Grade 12 Economics Exam
June 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 7 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 the multiplier is 3,5 and government spending increases by R20 000, what will the
effect be on total income?
A
R60 000
B
R6 333
C
R70 000
1.1.2 GDP is R25 billion, factor income from the rest of the world is R5 billion and factor
income to the rest of the world is R8 billion. What is the GNI?
A
R22 billion
B
R28 billion
C
R38 billion
1.1.3 Classical economists believed that … reasons are factors that cause the business
cycle.
A
exogenous
B
neutral
C
endogenous
1.1.4 How can the government use fiscal policy if the economy is expanding too slowly?
A
increase income tax
B
decrease subsidies
C
decrease VAT
1.1.5 The purchase of shares on the JSE by a foreigner is an example of a(n) …
investment.
A
direct
B
portfolio
C
other
1.1.6 A characteristic of collective goods is that it is …
A
excludable
B
competitive
C
non-rivalrous
1.1.7 South Africa’s agreement with the WTO is to … trade.
A
liberalise
B
rationalise
C
nationalise
1.1.8 The new economic paradigm is embedded in … policy / policies.
A
demand and supply side
B
expansionary monetary
C
expansionary fiscal
(8 x 2 = 16)
2
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
COLUMN B
1.2.1 Leakages
A
Quantity measured over a certain period of time
1.2.2 MTEF
B
Tax and government spending
1.2.3 Upswing
C
Recovery and prosperity
1.2.4 Fiscal policy
D
Tax, savings, exports
1.2.5 Trade balance
E
Tax on the sale of assets such as property
1.2.6 Capital gains tax
F
1.2.7 Current account
1.2.8 Flow
The government’s planned estimated expenditure
and income for the next three years
The value of goods exported, plus net gold exports
G
less the value of goods imported
Record of transactions for the trade in goods and
H
services, primary income flows and current transfers
I
Tax on the profits earned by listed companies
J
Tax, savings, imports
(8 x 1 = 8)
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.
appreciation; money market; demand; market failure; deregulation; private;
depreciation; supply; regulation; social; capital market
1.3.1 The importation of goods and services triggers a … for / of foreign exchange.
1.3.2 Green taxes and subsidies are aimed at adjusting … costs to account for the
negative effect of externalities.
1.3.3 A decrease in the price of a currency in terms of another currency.
1.3.4 The situation in which the free market forces of supply and demand fail to lead to an
efficient allocation of resources.
1.3.5 The removal of laws and other forms of government control.
1.3.6 A market for short-term savings and loans.
(6 x 1 = 6)
[30]
3
SECTION B (ANSWER TWO QUESTIONS FROM THREE)
QUESTION 2
2.1
Name TWO objectives of the public sector.
2.2
Study the information below and answer the question that follows.
(2 x 2 = 4)
Item
R million
Remuneration of employees 534 890
Tax on production
23 457
Subsidies on products
5 430
Fixed capital consumption
123 543
Tax on products
34 500
Subsidies on production
10 897
Net operating surplus
278 210
2.2.1
2.2.2
2.2.3
2.2.4
Given this information, what method should be used to calculate GDP?
What is “net operating surplus”?
Calculate GDP at factor cost (show your working)
What information would you need to calculate the GNP at factor cost?
2.3
Study the following photo and answer the questions that follow.
(2)
(2)
(4)
(2)
2.3.1 South Africa joined the BRICS countries in 2010. Identify the other four countries
involved.
(2)
2.3.2 Discuss the commonalities between these countries. (i.e. the criteria for
membership)
(4)
2.3.3 What does South Africa expect to gain from their membership of BRICS? (4)
2.4
Explain the Laffer curve. In your answer you must make use of a graph.
(8)
2.5
You are given the following information for a closed economy without government
or foreign sector: C = 30 + 0,8Y and I = 20. What is the equilibrium level of income
(output)? Draw a fully labelled 45º diagram to illustrate your answer.
(8)
[40]
4
QUESTION 3
3.1
Name any TWO monetary instruments that can be used to influence the business
cycle.
(2 x 2 = 4)
3.2
Use the data in the table to answer the questions that follow.
