1 SECONDARY SCHOOL IMPROVEMENT
PROGRAMME (SSIP) 2014
GRADE 12
SUBJECT:
ECONOMICS
LEARNER QUESTIONS
EXTRA SESSIONS 1 - 4
(Page 1 of 35)
© Gauteng Department of Education
2 TABLE OF CONTENTS
SESSION
NO
TOPIC
PAGE
1
Macroeconomics: The Circular flow,
Business Cycle, Public Sector and Economic
Growth and Development: the foreign
exchange market
3 - 17
2
Microeconomics: Economic Systems Protection & Free Trade (Globalisation)
17 - 26
3
Economic Pursuit
27 - 31
4
Contemporary Economic Issues
31 - 35
© Gauteng Department of Education
3 EXTRA SESSION NO: 1
TOPIC: MACRO ECONOMICS (The Circular flow, Business Cycle, Public Sector and Economic Growth and
Development: the foreign exchange market)
TYPICAL EXAM QUESTIONS
Hint: Questions should be read carefully and make sure you understand what the
question is asking. Always remember one alternative is completeley wrong, one is
nearly correct and one is totally correct. Remember only one option is correct.
When indicating two options your answer will immediatley be marked incorrect.
QUESTION 1: (COMPULSORY) 10 Minutes
(Taken from various sources)
MULTIPLE CHOICE
Various options are provided as possible answers to the following questions.
Choose the answer and write only the letter (A – C) next to the question
number in the answer book.
1.1.1 The instrument that is used to measure the value of goods and services at
constant prices is the _________ GDP.
A
nominal
B
real
C
per capita
1.1.2 If the marginal propensity to consume is 0.75, the value of the multiplier will be
__________
A
4
B
0.25
C
2.5
1.1.3 The distance from the trough to the peak on the cycle is the __________
A
trough
B
extrapolation
C
amplitude
1.1.4 The budgeting cycle runs from the ___________ of the following year.
A
1st of April to 31st of March
B
1st of March to the 30th of April
C
30th of April to the 1st of March
© Gauteng Department of Education
4 1.1.5 Payments for services form part of the __________ in the balance of
payments.
A
financial account
B
current account
C
unrecorded transactions
1.1.6 The economy is in equilibrium when …
A
markets = trade
B
profits = taxes
C
leakages = injections
1.1.7 … relates to the aggregated production by the citizens of the country,
wherever they may be economically active – abroad or in South Africa.
A
GDP
B
GNI
C
GDI
1.1.8 The fiscal policy in South Africa states that the deficit on the budget should not
exceed … of the GDP.
A
4%
B
3%
C
5%
8 x 2 = (16)
1.2
MATCHING
Choose a description from Column B that matches an item in Column A.
Write only the letter (e.g. E) next to the question number (1.2.1 to 1.2.8) in the
answer book.
COLUMN A
1.2.1 An Injection
1.2.2 A leakage
1.2.3 Investment
1.2.4 Savings
1.2.5 Non
excludable
goods
1.2.6 Stagflation
1.2.7 Trend line
1.2.8 Opportunity
cost
COLUMN B
A. The money that households and firms provide to financial
institutions. It represents that part of income which is not
consumed.
B. The spending by firms on capital goods.
C. Any spending not derived from income. It represents the
introduction of additional money into the economy.
D. Any flow of money that does not give rise to a further round
of income within the economy.
E. Persistent high inflation combined with high unemployment
figures.
F. They are consumed collectively by the community.
G. A general increase in prices causing the purchasing value of
money to fall.
H. A reduction in the general level of prices.
I. The general direction in which the indexes moves.
J. The value of the next best alternative that has been given up.
8 x 1 = (8)
© Gauteng Department of Education
5 1.3
Fill in the missing word
Write only the word next to the question number in the answer book.
1.3.1 To convert basic prices to market prices, taxes are added and
___________subtracted.
1.3.2 Causes of Business cycles that come from outside the economy we call
___________factors.
1.3.3 The cycle that is caused by changes in investment in equipment and
machinery is the ________cycle.
1.3.4 It is an increase in the price of a currency in terms of another currency –
______________.
1.3.5 A small initial change in spending produces a proportionately larger increase
in national income - _______________.
