ECS1601 May/Jun 2011 exam paper — questions

Free sample

  1. Question 1 · Circular flow and the economic system · 1.25 marks

    A diagram depicts the circular flow of income and spending between households and firms. It shows Firms connected to a Factor market by an arrow labelled (1) flowing from Firms to the Factor market; the Factor market connected to Households by an arrow labelled (2); Households connected to a Goods market by an arrow labelled (3); and the Goods market connected back to Firms by an arrow labelled (4). Which one of the following statements is correct?Show the full question

  2. Question 1.1 · National income accounting and GDP · 3 marks

    State the names of the three measures that economists use to assess how unequally income is distributed.Show the full question

  3. Question 1.2 · Circular flow and the economic system · 3 marks

    Identify the three flows that are associated with government in the circular flow of income.Show the full question

  4. Question 1.3 · AD-AS model and the Phillips curve · 3 marks

    Explain what the main sources of economic growth are when growth is viewed from the demand side.Show the full question

  5. Question 2 · Circular flow and the economic system · 1.25 marks

    Within the circular flow of income and spending, which one of the following statements is correct?Show the full question

  6. Question 2.1 · Fiscal policy, taxation and public finance · 3 marks

    Question 2 asks candidates to draw and label three separate diagrams, each on a supplied blank set of axes with the origin marked 0. Using the blank diagram provided, sketch and clearly label the effect of the introduction of a specific excise tax on cigarettes, showing how it changes the equilibrium price and quantity in that market.Show the full question

  7. Question 2.2 · Keynesian income determination and the multiplier · 3 marks

    Question 2 asks candidates to draw and label three separate diagrams, each on a supplied blank set of axes with the origin marked 0. On the blank set of axes given, draw and label a diagram showing the effect of a decrease in the proportional income tax rate on the equilibrium level of income within a simple Keynesian model of a closed economy.Show the full question

  8. Question 2.3 · AD-AS model and the Phillips curve · 3 marks

    Question 2 asks candidates to draw and label three separate diagrams, each on a supplied blank set of axes with the origin marked 0. On the blank set of axes supplied, draw and label a diagram illustrating the effect of a decrease in productivity on the price level and the level of production, using the AD-AS (aggregate demand-aggregate supply) model.Show the full question

  9. Question 3 · Money, banking and the money market · 1.25 marks

    The amount of money that an individual wishes to hold is determined by:Show the full question

  10. Question 3.1 · Keynesian income determination and the multiplier · 3 marks

    Gabriel's disposable income rises from R2 000 to R2 500, and as a consequence his saving rises from R300 to R450. Calculate Gabriel's marginal propensity to consume, showing all your calculations.Show the full question

  11. Question 3.2 · Keynesian income determination and the multiplier · 3 marks

    For a Keynesian model of a closed economy without a government, autonomous consumption (C-bar) equals 10, and at equilibrium consumption spending equals 70 while investment spending equals 20. Using the set of axes provided, draw a diagram of this model, clearly indicating the value of total autonomous expenditure and the equilibrium level of income.Show the full question

  12. Question 3.3.1 · Keynesian income determination and the multiplier · 2 marks

    Given the following data for an economy: consumption function C = 400 + (9/10)Yd; autonomous investment I-bar = 500; autonomous government spending G-bar = 1 280; the tax rate t = 1/3; autonomous exports X-bar = 900; and the import function Z = 600 + (1/10)Y. Calculate the size of the multiplier, showing all your calculations.Show the full question

  13. Question 3.3.2 · Keynesian income determination and the multiplier · 3 marks

    Using the same data as above — consumption function C = 400 + (9/10)Yd; autonomous investment I-bar = 500; autonomous government spending G-bar = 1 280; tax rate t = 1/3; autonomous exports X-bar = 900; and import function Z = 600 + (1/10)Y — calculate the equilibrium level of income, showing all your calculations.Show the full question

  14. Question 4 · Money, banking and the money market · 1.25 marks

    A rightward shift in the demand for money curve will lead to:Show the full question

  15. Question 4.1 · Exchange rates, balance of payments and trade · 4 marks

    Explain what effect a strong South African rand would have on the demand for fruit pickers in the Western Cape.Show the full question

