 800
Beneficial; R8 000
Costly; R12 500
Question 29
Which one of the following statements is INCORRECT?
a) Keynesian economists believe that the business cycle is caused by external factors, such as
government interference in the economy.
b) Classical economists believe that market economies are inherently stable, and fluctuations
are ascribed to exogenous factors.
c) Classical economists believe that government should not intervene in the economy to try to
smooth out the business cycle.
d) Structuralist economists believe that the market system is neither inherently stable nor
systematically unstable.
Classification: UNCLASSIFIED
Question 30
Consider the case of two countries, Afghanistan and the US, both producing carpets and fighter
aircraft. The table below shows output rates per day in the two countries if all resources are fully and
efficiently employed. Use this information to answer the question.
An appropriate international exchange ratio that would allow mutually advantageous trade to take
place would be:
a)
b)
c)
d)
1 aircraft = 25 carpets.
1 aircraft = 20 carpets.
1 carpet = 4 aircrafts.
1 aircraft = 22 carpets.
Question 31
The ________ demand for money arises out of the need to hold money as a medium of exchange. This
demand for money is a function of ________.
a)
b)
c)
d)
Precautionary; interest rates
Transactions; national income
Speculative; interest rates
Precautionary; national income
Question 32
As the interest rate ________, the opportunity cost of holding money ________ and individuals
choose to hold________ money.
a)
b)
c)
d)
increases, increases, more
decreases, decreases, more
increases, decreases, less
decreases, increases, more
Classification: UNCLASSIFIED
Question 33
Use the information given in the table below to answer the question
Consumer prices
a)
b)
c)
d)
A Rose by 10% from 2002 to 2004
B Fell by 25% from 2000 to 2002
C Fell by 10% from 2002 to 2004
D Rose by 8% from 2002 to 2004
Question 34
Use the information given in the table below to answer the question
Which country or countries have an absolute advantage and comparative advantage in shoes? (4
marks)
a) South Africa has an absolute and comparative advantage in shoes.
b) The United States has an absolute and comparative advantage in shoes.
c) The United States has a comparative advantage and South Africa has an absolute advantage
in shoes.
d) South Africa has a comparative advantage, and the United States has an absolute advantage
in shoes.
Question 35
When aggregate planned expenditure is less than GDP, there is an unintended ___________in
inventories, firm’s_______________ production and GDP begins to ___________
a)
b)
c)
d)
Decrease, increase, increase
Increase, decrease, decrease
Increase, decrease, increase
Decrease, increase, decrease
Classification: UNCLASSIFIED
Question 36
Complete the following sentence:
In terms of the AD-AS model, a decrease in the interest rate leads to a(n) _______________ in
investment spending, a(n) _______________ in aggregate spending, a(n) ______________ in
aggregate demand and, eventually to a(n)________________ in total production and (or) a(n)
_______________ in the price level.
a)
b)
c)
d)
Decrease; decrease; decrease; decrease; decrease
Increase; increase; increase; increase; increase
Increase; increase; decrease; decrease; decrease
Decrease; decrease; increase; increase; increase
Question 37
A justification for government intervention in the economy arises from the fact that market systems
usually produce ________ outcomes, but they do not necessarily produce ________ outcomes.
a)
b)
c)
d)
Efficient; equitable
Equitable; efficient
Efficient; profitable
Profitable; equitable
Question 38
When the government uses its overdraft facilities at the central bank, it ___________ the quantity of
money in the economy. This is called ___________________ financing.
a)
b)
c)
d)
Increases; deflationary
Decreases; inflationary
Decreases; deflationary
Increases; inflationary
Question 39
If the expected inflation rate is 5% and negotiators agree that the real wages should rise by 7%, the
two sides will agree to an increase in the money wage of
a)
b)
c)
d)
2%
5%
7%
12%
Classification: UNCLASSIFIED
Question 40
Consider the case of two countries, Mauritius, and South Africa, both producing rum and cloth. If all
resources are fully and efficiently employed, one worker in Mauritius can produce 270 units of rum or
30m of cloth per week, while one worker in South Africa can produce 320 units of rum or 40m of cloth
per week.
Based on this information:
a)
b)
c)
d)
South Africa has an absolute advantage in the production of rum only.
Mauritius should import rum from South Africa.
Mauritius has a comparative advantage in the production of cloth.
South Africa should export cloth to Mauritius.