1.3.6 Successive periods of increasing or decreasing economic activity –
____________ _____________.
6 x 1 = (6)
Hint: Time spent on ONE QUESTION OF 40 MARKS = 25 minutes
QUESTION 2 and/or 3 and/or 4
(Taken from various sources)
(As per the numbering in the exams)
MACROECONOMICS: The Circular flow
1.
2.
Describe the term economic circular flow.
Study the following model and answer the questions that follow:
a)
Use the relevant information below and determine the GDP(E).
Government spending = R3 500bn
Income taxation = R 2 000bn
(3)
© Gauteng Department of Education
6 Consumer spending = R1 000bn
Exports = R 3 000bn
Investment spending = R1 500bn
Imports = R 2 500bn
(3)
Explain the impact of a decrease in income taxes on the economy (model).
(4)
b)
MACROECONOMICS:
NATIONAL ACCOUNTS
National account aggregates show the total (aggregate) value of income, expenditure
and production in a country, the so called national income figures and these are
recorded in the national income accounts of the country.
The production method calculates the value of each stage in the production process,
thus the primary, secondary and tertiary sector outputs. Calculation yields GDP at basic
prices. The expenditure method adds up all the money spent in the country by
households, firms, government and the foreign sector on final goods and services.
Calculation yields GDP at market prices.
The income method add up all the money earned by households as remuneration for
the factors of production, that is, by adding the amount of money earned through wages,
rent, interest and profits. Calculation yields GDP at factor cost.
1. Study the table below and answer the questions:
(Taken from DoE, Nov. 2009)
CALCULATION OF GDP ACCORDING TO THE INCOME METHOD (2007)
R bn
Compensation of employees
843
Net operating surplus
644
Consumption of fixed capital
255
Gross value added @ A
1 742
Taxes on production
35
Subsidies on production
6
Gross value added @ basic prices
B
C on products
231
Subsidies on products
6
Gross domestic product @ market prices
1 996
Primary income from the rest of the world
46
Primary income from the rest of the world
108
GNI @ market prices
1 934
a)
b)
c)
d)
e)
f)
g)
Differentiate between the concepts GDP and GNP.
(4)
Which alternative term is used for GDP in the national accounts? (2)
Provide labels for A and C.
(4)
Calculate the gross value added at basic prices (letter B).
(4)
Which component contributed the most to the GDP?
(3)
Give a reason why the GNP figures in South Africa are generally lower
than the GDP figures.
(3)
Which financial institution is responsible for the publishing of the GDP
figures in South Africa?
(2)
[22]
© Gauteng Department of Education
2.
7 Study the table below and answer the questions.
Value added in R billion
Primary sector
Secondary sector
Tertiary sector
Gross value added at basic prices
Taxes on products
Subsidies on products
Gross domestic product at market
prices
SARB QB(June 2006)
2005
129
316
908
A
174
4
B
a) Calculate figure A and figure B. Show all calculations.
b) Which method of calculation was used?
3.
Study the data in the table and answer the questions that follow:
MAIN AGGREGATES
Remuneration of employees
Other tax on production
Subsidies on products
Factor payments from the rest
of the world
Factor payments to the rest of
the world
Consumption of fixed capital
Tax on products
Other subsidies on production
Net operating surplus
a)
b)
c)
d)
e)
f)
Billions of Rand
312
72
6
3
11
79
83
7
138
Identify the method used in the above table to calculate the GDP. (2)
Name any other two methods that can be applied to calculate GDP. (4)
Calculate the GDP at factor cost. Show all the calculations.
(4)
Calculate the GDP at market price. Show all the calculations.
(6)
The GNP (gross national product) differs from the GDP. Calculate the
GNP at market prices.
Note: Use the answer in Question 2.4.4 to do the calculations.
(4)
“South Africa is very popular among other nations as a place to employ
human and physical capital.” Do you agree with this statement?
Motivate your answer by referring to the above figures.
(3)
(4)
(2)
© Gauteng Department of Education
8 4. Study the data and answer the questions that follow: SARB QB (June
2006)
Expenditure on (in R billions)
Final consumption expenditure by
households
Final consumption expenditure by
government
Gross capital formation
Residual item
Gross domestic expenditure
Exports of goods and services
Imports of goods and services
Expenditure on GDP at market prices
a)
b)
c)
d)
e)
2005
968
307
278
-8
A
413
435
B
Explain the concept gross capital formation.