  16. Question 4.2 · National income accounting and GDP · 3 marks

    A table shows that country A's GDP at current prices was 100 in year 1 and 110 in year 2. Using this information, explain why it is impossible to determine whether the 10% increase in GDP from year 1 to year 2 represents genuine economic growth.Show the full question

  17. Question 4.3 · Keynesian income determination and the multiplier · 3 marks

    Explain what effect a decrease in the marginal propensity to import would have on the size of the multiplier.Show the full question

  18. Question 4.4 · Keynesian income determination and the multiplier · 4 marks

    Explain the impact that an increase in the tax rate would have on the equilibrium level of income within a Keynesian model of an economy.Show the full question

  19. Question 4.5 · AD-AS model and the Phillips curve · 5 marks

    Using the aggregate demand-aggregate supply model, explain how an increase in the interest rate would affect the level of production and income in the economy.Show the full question

  20. Question 4.6 · Unemployment and the labour market · 2 marks

    Identify which type of unemployment is the biggest problem in South Africa, and suggest one possible plan of action that could be used to address the type of unemployment you have identified.Show the full question

  21. Question 5 · Money, banking and the money market · 1.25 marks

    The quantity of money demanded for precautionary purposes decreases if:Show the full question

  22. Question 6 · Monetary policy and the Reserve Bank · 1.25 marks

    If the Reserve Bank wants to pursue a contractionary monetary policy, the bank should:Show the full question

  23. Question 7 · Monetary policy and the Reserve Bank · 1.25 marks

    If the cash reserve ratio is increased, the credit multiplier:Show the full question

  24. Question 8 · Fiscal policy, taxation and public finance · 1.25 marks

    Identify which one of the following is NOT a primary cause of government failure.Show the full question

  25. Question 9 · Fiscal policy, taxation and public finance · 1.25 marks

    Arguments in favour of privatisation include which one of the following?Show the full question

  26. Question 10 · Fiscal policy, taxation and public finance · 1.25 marks

    If government spending is higher than current government revenue, this situation is known as:Show the full question

  27. Question 11 · Fiscal policy, taxation and public finance · 1.25 marks

    Which of the following is true about the difference between legal incidence and effective incidence of a tax?Show the full question

  28. Question 12 · Fiscal policy, taxation and public finance · 1.25 marks

    If the supply curve of petrol has its normal shape and the price elasticity of demand for petrol is perfectly inelastic, a specific tax of R5 placed on each litre of petrol will be borne:Show the full question

  29. Question 13 · Exchange rates, balance of payments and trade · 1.25 marks

    A table compares gold and diamond production for Botswana and Zimbabwe: Botswana produces 3 ounces of gold and 9 carats of diamonds per labour hour, while Zimbabwe produces 2 ounces of gold and 4 carats of diamonds per labour hour. Based on this information, which one of the following statements is correct?Show the full question

  30. Question 14 · Exchange rates, balance of payments and trade · 1.25 marks

    Identify which item is, in practice, the balancing item in the balance of payments.Show the full question

  31. Question 15 · Exchange rates, balance of payments and trade · 1.25 marks

    An increase in the rand price of a foreign currency usually:Show the full question

  32. Question 16 · Exchange rates, balance of payments and trade · 1.25 marks

    When the rand appreciates against the dollar:Show the full question

  33. Question 17 · Exchange rates, balance of payments and trade · 1.25 marks

    Four supply-and-demand diagrams (R/$ on the vertical axis and quantity of dollars Q$ on the horizontal axis) are given. Figure 1 shows the original supply curve S and demand curve D intersecting at equilibrium E, with a new supply curve S1 lying to the right of S producing a new equilibrium E1 below E and a rightward arrow between them. Figure 2 shows the same original S and D intersecting at E, with a new demand curve D1 lying to the right of D producing a new equilibrium E1 above E and a rightward arrow. Figure 3 shows S and D intersecting at E, with a new demand curve D1 lying to the left of D producing a new equilibrium E1 below and to the left of E and a leftward arrow. Figure 4 shows S and D intersecting at E, with a new supply curve S1 lying to the left of S and a new demand curve D1 lying to the right of D, producing a new equilibrium E1 above E, with a leftward arrow near the top of the diagram and a rightward arrow near the bottom. Which of these figures shows the impact of an increase in USA interest rates on the South African foreign exchange market?Show the full question