Item
R million
Current transfers
-7 689
Net gold exports
26 667
Net portfolio investments
20 557
Payment for services
50 534
Goods: Exports
302 559
Net direct investments
-4 227
Income receipts
24 456
Income on services
62 997
Income payments
46 546
Goods: Imports
299 875
Net other investments
30 472
3.2.1 Define “balance of payments”
3.2.2 Calculate the balance on the current account.
3.2.3 Give an explanation for the R-4 227 million for Net direct investments
3.3
(2)
(4)
(4)
Study the following cartoon and answer the questions that follow:
3.3.1 Complete the following sentence: As in the game of “snakes and ladders” the ladder
of education enables the individual to …
(2)
3.3.2 Explain the link between education / training and poverty alleviation.
(4)
3.3.3 Comment on the role of fiscal policy especially on the promotion of employment and
skills training as part of the Skills Development Levies Act.
(4)
3.4
Discuss the causes of business cycles with reference to the exogenous and
endogenous factors.
(2 x 4 = 8)
3.5
Briefly discuss export promotion as a strategy to ensure economic growth.
(4 x 2 = 8)
[40]
5
QUESTION 4
4.1
Name TWO supply-side policies that the government can use to stimulate economic
growth.
(2 x 2 = 4)
4.2
Study the following extract and answer the questions that follow:
According to the results of a rebasing exercise undertaken by Nigeria’s National Bureau of
Statistics, the country’s nominal GDP last year at current prices was $509.9bn, Reuters reported on
Sunday. This makes the Nigerian economy about 60% bigger than South Africa’s, with a nominal
GDP of $322.6bn last year, based on Statistics SA figures and the rand-dollar exchange rate on
December 31 last year. With a population of 169-million, Nigeria has been a growing destination for
foreign investors partly because of its rapidly growing consumer market. The revisions double
Nigeria’s per capita GDP from about $1,555 in 2012, to about $3,020 now, boosting the
attractiveness of its consumer-facing industries. But this still leaves South Africa far ahead in terms
of individual consumer buying power with a per capita GDP of $6,089 last year, based on Stats SA
estimates, given that Nigeria’s population is more than three times that of South Africa.
Source: Business Day, 7 April 2014
4.2.1 Provide one possible reason for the growth seen in Nigeria over the last number of
years.
(2)
4.2.2 Comment on Nigeria’s GDP per capita compared to South Africa. (What can we
deduce from this?)
(4)
4.2.3 Briefly discuss Nigeria as a destination for foreign investment compared to South
Africa. Will these latest figures damage South Africa’s position as the investment
destination of choice in Africa?
(4)
4.3
Read the passage below and answer the questions that follow:
A LARGE expansion of public works employment, mainly through the Community Works
Programme, is planned over the next three years to help compensate for anticipated moderate
economic growth, which will be insufficient to significantly change the unemployment picture. While
the National Development Plan says South Africa needs to lift growth above 5% to address the
unemployment and poverty challenges meaningfully, the growth estimates in the 2014-15 budget
presented in Parliament fell far short of this, at 2.7% for this year, rising to 3.5% by 2016. Funding
for the Community Works Programme will grow an average of 29% from R1.7bn in the past year to
R3.7bn in 2016, making it one of the most expansionary programmes in a budget otherwise
constrained by real spending growth of 1.9%.
Source: Business Day, 27 February 2014
4.3.1 Name the type of economic policy at work.
(2)
4.3.2 What is a “Community Works Programme”? Make use of examples in your answer.
(4)
4.3.3 Explain how an injection of R2bn through the Community Works Programme is
likely to impact on the economy as a whole. (Hint: explain the Keynesian multiplier
process).
(4)
4.4
Briefly discuss FOUR reasons for international trade.
(4 x 2 = 8)
4.5
Explain the relationship between inflation and unemployment. Draw the Phillips
curve to assist you in your explanation.
(2 x 4 = 8)
[40]
6
QUESTION 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
Failure by the public sector to produce public goods and services causes higher prices in
the market.
Discuss the characteristics, reasons and effects of the public sector failures when
providing goods and services.
(40)
QUESTION 6
'The opening up of foreign trade … sometimes works a sort of industrial revolution in a
country whose resources were previously underdeveloped.' (John Stuart Mill)
Discuss the arguments in favour of a policy of free trade and critically evaluate the South
African international trade policies and major protocols regarding free trade.
(40)
7
8
Grade 12 Economics Exam
June 2014
Paper 1 (Macroeconomics)
ANSWER SHEET
NAME: _______________________________
A
B
C
D
TEACHER: SH / WD / 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
9