(2)
Calculate the value of A and B. Show all calculations.
(4)
Which method of calculation was used?
(1)
If one uses the production method to calculate the GDP (P) at market
prices, will GDP (E) be more, equal or less? Motivate your answer.(3)
Define the concept residual item.
(2)
MACROECONOMICS: THE MULTIPLIER
The consumers can do two things with their money – spend it or save it. The
proportion spent shows the marginal propensity to consume (MPC) and the
proportion saved shows the marginal propensity to save (MPS). MPC + MPS = 1.
∆!
The formula for calculating the MPC is 𝑀𝑃𝐶 = ∆! OR MPC = 1 – MPS. The MPC is
used to calculate the multiplier.
The formula for calculating the multiplier is 1 ÷ (1 – MPC). The ‘1’ (a whole number)
stands for the new money that enters the circular flow. First we subtract the MPC
fraction from the whole. Then we divide the whole by (1 – MPC). The answer is the
multiplier. Note that (1 – MPC) is equal to MPS.
The macroeconomic multiplier (∝) is equal to the change in the equilibrium value of
output (change Y) divided by the change in the value of the injections (change in J):
!"
∝ = !"
The bigger the MPC, the bigger the multiplier and vice versa.
For example, if the MPC is 0,8 the multiplier value is 5. If MPC is 0,2 the multiplier
value is 1,25.
The two-sector model includes the households and the firms, whereas the threesector model includes the government. When we calculate the multiplier for the
three-sector economy, we must include the effect of taxation as a leakage.
© Gauteng Department of Education
9 !
The formula is k = (!"#!!"#)
MRT is the marginal rate of taxation.
In the four-sector economy we include the foreign sector. The multiplier is
calculated by including the marginal propensity to import.
!
The formula is k = (!"#!!"#!!"!)
1.
Make a study of the following scenario and then calculate the value of
the multiplier.
(Taken from CAPS training)
A Government agency is building hotels around Gauteng. It receives extra
income of R10 million. Part of this money is spent on building materials and
payment of employees and a part is not spent. The agency spent R8 million
and saved R2 million, extra spending requires firms to further increase output
by hiring more factors so that its income rises, again. The initial injection of
R10 million generates further rounds of income, output and expenditure of R8
million, R6 million, etc. The overall increase in GDP is higher than the initial
increase in government spending.
(3)
2.
Make a study of the following scenario and then answer the question.
An individual pays a gardener R100 for a spring clean-up. The gardener
saves R10 of those R100 but spends R90 at the local hardware store for new
tools. Of the R90, the hardware storeowner saves R9 and spends R81 on a
golf club. The golf storeowner spends 90 percent of the R81 (R73) to take his
family out to dinner. The R100 that was originally spent was re-spent three
more times and, in the process, was turned into R344 of income to others.
This process continues and ultimately R100 of spending could lead to as
much as R1000 of income.
What is the multiplier effect in this scenario?
3.
(3)
Analyse and explain the multiplier process illustrated on the Keynesian
Model where MPC is 80%, after a tax relief of R1 000 by the government.
© Gauteng Department of Education
(8)
4.
10 Make a study of the following Scenario and then answer the questions
that follow:
(Taken from CAPS training)
a) Assume that the level of output gap is 200 and mpc is 0.2.
(3)
b) Work out how much extra government expenditure is required to ensure
that the economy is producing the full employment level of output.
(3)
c) If national income increases by R300m as a result of an investment of
R 60m. What is the size of multiplier?
(3)
d) If national income increases by R100m and the multiplier is 4.
e) What is the change in injection?
(3)
(3)
MACROECONOMICS: BUSINESS CYCLES
1. List the characteristics (features) of a business cycle.
(4)
2. Study the diagram and answer the questions: (Taken from DBE - Feb 2012)
a) Identify and label point A to B and then point C to D.
(4)
b) Explain how government can stimulate economic activity in an effort to smooth
out business cycles.
(4)
c) What is indicated by the trend?
(2)
© Gauteng Department of Education
11 3. Make a study of the following cartoon and answer the questions that follow:
a) What is the message behind the cartoon?
