Grade 11 Economics Exam
November 2012.
Time: 150 Minutes
Marks: 200
INSTRUCTIONS
1
Answer FOUR questions as follows:
SECTION A: TWO QUESTIONS OUT OF FOUR
SECTION C: BOTH ESSAY QUESTIONS
(+/- 70 minutes)
(+/- 80 minutes)
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 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 14 PAGES
Grade 11 Economics November 2012
SECTION A: Answer any TWO questions from this section.
Start each question on a new sheet of paper.
QUESTION 1: Measuring the performance of the economy
1.1
For each of the following seven questions, there are four possible answers:
A, B, C or D. Choose the one you consider correct and write your choice on
your answer paper. Make sure you label your answers correctly.
1.1.1 The table shows inflation rates, unemployment rates and changes in nominal wage
rates between 2008 and 2009 for a number of countries.
country
France
Germany
UK
US
Inflation %
+0.2
+0.2
+1.8
–0.3
Unemployment %
9.4
8.3
7.8
9.4
nominal wages %
+3.0
+2.7
+2.5
+2.5
What can be concluded from the table?
A.
B.
C.
D.
On average, those in employment in the UK had an increase in real incomes.
The same number of people were unemployed in the US and France.
The same product would have the same price in France and Germany.
Unemployment was highest where inflation was highest.
1.1.2 The table shows some indicators of macro-economic performance in the US
economy for five decades.
economic target
1950s
real GDP growth (average %) 4.18
inflation (average %)
2.07
unemployment (average %)
4.51
1960s
4.43
2.33
4.78
1970s
3.28
7.09
6.22
1980s
3.02
5.66
7.27
1990s
3.03
3.00
5.76
Between which decades did the US government achieve an overall improvement in
its performance with no trade-off between individual policy goals?
A.
B.
C.
D.
1950s to 1960s
1960s to 1970s
1970s to 1980s
1980s to 1990s
1.1.3 The table gives information about two countries in 1994 and 2004.
country
1
2
GNP
(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
2
Grade 11 Economics November 2012
From the data in the table, what can be concluded about the real GNP 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.
1.1.4 The table shows the balance in $ million for four items in a country’s current
account for two years.
Year 1
Year 2
visibles
–72
–87
invisibles
84
96
income
–3
12
transfers
–24
–44
What can be concluded about the changes between Year 1 and Year 2?
A. Income has moved from a net inflow to a net outflow.
B. The difference between the value of exported and imported services has
increased.
C. The value of exported goods has fallen.
D. Transfers into the country have increased.
1.1.5 A South African multinational company receives profits from its factories based in
Angola. It then buys an US-owned firm based in Angola.
How will these transactions appear in South Africa’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
1.1.6 Assume that, in the population, 95 million people worked for pay last week, 5 million
people did not work for pay but had been seeking a job, 5 million people did not
work for pay and had not been seeking a job for the past several months, and 45
million were under age 16. The unemployment rate, given these numbers, is:
A. 5%
B. 8%
C. 10%
D. 20%
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Grade 11 Economics November 2012
1.1.7 The diagram shows the Lorenz curve for a country. What is the value of its Gini
coefficient?
A. 0
1.2
B. 1
C. ½
D. -1
7 x 2 = (14)
Study the table below and answer the questions that follow:
National income and production accounts of South Africa (2008) at current prices
Method 1
Compensation of
employees
Net operating
surplus
Consumption of fixed
capital
R million
956 562
759 767
306 946
Method 2
Consumption
expenditure
Government
expenditure
Gross capital
formation
Exports of goods
and services
Imports of goods and
services
R million
1 384 979
Method 3
R million
Primary sector
264 474
464 791
Secondary sector
496 016
520 305
Tertiary sector
1 292 997
807 704
878 482
Source: SARB Quarterly Bulletin March 2009
1.2.1 Identify Methods 1, 2 and 3 in the table above.
(3)
1.2.2 Calculate GDP at basic prices and factor cost (show all your working).
(6)
1.2.3 Explain the difference between the two figures you calculated in 1.2.2 above.
(3)
1.2.4 Calculate GDE (show all your working).
(3)
1.2.5 Calculate NDP at basic prices (show all your working).
(3)
1.2.6 The figures in the table are measured at current prices. 2008 is also a base year.
What does this imply about GDP at constant prices? Explain your answer.
