Grade 12 Economics Exam
September 2014
Paper 1 (Macroeconomics)
Time: 90 Minutes
Marks: 150
INSTRUCTIONS
1
Answer FOUR questions as follows:
SECTION A: COMPULSORY QUESTION (+/- 10 minutes)
SECTION B: TWO QUESTIONS OUT OF THREE OPTIONS (+/- 45 minutes)
SECTION C: ONE QUESTION OUT OF TWO OPTIONS (+/- 35 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 PAGE. Leave one to two lines open between subsections of each question.
5
Read each question carefully.
6
A neat and systematic presentation of facts is required.
7
Answer in full sentences.
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 only a black or blue pen (graphs / diagrams may be done in pencil).
10
Non – programmable pocket calculators may be used.
THIS QUESTION PAPER CONSISTS OF 10 PAGES AND ONE ANSWER SHEET
SECTION A (COMPULSORY)
QUESTION 1
1.1
For each question there are three possible answers, A, B and C. 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 If national income increases by R500 million as a result of an investment of R200
million, what is the value of the multiplier?
A
B
C
2,5
0,4
5
1.1.2 Consumption of fixed capital is used to calculate GDP at …
A
B
C
basic prices
market prices
factor cost
1.1.3 A focus on the improvement of input efficiency is a characteristic of the … -side
policy.
A
B
C
demand
supply
demand and supply
1.1.4 If the South African Reserve Bank sells foreign exchange to pay for deficits in the
current account, this affects:
A
B
C
the financial account
the capital transfer account
the official reserve account
1.1.5 The process whereby previously disadvantaged groups of people are empowered in
development is called …
A
B
C
Skills support programme (SSP)
Black Economic Empowerment (BEE)
National Development Plan (NDP)
1.1.6 The scorecard used to measure progress with Black Economic Empowerment
(BEE) is published by the …
A
B
C
Amalgamated Banks of South Africa
Development Bank of South Africa
Department of Trade and Industry
2
1.1.7 Spatial areas that offer a passageway to mining, manufacturing and other
businesses are referred to as …
A
B
C
gateways.
corridors.
export processing zones.
1.1.8 A corridor that links an area with growth potential to an area of higher economic
activity in order to promote job creation and economic development is called:
A
B
C
an SDI
an IDZ
a DTI
(8 x 2 = 16)
1.2
Choose a description from COLUMN B that matches an item in COLUMN A.
Write only the letter (A – J) next to the question number (1.2.1 – 1.2.8) on your
ANSWER SHEET.
COLUMN A
1.2.1
1.2.2
1.2.3
1.2.4
1.2.5
1.2.6
1.2.7
1.2.8
Comparative advantage
D
Marginal propensity to
save
A
Public goods
F
The BoP current account
I
Dualistic
H
Import quota
C
Exogenous approach
E
World Bank
G
COLUMN B
A
The portion of an increase in income that is not
consumed.
B
Ratio between the eventual change in income and
the initial investment.
C
A limit on the quantity that can be imported
D
Produces goods at a lower input cost than other
countries.
E
Believes that markets are inherently stable
F
Non-rival and non-excludable
G Provides loans to developing countries
H
A country where a developed component co-exists
with a developing component
I
Reflects a country’s net income
J
The two sector circular flow model can also be
referred to as being …
(8 x 1 = 8)
3
1.3
Complete the following statements by using the words provided in the list
below. Write only the word next to the question number (1.3.1 – 1.3.6) on your
ANSWER SHEET.