(2)
b) Why do you think that unemployment will not lead to an economic lift off? (2)
c) To which forecasting does unemployment refer to?
(2)
d) How would you describe the recovery phase of a typical business cycle? (2)
4. “Periods of expansion and contraction in the economy are captured on the
graph below which is called a business cycle.”
Explain the expansionary period with the aid of the diagram.
(8)
© Gauteng Department of Education
12 MACROECONOMICS: THE PUBLIC SECTOR
1. Define the concept public corporations.
(3)
2. Explain possible reasons for government to intervene in the economy.
(8)
3. Critically discuss how the state intervenes in the market when there are positive
or negative externalities.
(8)
4. Study the cartoon below and answer the questions that follow:
(Taken from Feb/March 2014)
a. What is the purpose of the annual budget?
(2)
b. Government has spent considerable amounts of money on the implementation
of e-tolls in South Africa. What can government do to recover this money? (2)
c. What can employers do to reduce the negatively impact of strikes on
production?
(2)
d. Do you think that the minister of finance can stop the rocket that is heading his
way? Motivate your answer
(4)
© Gauteng Department of Education
13 5. Study the graph below and answer the questions that follow:
a. What paradox does the graph represent?
b. Consider what would happen if the tax rate was moved to the point at T.
c. Evaluate the usefulness of the Laffer curve.
(2)
(4)
(4)
MACROECONOMICS: Economic Growth and development: the foreign
exchange market.
BALANCE OF PAYMENTS
Balance of payments is a systematic record of all the economic transactions between
the residents of the reporting country and the residents of the rest of the world over a
specific period of time. Composition:
• Current account
• Capital transfer account
• Financial account
• Official reserve account
1.
Study the data below and answer the questions that follow:
EXTRACT FROM NATIONAL ACCOUNTS OF
SOUTH AFRICA AT CURRENT PRICES - 2012
R MILLION
Gross domestic product (GDP) at
market prices
3 155 195
Primary income from the rest of the
world
48 501
Primary income to the rest of the
A
world
Gross national product (GNP) at
market prices
3 085 188
Source: SARB - Quarterly Bulletin, March 2013
© Gauteng Department of Education
14 a)
b)
c)
d)
2.
Define the concept gross domestic product.
Calculate the value of A in the table.
Give an example of a primary income from the rest of the world.
Explain the difference between current prices and constant prices.
(2)
(2)
(2)
(4)
Study the graph below and answer the questions that follow:
(Taken from DBE, Feb 2014)
a)
b)
c)
d)
Define the term balance of trade.
(2)
Describe the general trend on the balance on the current count
between 2006 and 2011.
(2)
Name ONE item that appears in the financial account of the balance of
payments.
(2)
Suggests TWO methods to improve the BOP’s current account.
(2)
MACROECONOMICS: Foreign exchange market (Globalisation)
1. Tabulate possible reasons for the exchange rate of South Africa to change.
(8)
2. Explain what happens when South Africa experience an upwards or downwards
shift in the value of their currency.
(8)
3. Study the diagram and answer the questions that follow:
(Taken from DBE, March 2013)
© Gauteng Department of Education
15 a. Identify the original point of equilibrium.
(2)
b. Define the term foreign exchange market.
(2)
c. What happens to the quantity of dollars when the supply curve shifts for SS to
S1S1? Give a possible reason for this shift.
(4)
d. What happens to the value of the rand in terms of the US dollar when SS
shifts to S1S1? Motivate your answer.
(4)
e. Differentiate between revaluation and devaluation.
(4)
f. List TWO factors that can have an influence on the demand for foreign
currency in South Africa.
(4)
g. How can the SARB intervene in the market to influence the exchange rate?(4)
4. Calculate the terms of trade given the following scenario.
Average price of exports = R40 and average price of imports = R50. Imagine that
there is a change in the price of imports, ceteris paribus, to R60. Calculate the
new terms of trade and explain the implication of the change in terms of trade for
the people of the country. Say explicitly whether they are better off or worse off.
(4)
© Gauteng Department of Education
16 5. Study the table and calculate the terms of trade for 2006 and 2007. Show all
calculations.