  34. Question 18 · Exchange rates, balance of payments and trade · 1.25 marks

    The terms of trade measure:Show the full question

  35. Question 19 · National income accounting and GDP · 1.25 marks

    When the Gross Domestic Product is measured:Show the full question

  36. Question 20 · Inflation and price indices · 1.25 marks

    A table gives the Consumer Price Index for three years: in 2000 the CPI was 100; in 2002 it was 125; and in 2004 it was 135. Based on this information, consumer prices:Show the full question

  37. Question 21 · Unemployment and the labour market · 1.25 marks

    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 full-time students. The unemployment rate in this country equals:Show the full question

  38. Question 22 · Keynesian income determination and the multiplier · 1.25 marks

    In the Keynesian model, the price level is assumed to be:Show the full question

  39. Question 23 · Keynesian income determination and the multiplier · 1.25 marks

    The equilibrium level of income is that at which:Show the full question

  40. Question 24 · Keynesian income determination and the multiplier · 1.25 marks

    In the simple Keynesian model of a closed economy without a government, which one of the following statements is correct?Show the full question

  41. Question 25 · Keynesian income determination and the multiplier · 1.25 marks

    In the simple Keynesian model of a closed economy with a government, which one of the following statements is correct?Show the full question

  42. Question 26 · Keynesian income determination and the multiplier · 1.25 marks

    In a simple Keynesian model with government and foreign sectors, which one of the following statements is INCORRECT?Show the full question

  43. Question 27 · Keynesian income determination and the multiplier · 1.25 marks

    The multiplier effect of an increase in government expenditure on income is weakened by:Show the full question

  44. Question 28 · Keynesian income determination and the multiplier · 1.25 marks

    Assume the marginal propensity to consume is 0,8 in a closed economy without a government. Under this assumption, which one of the following combinations is correct?Show the full question

  45. Question 29 · Fiscal policy, taxation and public finance · 1.25 marks

    If the government spends more, but keeps the tax rate constant, which one of the following combinations correctly describes the resulting changes in consumption spending, total tax revenues, and investment spending respectively?Show the full question

  46. Question 30 · AD-AS model and the Phillips curve · 1.25 marks

    A simultaneous increase in wages and an increase in taxes will:Show the full question

  47. Question 31 · AD-AS model and the Phillips curve · 1.25 marks

    If the aggregate supply curve is perfectly inelastic, an increase in aggregate demand will lead to an increase in:Show the full question

  48. Question 32 · AD-AS model and the Phillips curve · 1.25 marks

    Suppose the SARB decreases interest rates while the oil price is increasing. Which one of the following combinations correctly describes the expected effect on the price level and real GDP?Show the full question

  49. Question 33 · Monetary policy and the Reserve Bank · 1.25 marks

    Which one of the following statements regarding the monetary transmission mechanism is correct?Show the full question

  50. Question 34 · Inflation and price indices · 1.25 marks

    If the inflation rate was 10 percent last year and is now 6 percent this year, it means:Show the full question

  51. Question 35 · Fiscal policy, taxation and public finance · 1.25 marks

    Bracket creep would be eliminated when tax rates are based on:Show the full question

  52. Question 36 · Unemployment and the labour market · 1.25 marks

    Which one of the following statements on unemployment is correct?Show the full question

  53. Question 37 · Unemployment and the labour market · 1.25 marks

    If nominal wages and prices rise at the same rate, say 6,5% per year, then real wages will:Show the full question

  54. Question 38 · AD-AS model and the Phillips curve · 1.25 marks

    The Phillips curve shows a negative relationship between:Show the full question

  55. Question 39 · National income accounting and GDP · 1.25 marks

    A nation's standard of living will certainly increase when:Show the full question

  56. Question 40 · Fiscal policy, taxation and public finance · 1.25 marks

    Assume a given level of government spending and a given tax rate. Which one of the following combinations correctly completes the statement: the budget deficit will grow during ___ and decline during ___ ?Show the full question

  57. Question 41 · Keynesian income determination and the multiplier · 0 marks

    This item is for information purposes only and does not count towards the marks. Students were asked which of the following they made use of during the semester: (a) the CD-ROM, (b) the DVD.Show the full question

  58. Question 42 · Keynesian income determination and the multiplier · 0 marks

    This item is for information purposes only and does not count towards the marks. Students were asked which of the following they made use of during the semester: (a) the podcasts on myUnisa, (b) the checklists in the Study Guide.Show the full question