The new economic paradigm; Lorenz curve; NEPAD; Laffer curve; current transfer;
capital transfer; devaluation; revaluation; import substitution; export promotion;
SACU; SADC
1.3.1 Some of the income tax collected by the government is used to finance the payment
of pensions. CURRENT TRANSFER
1.3.2 Some countries fix the value of their currency in terms of other currencies. When
the value of the currency is adjusted and fixed at a lower rate it is called …
DEVALUATION
1.3.3 SASOL and Mossgas (now PetroSA) are examples of … IMPORT SUBSTITUTION
1.3.4 An approach that comprises of both demand and supply side policies. THE NEW
PARADIGM
1.3.5 This models the idea that there is an optimal level of tax for the government to
charge. LAFFER CURVE
1.3.6 This free trade area would encourage economies of scale with competitive
industries that would increase intra-regional trade and boost foreign investment to
the region. SADC
(6 x 1 = 6)
[30]
4
SECTION B (ANSWER TWO QUESTIONS FROM THREE)
QUESTION 2 (Macroeconomics)
2.1
Name TWO of South Africa’s macro-economic objectives.
ECONOMIC GROWTH; INCREASED EMPLOYMENT; REDISTRIBUTION OF
WEALTH; INTERNAL PRICE STABILITY (INFLATION); EXTERNAL PRICE
STABILITY (EXCHANGE RATES)
(2 x 2 = 4)
2.2
Study the information below and answer the question that follows.
2.2.1 Differentiate between GDP and GNP.
GDP: GROSS DOMESTIC PRODUCT: PRODUCTION OF FINISHED GOODS
THAT TAKES PLACE WITHIN THE BORDERS OF THE COUNTRY WITHIN A
GIVEN PERIOD.
GNP: PRODUCTION BY CITIZENS OF A COUNTRY REGARDLESS WHERE
THEY ARE IN THE WORLD.
(2)
2.2.2 Which alternative term is used for GDP in the national accounts?
GROSS VALUE ADDED
(2)
2.2.3 Provide labels for A and C.
A: FACTOR COST
C: TAXES
(2)
2.2.4 Calculate B.
BP: 1771 (BP = FC + TAXES – SUBSIDIES)
(2)
2.2.5 Which component contributed most to the GDP?
COMPENSATION TO EMPLOYEES
(2)
2.3
Study the following cartoon and answer the questions that follow.
5
2.3.1 Define economic growth.
INCREASE IN PRODUCTION OF FINAL GOODS WITHIN A GIVEN YEAR AS
MEASURED BY THE GDP.
(2)
2.3.2 Identify two organizations represented in the cartoon. COSATU, SARB, DTI, DEPT
OF FINANCE (GOVERNMENT)
(2)
2.3.3 Which person (not organization) in the cartoon is responsible for monetary policy in
South Africa? GILL MARCUS
(2)
2.3.4 Briefly explain one possible policy instrument that the person identified in 2.3.3
could use to stimulate economic growth. LOWER INTEREST RATES, BUYS
BONDS, LOWER BANKS’ RESERVE REQUIREMENT
(2)
2.3.5 In your opinion, what is the core message of the cartoon? ANY RELEVANT
ANSWER…
(2)
2.4
Discuss the exogenous approach as a cause of business cycles.
CLASSICAL ECONOMISTS BELIEVE BUSINESS CYCLE IS INHERENTLY
STABLE. THEY BELIEVE THAT BUSINESS CYCLES ARE CAUSED BY
EXOGENOUS FACTORS SUCH AS CHANGES IN MONEY SUPPLY,
TECHNOLOGY, GOVERNMENT POLICY OR CLIMATE.
(4 x 2 = 8)
2.5
Discuss the workings of the Keynesian multiplier in a four sector model. Focus in
particular on the economic effect of Foreign Direct Investment on the South African
economy.
MULTIPLIER ENABLES US TO UNDERSTAND WHY A CHANGE IN
EXPENDITURE CAUSES A LARGER CHANGE IN EQUILIBRIUM LEVEL OF
OUTPUT.