(2)
1.3
Discuss and describe how the Lorenz Curve and the Gini co-efficient are derived /
calculated and how they are used as measures of income inequality.
(16)
/50/
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Grade 11 Economics November 2012
QUESTION 2: Inflation
2.1
For each of the following seven questions, there are four possible answers:
A, B, C or D. Choose the one you consider correct and write your choice on
your answer paper. Make sure you label your answers correctly.
2.1.1 The diagram compares the inflation rates of Paraguay and Argentina between 1950
and 2005.
What can be concluded about inflation rates in the two countries in the period 1950
to 2005?
A. Argentina’s prices fell rapidly between 1992 and 1995.
B. Argentina stabilised its price level between 1973 and 1992.
C. Paraguay was always more successful than Argentina at controlling its inflation
rate.
D. Paraguay was most successful at controlling its inflation rate between 1962 and
1970.
2.1.2 Over a period of a year, the annual rate of inflation falls from 10 % to 6 %.
Which statement is correct?
A.
B.
C.
D.
The cost of living has increased.
The purchasing power of money has increased.
There has been a reduction in the Consumer Price Index.
The standard of living has increased.
2.1.3 Which statement about inflation is correct?
A. Cost-push inflation is likely to occur when the government increases its
expenditure.
B. Demand-pull inflation is likely to occur when the country’s exchange rate
appreciates.
C. The Quantity Theory of Money predicts that changes in money supply can cause
inflation.
D. When inflation is unanticipated real values remain unchanged.
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Grade 11 Economics November 2012
2.1.4 The table shows the annual percentage change in an index of prices.
country
2008
China
6.3
Pakistan
24.3
Saudi Arabia 10.9
United States 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.
2.1.5 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
2.5%
2.5%
3%
3%
increase in money value
of national income
5%
7%
5%
7%
2.1.6 Between 2008 and 2009 a country’s national income at current prices increased by
15%. At the same time the country experienced 5% inflation.
Which index number most closely represents the country’s national income in 2009
at 2008 prices (2008 = 100)?
A. 103
B. 110
C. 115
D. 120
2.1.7 What is likely to be the effect of a fall in oil prices on the global economy?
A. a decrease in the rate of economic growth
B. a decrease in unemployment
C.
a strengthening of cost-push inflation
D.
a weakening of demand-pull inflation
7 x 2 = (14)
PTO
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Grade 11 Economics November 2012
2.2
Study the article below and answer the questions that follow:
Housing to get heavier weighting in inflation basket
HOUSING costs will carry a significantly larger weighting in a revamped measure for
consumer inflation that takes effect at the start of next year, Statistics South Africa said on
Tuesday.
The existing consumer price index (CPI) is monitored by the Reserve Bank when it makes
decisions on interest rates. It rose 5.5% in September, up from 5% in the previous month
and nearing the top of its official 3%-6% target range.
The contribution of housing costs to the CPI will rise to 22.8% from 21%, largely due to
double-digit increases in electricity prices, Stats SA said. The weighting of food and nonalcoholic beverages will fall to 17.5% from 18.3% at present. Transport costs will carry a
weight of 15.4%, down from 17.8%, reflecting a reduction in the importance given to
purchases of motor vehicles.
The calculations are based primarily on the outcome of the Income and Expenditure Survey
for 2010-11, released by Stats SA at the same time, but are supplemented by data from
retailers.
They showed there had been a substantial shift in spending away from goods to services.
This means that goods will account for just 49% of the weight of the overall CPI, compared
with 54% now, while services will make up 51% of the weight, compared with 46% at
present.
The last time Stats SA made changes to the index was in 2009, when the measure was
overhauled to reflect international best practice.
Source: Business Day, November 2012
2.2.1 Define “CPI”.
(3)
2.2.2 What do you understand the term “weighting” to mean in the context of the CPI?
(3)
2.2.3 Explain why there might have been:
i.
“a reduction in the importance given to purchases of motor vehicles” and
ii.
“a substantial shift in spending away from goods to services”
(6)
2.2.4 There has been some criticism of the new weightings – especially in regard to the
data used to calculate them. What do you think is the main reason for this criticism?