(Taken from DBE, Nov 2010)
(6)
Year
2006
2007
TERMS OF TRADE
Index of export
Index of import
prices
prices
104
96
103
98
Terms of
trade
A
B
Time spent on this Section = 30 minutes
Answer only ONE question in this Section.
HINT - If you choose to ignore this instruction and write both of them, only the
first one will be marked.
QUESTION 5 or 6 (as per the format of the exam paper)
MACROECONOMICS - THE CIRCULAR FLOW
(Taken from DoE, Nov. 2008)
30 MINUTES
‘The interaction between the participants in an open economy can be illustrated by
the circular flow model.’
With the aid of a diagram, which includes injections and withdrawals/leakages,
discuss the interaction of the participants in an open economy. Conclude your
answer by explaining how one individual’s spending becomes another person’s
income (the multiplier effect).
[40]
Each essay question carries 40 marks allocated as follows:
• Introduction / Salutation
(2 Marks)
• Body – Main part: Discuss and illustrate the interaction of participants in an open
economy linking it with injections and leakages as well.
(26 Marks)
• Body – Additional part: The multiplier effect.
(10 Marks)
• Conclusion
(2 Marks)
Organize your essay in paragraphs with headings.
MACROECONOMICS: BUSINESS CYCLES
30 MINUTES
You are requested by parliament to make a speech as to why government
intervention is necessary in order to curb excessive business cycle fluctuations. In
your speech you have to focus on the monetary policy measures as the most
important policy implemented by the state.
[40]
© Gauteng Department of Education
17 Each essay question carries 40 marks allocated as follows:
• Introduction / Salutation
(2 Marks)
• Body – Main part: Main speech
(26 Marks)
• Body – Additional part: Own points of argument/interpretation of topic. (10 Marks)
• Conclusion
(2 Marks)
Organize your essay in paragraphs with headings.
MACROECONOMICS - BALANCE OF PAYMENTS
30 MINUTES
Write an essay on disequilibria on the Balance Of Payments (BOP) and discuss how
these imbalances can be corrected. Introduce the essay by referring to the use of
the Balance Of Payments. Then refer to disequilibria that may occur and what
governments can do about it.
(40)
Each essay question carries 40 marks allocated as follows:
— Introduction
(2 Marks)
— Body – Main part: Disequilibria in the BOP account
(26 Marks)
— Body – Additional part: Policies to reduce large deficits on the BOP (10 Marks)
— Conclusion
(2 Marks)
Organize your essay in paragraphs with headings.
EXTRA SESSION NO: 2
MICROECONOMICS: ECONOMIC SYSTEMS - PROTECTION & FREE TRADE
(GLOBALISATION)
Learner Note: Export promotion is when government pay incentives to
encourage the production of goods/services that can be exported to eventually
achieve a significant export-led economic growth. An outward-facing policy.
Import substitution is when countries introduce policies to encourage the
production of imported goods locally e.g. expanding factories, thus diversifying &
strengthening the economy. An inward-looking strategy. Very often countries have
some type of mix of policies. This mix is determined by government and is tailored
to promote economic growth by obtaining a certain balance between imports and
exports.
Free trade occurs where goods and policies can be freely exchanged between
countries, where governments do not impose restrictions such as customs duties or
embargo’s on trade (no barriers). Trade liberalisation means the abolishment of
government intervention in trade flows on both the import and the export side.
TYPICAL EXAM QUESTIONS
© Gauteng Department of Education
18 QUESTION 1
5 MINUTES
(Taken from various sources)
MULTIPLE CHOICE
Various options are provided as possible answers to the following questions.
Choose the answer and write only the letter (A – C) next to the question
number in the answer book.
1.1.1 An … is a free trade enclave within a protected economy in other words a
fenced and controlled industrial park outside the domestic customs area,
located near a harbour/airport, operating in a free trade environment.
A
EPZ
B
IMS
C
IDP
1.1.2 The … promotes free trade between countries.
A
DTI
B
WTO
C
IMF
1.1.3 … means selling goods in a foreign market at prices that are below their
cost of production.