MULTIPLIER IS EQUAL TO THE CHANGE IN THE EQUILIBRIUM VALUE OF
OUTPUT (CHANGE IN Y) DIVIDED BY THE CHANGE IN THE VALUE OF THE
INJECTIONS (CHANGE IN J)
6
ALSO, THE VALUE OF THE MULTIPLIER IS DIRECTLY RELATED TO THE
MPC.
k = 1 / (1-mpc)
THE LARGER THE mpc, THE GREATER THE MULTIPLIER EFFECT AND THE
BIGGER THE INCREASE IN THE EQUILIBRIUM LEVEL OF OUTPUT(4 x 2 = 8)
[40]
QUESTION 3 (Economic Pursuits)
3.1
Name any TWO indicators that show important information about education in a
country. ADULT LITERACY RATE, AVE. YEARS OF SCHOOLING (2 x 2 = 4)
3.2
Use the data in the table to answer the questions that follow.
3.2.1 Identify the person depicted in the cartoon. TREVOR MANUEL
(2)
3.2.2 Apart from poverty eradication and job creation, name two other aims of the NDP.
IMPROVE INFRASTRUCTURE, CHANGE TO A LOW-CARBON ECONOMY,
TRANSFORM URBAN AND RURAL SPACES, IMPROVE EDUCATION AND
7
TRAINING, PROVIDE QUALITY HEALTH CARE, IMPROVE PUBLIC SERVICES,
BUILD SAFER COMMUNITIES, FIGHT CORRUPTION, TRANSFORM SOCIETY
(2)
3.2.3 Briefly comment on government’s plans to address poverty eradication as part of
the NDP. INTERNATIONAL BENCHMARK FOR THE POVERTY LEVEL IN
MIDDLE-INCOME COUNTRIES IS LIVING ON $2,50 PER DAY.
1990 – 50%
2011 – 34%
(2)
OVER R1 TRILLION WAS SPEND ON SOCIAL SERVICES AND WELFARE IN
2012/13.
3.2.4 Why is the main character in the cartoon peeking to his left? CONCERNED
ABOUT CORRUPTION, ABUSE OF POWER AND MISMANAGEMENT OF
FUNDS. ANY OTHER RELEVANT ANSWER …
(2)
3.2.5 Explain / comment on the title “Uncle Trevor wants you”.
ANY RELEVANT ANSWER …
(2)
8
3.3
Study the following extract and answer the questions that follow:
3.3.1 What does the abbreviation IDZ mean?
INDUSTRIAL DEVELOPMENT ZONES
(2)
3.3.2 State the aim of the IDZ’s within the South African economy.
ATTRACT BUSINESS INVESTMENT, WHERE EXPORTS WILL INCREASE AND
SOUTH AFRICAN PRODUCTS WILL BE MORE COMPETITIVE.
(2)
3.3.3 What is the purpose of EIDD? PROVIDE LEADERSHIP IN THE DEVELOPMENT
POLICIES AND STRATEGIES THAT CREATE AN ENABLING ENVIRONMENT
FOR COMPETITIVENESS, EQUITY AND ENTERPRISE DEVELOPMENT.
(2)
3.3.4 In 2012 the IDZ’s were converted into SEZ’s. Explain. ADDITIONAL INCENTIVES
HAVE BEEN ADDED TO ENCOURAGE DEVELOPMENT.
(2)
3.3.5 Does the DTI contribute to the supply or demand side approach to economic
growth? SUPPLY SIDE
(2)
3.4
Supply side policies focus on the ability of markets to supply enough goods and
services to meet aggregate demand. Briefly discuss this statement by focusing on
the effectiveness and efficiency of markets in the South African context. (2 x 4 = 8)
MARKETS NEED TO BE ORGANISED EFFICIENTLY, THIS IS DONE BY:
REDUCING UNNECESSARY REGULATIONS – MANY LABOUR LAWS HAVE
BEEN CRITICISED FOR REDUCING EMPLOYMENT.
INCREASING COMPETITION – THE COMPETITION ACT HAVE DONE MUCH
TO REDUCE ANTI-COMPETITIVE BEHAVIOUR.
PRIVATISATION – SOME STATE OWNED ENTERPRISES HAVE BEEN SOLD
TO PRIVATE SHAREHOLDERS, TELKOM ETC.