Question 41
The macroeconomic view of a trade deficit implies that, other things equal, the imposition of a tariff
will reduce South Africa's trade deficit
a)
b)
c)
d)
Because exports will be promoted and imports cannot possibly change
Because imports will be reduced and exports cannot possibly change
Only if the tariff has no impact on South Africa's spending or income
Only if the tariff leads to increased income in South Africa relative to its spending
Classification: UNCLASSIFIED
Question 42
Consider the case of two countries, Afghanistan and the US, both producing carpets and fighter
aircraft. The table below shows output rates per day in the two countries if all resources are fully and
efficiently employed.
Use this information to answer the question.
If Afghanistan raised its aircraft productivity to 5 units per day, then
a)
b)
c)
d)
Mutually beneficial trade would no longer be possible.
Afghanistan would continue to import fighter aircraft from the US.
Afghanistan should switch from the export of carpets to the export of aircraft.
The US would retain its comparative advantage in carpet manufacture.
Question 43
If more American tourists visit South Africa. The _____________________ of dollars increases and the
dollar in the rand/dollar exchange rate _____________________.
a)
b)
c)
d)
Supply; depreciates
Demand; depreciates
Supply; appreciates
Demand; appreciates
Question 44
In balance-of-payments accounting, the sale of a foreign production facility by a SA firm is a
__________ item in the SA balance of payments; the deposit of funds in a foreign bank account by a
SA citizen __________ item in the SA balance of payments.
a)
b)
c)
d)
Debit; also, is a debit
Debit; is a credit
Credit; is a debit
Credit; also, is a credit
Classification: UNCLASSIFIED
Question 45
The table below shows a section of the national accounts for a small country in 2018. Answer the
question that follows using the information provided in the table.
The value of Gross Domestic Product (GDP) is:
a)
b)
c)
d)
16 100
19 900
16 600
15 600
Question 46
To calculate gross national income (GNI) from gross domestic product (GDP), ___________________
must be added and _________________________ must be subtracted from GDP.
a)
b)
c)
d)
Primary income payments; primary income receipts
Primary income receipts; primary income payments
Subsidies for local production; tariffs on production from the rest of the world
Taxes from the rest of the world; subsidies received from the rest of the world
Question 47
In a country with a population of 50 million people, there are 20 million children under the age of 15
years, 16 million employed, 9 million pensioners, 4 million unemployed and 1 million people who are
physically unable to work. The unemployment rate in this country equals
a)
b)
c)
d)
10%.
13,3%.
20%.
25%.
Classification: UNCLASSIFIED
Question 48
Refer to the table below that contains information about the Consumer Price Index in Mythopia, in
order to answer the question.
The unit of currency in Mythopia is the Myth.
Between 2010 and 2012, the purchasing power of the consumer’s Myth
a)
b)
c)
d)
Decreased to 20,8 cents.
Decreased to 120,8 cents.
Decreased to 83 cents.
Decreased to 93 cents.
Question 49
Suppose the SARB decrease interest rates while oil prices is increasing. What would be the expected
effect on real GDP and the price level?
a)
b)
c)
d)
Option 1
Option 2
Option 3
Option 4
Question 50
Which one of the following statements is INCORRECT?
a) The level of autonomous consumption is determined by the non-income determinants of
consumption spending.
b) The impact of a change in one or more of the non-income determinants of consumption can
be illustrated by a shift of the consumption function.
c) The level of autonomous consumption determines the position of the consumption function.
d) Investment spending is the most stable component of aggregate spending in the economy.
Classification: UNCLASSIFIED
Question 51
Which one of the following does NOT represent a key macroeconomic variable?
a)
b)
c)
d)
e)
The unemployment rate
The inflation rate
Gross Domestic Product (GDP).
Income distribution.
The population growth rate.
Question 52
If we were to add up the value of output of all firms in the economy, we would:
a)
b)
c)
d)
e)
obtain GDP at factor cost.
obtain GDP at market prices.
obtain GDP using the income method.
overestimate the value of production taking place in the economy
underestimate the value of production taking place in the economy
Question 53
Questions (a) and (b) are based on the table below, which describes the process by which a loaf of
bread is made available to a consumer as a final good.
Question A
The total value of a loaf of bread is
a)
b)
c)
d)
e)
R7,00
R12,00
R4,00
R33,00
R10,00
Question B
The value added by the grocer equals:
a)
b)
c)
d)
e)
R12,00
R10,00
R2,00
R5,00
R4,00
Classification: UNCLASSIFIED
Question 54
Net product is equal to gross product net of:
a)
b)
c)
d)
e)
inflation.
indirect taxes.
subsidies.
net factor payments.
depreciation/consumption of fixed capital.