(4)
2.2.5 The new CPI calculations will be “rebased” to 2012. Explain.
2.3
(4)
Using diagrams to assist you, explain “demand-pull and cost-push inflation.
(16)
/50/
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Grade 11 Economics November 2012
QUESTION 3: Theory of the firm
3.1
For each of the following seven questions, there are four possible answers:
A, B, C or D. Choose the one you consider correct and write your choice on
your answer paper. Make sure you label your answers correctly.
3.1.1 Which diagram correctly shows the relationship between the average product (AP)
and the marginal product (MP) of labour given that the quantities of other factor
inputs remain constant?
3.1.2 In the diagram, a firm is operating at point X on its long-run average cost curve.
Which statement is not correct?
A.
B.
C.
D.
The firm is employing the least-cost combination of factor inputs to produce OQ.
The firm is operating below its minimum efficient scale.
The firm is producing at its cost-minimising level of output.
The firm is producing output OQ at minimum cost.
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Grade 11 Economics November 2012
3.1.3 The schedule shows the short-run marginal cost of producing good X.
units of X
marginal cost ($)
1
40
2
30
3
30
4
60
5
120
Given that the total fixed cost is $20, what level of output minimises average total
cost?
A. 2 units
B. 3 units
C. 4 units
D. 5 units
3.1.4 The diagram shows a firm’s demand curve and its marginal revenue curve.
What is the approximate price elasticity of demand at price OP?
A. 0.25
B. 0.5
C. 1
D. 2
3.1.5 The table shows information about a profit-maximising firm.
output
17 000 units
price per unit
$1.75
fixed costs
$10 000
variable costs per unit
$1.70
What should the firm do?
A.
B.
C.
D.
close down immediately because it is not covering its fixed costs
close down immediately because it is not covering its average costs
close down immediately because it is not covering its total costs
continue production in the short run because it is covering its variable costs
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Grade 11 Economics November 2012
3.1.6 The diagram shows a firm’s marginal and average cost curves.
The firm enters a collusive agreement with other firms in the industry. It is agreed
that each firm will charge a common price, OP, and will restrict the level of its output
to a production quota set by the industry cartel.
The firm is allocated a production quota, Oq.
The firm decides to cheat in order to maximise its profits.
What is its short-run increase in profits?
A.
B.
C.
D.
PGKL
PHJL
PHJL minus PGNM
PGKL minus LKNM
3.1.7 A competitive market becomes a monopoly.
What is likely to happen?
A. Consumer surplus will be reduced by the amount of the deadweight loss.
B. Producer surplus will be reduced by the amount of the deadweight loss.
C. The loss in consumer surplus will be balanced by the increase in producer
surplus.
D. There will be a transfer of surplus from consumer to producer.
7 x 2 = (14)
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Grade 11 Economics November 2012
3.2
The figure below represents the long run equilibrium position of a firm; “Pukka
Pizza’s”
3.2.1 In what market structure would Pukka Pizzas operate? Give ONE reason for your
answer.
(4)
3.2.2 Identify the curves labelled I – IV.
(4)
3.2.3 What is Pukka Pizzas long-run equilibrium price AND quantity?
(4)
3.2.4 How much economic profit is Pukka Pizzas earning?
(2)
3.2.5 Identify ONE possible strategy which Pukka Pizzas could pursue in order to
increase its economic profits in the future. Explain how this strategy would be
represented in the diagram above (a quick sketch may be helpful in your answer).
(6)
3.3
Define and discuss “economies and diseconomies of scale” (a diagram may be of
assistance) and give two examples of how each of them arise.
(16)
/50/
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Grade 11 Economics November 2012
QUESTION 4: GROWTH AND DEVELOPMENT
4.1
For each of the following seven questions, there are four possible answers:
A, B, C or D. Choose the one you consider correct and write your choice on
your answer paper. Make sure you label your answers correctly.
4.1.1 What is typically associated with a relatively low level of income per capita in a
country?
A.
B.
C.
D.
a high rate of saving
a low rate of economic growth in past periods
a low rate of inflation
a low rate of population growth
4.1.2 Economists have proposed that the best policy to promote development is ‘trade
not aid’.