3.5
Explain any two differences between the developed countries in the North and
developing countries in the South. Make use of examples where appropriate.
9
NORTH
15% OF WORLD POPULATION
GROWTH RATES LESS THAN 3%
CONTROLS WORLD TRADE AND
INVESTMENTS
SOUTH
85% OF WORLD POPULATION
GROWTH RATES OF OVER 6%
PLAYS SMALL BUT GROWING ROLE
IN WORLD TRADE; RELIES ON
NORTH TO PROVIDE INVESTMENT
LIFE EXPECTANCY OVER 75
LIFE EXPECTANCY ABOUT 50
YEARS,
IN
SOME
AFRICAN
COUNTRIES 40 YEARS
LOW LEVELS OF POVERTY
HALF THE POPULATION LIVES IN
POVERTY
78% OF WORLD INCOME; HIGH PER 22% OF WORLD INCOME; 85% OF
CAPITA INCOME
WORLD POPULATION; LOW PER
CAPITA INCOME
LITERACY LEVELS ABOVE 95%
LEVELS AS LOW AS 50% IN SOME
COUNTRIES; ESPECIALLY THAT OF
WOMAN
(2 x 4 = 8)
[40]
10
QUESTION 4 (Macro & Economic Pursuits)
4.1
Name TWO examples of an indirect tax.
4.2
Study the following extract and answer the questions that follow:
(2 x 2 = 4)
4.2.1 The World Bank uses 2000 as the base year? What does that mean?
THE YEAR 2000 IS USED AS REFERENCE OR BENCHMARK
(2)
4.2.2 Why do we use constant prices when comparing GDP per capita?
CONSTANT PRICES TAKES THE EFFECT OF INFLATION INTO ACCOUNT.
GROWTH IN REAL FIGURES EXCLUDES INFLATIONARY PRESSURES.
(2)
4.2.3 Identify the trend visible from the data provided.
FROM 2004 TO 2014 STRONG INDICATION OF POSITIVE GROWTH IN SA’s
GROWTH IN GDP PER CAPITA.
(2)
4.2.4 Name the single biggest shortcoming when using GDP per capita for comparison
purposes. DOESN’T TELL US ANYTHING REGARDING THE DISTRIBUTION OF
THE INCOME. (WEALTH GAP)
(2)
4.2.5 Which other indicator could be used to measure the problem identified in 4.2.4?
GINI COEFFICIENT (LORENZ CURVE)
(2)
4.3
Study the cartoon below and answer the questions that follow:
11
4.3.1 How did the first democratically elected South African government address the
problems illustrated by the cartoon after the 1994 elections?
RECONSTRUCTION AND DEVELOPMENT PROGRAMME
(2)
4.3.2 Which social indicator can be used to measure a country’s performance when
addressing these issues? Explain.
HUMAN DEVELEPMENT INDEX (HDI) – MEASURE OF PEOPLE’S ABILITY TO
LIVE A LONG AND HEALTHY LIFE, TO COMMUNICATE, TO PARTICIPATE IN
THE COMMUNITY AND TO HAVE SUFFICIENT INCOME TO EXPERIENCE A
DECENT LIFESTYLE.
(4)
4.3.3 Which type of government policy can be used to address the issues depicted in the
cartoon?
FISCAL POLICY – BUDGET – SOCIAL AND WELFARE SPENDING
(2)
4.3.4 Why can national debt be regarded as a burden on future generations?
INTEREST PLUS CAPITAL AMOUNT DUE PAYABLE OVER TIME – FUTURE
GOVERNMENTS ARE RESPONSIBLE FOR CURRENT GOVERNMENTS’
SPENDING. FUTURE GOVERNMENTS WILL HAVE TO FUND THE
REPAYMENT OF DEBT FROM TAXES LEVIED ON CITIZENS (FUTURE
GENERATIONS). (2)
4.4
Explain the working of the Current account in the Balance of Payments. Make use
of appropriate examples.