Question 55
If dairy farming is subsidised, we would expect the value of a litre of milk to be:
a)
b)
c)
d)
e)
equal to the price paid by the consumer for a litre of milk.
greater than the price paid by the consumer for a litre of milk.
less than the price paid by the consumer for a litre of milk.
lower because of the subsidy.
higher because of the subsidy.
Question 56
Nominal GDP calculated at market prices differs from nominal GDP at factor cost. Which of the
following items would account for the difference?
a)
b)
c)
d)
e)
Depreciation on capital equipment.
Inflation.
Interest on loans.
Indirect taxes and subsidies.
Net incomes from abroad.
Question 57
If 2010 is the base year for real GDP calculations, we know for certain that nominal GDP:
a)
b)
c)
d)
e)
is less than real GDP in 2010.
is greater than real GDP in 2010.
equals real GDP in 2010.
in 2009wasgreater than real GDP in 2010.
in 2009 was less than real GDP in 2010.
Question 58
GDP at ________ prices will usually be greater than GDP at ________ prices because of ________.
a)
b)
c)
d)
e)
constant; current; inflation
current; constant; inflation
constant; current; depreciation
current; constant; depreciation
current; constant; deflation
Classification: UNCLASSIFIED
Question 59
Since the R200 note was first introduced in South Africa, its value has:
a)
b)
c)
d)
e)
decreased in nominal terms and increased in real terms.
decreased in nominal terms and decreased in real terms.
increased in nominal terms and decreased in real terms.
increased in nominal terms and increased in real terms.
decreased in real terms, although its nominal value has remained unchanged.
Question 60
If South Africa’s GDP is greater than its GNI, then the income earned by foreign investors and foreign
workers in South Africa is ________ the income earned by South Africans who have invested, or who
are working, abroad.
a)
b)
c)
d)
e)
greater than
added to
subtracted from
less than
deflated by
Question 61
To derive GDP at market prices from Gross Domestic Expenditure, we must:
A.
a)
b)
c)
d)
subtract spending on exports and add spending on imports.
subtract spending on imports and add spending on exports .
subtract spending on intermediate goods and add spending on exports.
subtract spending on exports and add spending on intermediate goods.
subtract spending on net exports.
Question 62
The table below shows a section of the national accounts for a small country in 2012. Answer
Questions (a)and (b)using the information provided in the table.
Consumption expenditure
Government expenditure
Depreciation
Exports
Imports
Gross capital formation (investment)
Question A
The value of Gross Domestic Expenditure is:
a) 15 900
b) 15 200
10500
3 000
500
1 200
1 000
2 200
Classification: UNCLASSIFIED
c) 15 400
d) 18 400
e) 15700
Question B
The value of Net Domestic Product is:
A.
B.
C.
D.
E.
15 900
15 700
15 200
15 400
18400
Question 63
In a country with a population of 50 million people, there are 20 million children under the age of 15
years, 16 million employed, 9 million pensioners, 4 million unemployed and 1 million people who are
physically unable to work. The unemployment rate in this country equals:
a)
b)
c)
d)
e)
8%
10%
13,3%
20%
25%
Question 64
A consumer’s real purchasing power refers to:
a)
b)
c)
d)
e)
the nominal income level of the consumer.
wage income earned through employment.
the maximum volume of goods and services that the consumer can buy.
nominal GDP per capita.
real GDP deflated by the price level.
Question 65
The inflation rate is measured by:
a)
b)
c)
d)
e)
the ratio of current year CPI to base year CPI.
the percentage change in the CPI from one year to the next.
the percentage change in GDP from one year to the next.
the ratio of current year CPI to the next year’s CPI.
the ratio of current year PPI to the next year’s PPI.
Classification: UNCLASSIFIED
Question 66
In order to answer Questions (a), (b)and (c) refer to the table below. This table contains information
about the consumer price index in Mythopia. The unit of currency in Mythopia is the Myth.
Year
2010
2011
2012
CPI
100,0
112,1
120,8
Question A
Between 2010 and 2012, the purchasing power of the consumer’s Myth:
a)
b)
c)
d)
e)
decreased to 20,8 cents.
decreased to 120,8 cents.
decreased to 83 cents.
decreased to 93 cents.
increased to 120,8 cents.