What is implied by this proposal?
A. Developing countries should become self-sufficient and not rely on aid.
B. Developing countries should be given greater access to markets in developed
countries.
C. Developing countries should use foreign aid to invest in their export industries.
D. Developing countries should use trade barriers to promote import substitution.
4.1.3 What is likely to result from foreign direct investment in developing economies?
A.
B.
C.
D.
a reduction in local wage levels
a reduction in tax revenues in developing economies
a reduction in the range of consumer goods available to the local population
a worsening of net income flows from investments
4.1.4 What is most likely to indicate that an economy is developed rather than
developing?
A.
B.
C.
D.
a high birth rate and a low death rate
a large primary sector and a high population growth
a large service sector and capital intensive production
a low level of investment and a high rate of savings
4.1.5 What will be the likely effect on the remaining population of a developing country
when newly trained, skilled workers migrate to developed countries?
A.
B.
C.
D.
Its average age will increase.
Its mobility will increase.
Its productivity will increase.
Its total size will increase.
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Grade 11 Economics November 2012
4.1.6 Which indicators are used to calculate the Human Development Index?
A.
B.
C.
D.
population growth, GDP per capita, life expectancy
population growth, low nutrition, infant mortality rate
life expectancy, educational attainment, GDP per capita
current account balance, life expectancy, educational attainment
4.1.7 In 2008, the US had a higher GDP per head than Iceland, but a lower Human
Development Index ranking than Iceland. What could explain this difference?
A.
B.
C.
D.
Average family size is higher in Iceland.
Life expectancy is higher in Iceland.
School enrolments are higher in the US.
The population of the US is larger.
7 x 2 = (14)
4.2
Study the article below and answer the questions that follow:
Census 2011 will widen the rural-urban gap
Johannesburg - The development and income gap between urban and rural South Africans
is set to widen if policymakers follow the findings of Census 2011.
The Treasury allocates the budget according to the number of people living in a province.
With Gauteng now confirmed as South Africa’s most populous province, government is
expected to allocate to the province a lion’s share of its R1 trillion budget in February next
year. On the flip side, the provinces that have seen exoduses because of their dire prospects
are set to get the short end of the stick and become poorer.
Efficient Group chief economist Dawie Roodt said the increase in the number of South
Africans living in urban areas would make it easier for companies to reach their customers
and it would make it easier for government to provide services. He said migration to urban
areas would result in big cities needing more infrastructure investment. This also means that
urban areas may end up taking a big chunk of the R3.2 trillion government wants to spend
over the next eight years to upgrade electricity, road and rail infrastructure. Roodt said: “I
don’t have anything against rural areas, but I think it makes sense to build a road that is
going to be used by many people rather than few people.”
Source: Fin24.com, November 2012
4.2.1 What is a “census”?
(3)
4.2.2 What is a “development and income gap”?
(3)
4.2.3 In your own words, briefly explain, why the results of Census 2011 “will widen the
rural-urban gap”.
(4)
4.2.3 Using the information in the article, as well as your own knowledge, briefly discuss
the advantages and disadvantages of urban migration in terms of economic
development.
(10)
4.3
Identify and briefly discuss FOUR characteristics of developing economies.
(16)
/50/
SECTION A TOTAL: /100
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Grade 11 Economics November 2012
SECTION B: Answer BOTH questions from this section.
QUESTION 5: Inflation
The South African Reserve Bank regards its primary goal in the South African economic
system as "the achievement and maintenance of price stability".
Explain the reasons why the South African Reserve Bank fights inflation and discuss the
methods that it uses to do so.
(50)
QUESTION 6: Theory of the firm
“Monopoly and perfect competition represent two extremes along a continuum of market
structures. At the one extreme is perfect competition, representing the ultimate of
efficiency achieved by an industry that has extensive competition and no market control.
Monopoly, at the other extreme, represents the ultimate of inefficiency brought about by
the total lack of competition and extensive market control.”
To what extent do you agree with this statement?
(Your answers should compare, contrast and explain the long run equilibrium position of a
perfectly competitive industry with that of a monopoly and should include well labelled and
relevant diagrams)
(50)
SECTION B TOTAL: /100
GRAND TOTAL: /200
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