RECORDS TRANSACTIONS FOR THE TRADE IN GOODS AND SERVICES,
PRIMARY INCOME FLOWS AND CURRENT TRANSFERS.
TRADE BALANCE IS THE VALUE OF EXPORTED GOODS PLUS NET GOLD
EXPORTS LESS THE VALUE OF THE IMPORTED GOODS.
TRADE BALANCE CAN BE POSITIVE OR NEGATIVE.
COUNTRIES CAN IMPORT AND EXPORT SERVICES (TOURISTS, INSURANCE,
SHIPPING, ETC.)
PRIMARY INCOME FLOWS ARE THE PAYMENTS IN RESPECT OF INTEREST
AND DIVIDENDS MADE BETWEEN CITIZENS AND FIRMS IN DIFFERENT
COUNTRIES.
CURRENT TRANSFERS ARE TRANSFER PAYMENTS, SUCH AS PENSIONS
AND GRANTS. NET TRANSFERS ARE THE PAYMENTS OF TRANSFERS
BETWEEN COUNTRIES.
(2 x 4 = 8)
4.5
Briefly explain two of the regional development policies as implemented by the
South African government.
SDI:
*SPATIAL DEVELOPMENT INITIATIVE IS AN AREA WITH HIGH LEVELS OF
UNEMPLOYMENT AND POVERTY THAT HAS BEEN IDENTIFIED BY
GOVERNMENT FOR A CO-ORDINATED EFFORT TO DEVELOP THE
ECONOMIC POTENTIAL OF THE AREA.
*UNDER-DEVELOPED AREAS WITH POTENTIAL FOR SUSTAINABLE
GROWTH. (MANY POOR, UNEMPLOYED PEOPLE)
*PUBLIC-PRIVATE PARTNERSHIPS
SEZ (IDZ):
*ENCLOSED INDUSTRIAL AREA NEAR AN INTERNATIONAL PORT OR
AIRPORT WHERE NORMAL CUSTOMS REGULATIONS DO NOT APPLY.
*DESIGNED TO INCREASE ECONOMIC GROWTH, BOOST EXPORTS,
CREATE JOBS
12
*PUBLIC-PRIVATE PARTNERSHIPS
*COMPETITIVE ADVANTAGE FOR FIRMS THROUGH INCENTIVES OFFERED
*FOCUSSED ON EXPORT-ORIENTATED MANUFACTURING
(2 x 4 = 8)
[40]
SECTION C (ANSWER ONE ESSAY QUESTION FROM TWO)
Your answer will be assessed as follows:
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
MARK ALLOCATION:
Max. 2
Max. 26
Max. 10
Max. 2
40
QUESTION 5 (Macroeconomics)
“It is the work of economists to analyse events as they happen, to explain them and to
predict or forecast their future behaviour.” – Mike Levin
Discuss how business cycle indicators are used in forecasting. Make use of a diagram to
explain a typical business cycle.
(26)
Conclude your discussion with a note to the local business chamber indicating why you
think we are at a certain point in the cycle.
(10)
[40]
PTO
13
QUESTION 6 (Economic Pursuits)
Source: World Bank Data 2014
Explain and discuss each of the economic and social indicators depicted above for the
South African economy.
(26)
Using the information contained in them, analyse the state of economic development in
South Africa
(10)
[40]
14
Grade 12 Economics Exam
September 2014
Paper 1 (Macroeconomics and Economic Pursuits)
ANSWER SHEET
NAME: _______________________________
A
B
C
D
TEACHER: SH / CCS / WHS
1.3.1
1.1.1
1.3.2
1.1.2
1.3.3
1.1.3
1.3.4
1.1.4
1.3.5
1.1.5
1.3.6
1.1.6
1.1.7
1.1.8
1.2.1
1.2.2
1.2.3
1.2.4
1.2.5
1.2.6
1.2.7
1.2.8
15