Question B
The inflation rate in 2012 was:
a)
b)
c)
d)
e)
7,8%
8,7%
20,8%
17,2%
120,8%
Question C
Suppose that the inflation rate in 2013, calculated using the CPI, was found to be 8%. What was the
value of the CPI in 2013?
a)
b)
c)
d)
e)
128,8
130,5
129,7
132,0
124,0
Question 67
The current account of the balance of payments records:
a) all sales and purchases of goods and services as well as income flows to and from the rest
of the world.
b) the value of exports, but not imports.
c) the change in the country’s gold reserves.
d) all purely financial flows in and out of the country.
e) all of the above.
Classification: UNCLASSIFIED
Question 68
If the financial account is in surplus, then:
a)
b)
c)
d)
e)
the value of imports exceeds the value of exports.
the value of exports exceeds the value of imports.
there will be a surplus on the overall balance of payments.
capital outflows exceed capital inflows.
there has been a net inflow of foreign capital into the country.
Question 69
Which one of the following steps is required to construct a Lorenz curve?
a) Find the cumulative age of
b) Order the population from youngest to oldest
c) Order the population from poorest to richest
d) Divide the income of the richest group by the income of the poorest group
e) Divide the population into ten equal groups and calculate the average in
Question 70
Refer to the table below that describes the income distribution in a country.
Population
Poorest 20%
Next 20%
Cumulative Percentage
Population
Income
20
5
40
10
Next 20%
60
25
Next 20%
80
60
Richest 20%
100
100
In this country, the richest 40% of the population earn ________ of the total income; whilst the
poorest 40% of the population earn ________ of the total income.
a) 40%; 15%
b) 40%; 10%
c) 60%; 15%
d) 75%; 10%
e) 75%; 15%
Question 71
The area between the Lorenz curve of a country and the diagonal of perfect equality represents
a) the area of equality
b) the area of inequality
Classification: UNCLASSIFIED
c) The Gini coefficient
d) The quantile ratio
e) the cumulative percentage of the population
Question 72
Which of the following is recorded on the financial account of the balance e of payments?
a)
b)
c)
d)
A group of South Africans spends three weeks touring Europe
A German firm pays R5 million dividends to the holders of its shares in South Africa
An American firm sells its shares in a South African construction firm
A group of German tourists visits the Kruger National Park in South Africa for two weeks
Question 73
Which of the following summarises transactions involving a country’s international exchange of
goods,
services, current transfers and income?
A.
Current account
B.
Financial account
C.
Balance of
payments
D.
Gold standard
E.
Balance of trade
Question 74
Which of the following would most likely contribute to a deficit (or reduce the surplus) on the South
African current account?
a)
b)
c)
d)
e)
A depreciation of the Rand
A Malaysian company invests in a South African oil company.
An increase in transfers from Italian citizens to their South African relatives
A decline in imports
An increase in mine workers’ transfer earnings to Mozambique
Question 75
Which one of the following has to be taken into account when GDP is estimated?
a)
b)
c)
d)
e)
John purchases shares to the value of R150000 in Anglo American plc
Peter invests in a 24-month tax free fixed deposit.
firm buys Mpho, its sales representative, a new car.
Patrick, a university student, buys an old car from a friend.
Anne, a civil pensioner, receives her monthly pension from the government.
Classification: UNCLASSIFIED
Question 76
Which one of the following should not be taken into account when GDP is estimated?
a) Supreme Limited buys a new truck to deliver finished goods.
b) Paramount Inc buys a new car for Johnson, one of the firm’s sales representatives.
c) Koos, a wheat farmer, purchases a new tractor for his farm.
d) Nigel, an accountant, has his private car stolen at work.
e) Nigel buys a new car to replace the stolen one.
Question 77
Which one of the following statements is correct?
a) The South African national accounts are compiled by the National Treasury.
b) The GDP is the total quantity of goods and services produced in the country.
c) The GDP is estimated according to double entry bookkeeping system. All items are
therefore counted twice.
d) The GDP is the total value of all intermediate goods produced in the country.
e) The GDP can be estimated by adding the value added by all the different sectors of the
economy.
Question 78
Which one of the following statements is incorrect?
a) GDP estimated from the production side is also called gross value added (GVA).
b) To estimate GDP from the expenditure side, the expenditure on final goods and services
should be taken into account.
c) GDP can also be estimated as the total value of all incomes (wages and salaries, rent,
interest and profit) in the economy.
d) The three methods of estimating GDP should in principle yield the same results.
e) GDP can be estimated by adding the total value of primary inputs to total value of
intermediate goods and services