A
Dumping
B
Embargo
C
Exchange control
1.1.4 The BRICS agreement includes the following countries:
A
Botswana, Russia, India, China and South Africa
B
Brazil, Russia, India, China and South Africa
C
Brazil, Russia, India, China and South America
1.1.5 Which statement is NOT an argument in favour of protectionism?
Developing strategic industries
B
Diversification of industries
C
Duration of protection
5 x 2 = (10)
QUESTION 2 5 MINUTES (Taken from NOV. 2013 KWAZULU NATAL trial)
Study the picture below and answer the questions that follow.
Source: http://economyincrisis.org
© Gauteng Department of Education
19 a.
b.
c.
Write the acronym WTO in full.
(2)
Name the organisation that was replaced by WTO.
(2)
Mention one role/function of the WTO with reference to the picture
above.
(2)
Briefly discuss free trade area (FTA) as a form of trade liberalization. (4)
d.
QUESTION 3 - 5 MINUTES (Taken from NOV. 2013 KWAZULU NATAL trial)
Explain how tariffs and subsidies are used as methods of import substitution.
(8)
QUESTION 4
5 MINUTES
(Taken from DBE, febr. 2010)
Discuss the arguments in favour of free trade.
(8)
QUESTION 5
25 MINUTES (from DoE, NOV. 2009/adapted to caps)
“Dismantling barriers to trade, especially those facing South African exporters, is a
critical component of any economic strategy that promote sustainable growth”
Discuss export promotion as part of the South African international trade policies.
Briefly explain the effectiveness of the methods through which exports are promoted
and highlight the advantages and disadvantages of such a policy. In the additional
part evaluate South Africa’s international free trade protocols.
[40]
MICROECONOMICS: DYNAMICS OF PERFECT / imperfect MARKETS
Learner Note
Perfect competition is a market structure with many buyers and sellers where entry and exit
is easy and the product sold is homogeneous. It occurs when none of the individual market
participants can influence the market price of the product. The sellers in a perfect market are
price takers. There is perfect knowledge of market conditions.
Monopoly exists where there is only one seller of a product, when the product has no close
substitutes and when barriers block into the market completely. Entry into the market is
blocked. The monopolist withholds information from consumers.
Oligopoly is a market structure in which a small number of large sellers dominate the market.
The product sold may be identical or differentiated. Entry into the market is restricted (not
easy). Sellers have considerable price control but not more than monopolists. Because there
are so few competitors in the market, firms in in an oligopoly are interdependent in their
decision-making. There is no perfect knowledge of market conditions.
Monopolistic competition is a market structure with many buyers and sellers where entry is
relatively easy and the product is differentiated. Monopolistic competition is the combination
of a business in the perfect market and a monopoly. Monopolistic competitors have little
control over prices.
QUESTION 1
5 MINUTES
(Taken from VARIOUS SOURCES)
1.2
MATCHING
Choose a description from Column B that matches an item in Column A.
Write only the letter (e.g. E) next to the question number (1.2.1 to 1.2.8) in the
answer book.
COLUMN A
COLUMN B
1.2.1 Perfect Market A Costs and benefits that convert private costs and
benefits into social costs and benefits
1.2.2 Imperfect
B An arrangement between businesses with the aim of
Market
limiting competition between them
© Gauteng Department of Education
20 1.2.3 Equilibrium
Point
1.2.4 Normal Profit
1.2.5 Externalities
1.2.6 Collusion
1.2.7 Cartel
1.2.8 Market
structure
C How a market is organised
D Can make economic profit over the long run
E An organisation of businesses in an oligopoly that comes
into existence with the aim of operating like a monopoly
F Cannot make economic profit over the long run
G The profit that the firm must make to ensure that it
remains in the industry
H Break-even point
I An institution or mechanism that brings together buyers
and sellers of goods or services
J Costs and benefits that convert social costs and benefits
into private costs and benefits
8 x 1 = (8)
QUESTION 2
5 MINUTES
(Taken from DBE, febr. 2011)
Study the graphs below and answer the questions that follow:
GRAPH A
GRAPH B
a.
b.
c.
d.
Which ONE of the above graphs is associated with an economic loss?
Define the term normal profit.
Identify the profit maximisation point in Graph B.
Calculate the total economic loss. Show ALL calculations.
(2)
(3)
(2)
(3)
QUESTION 3 15 MINUTE (Taken from NOV. 2013 KWAZULU NATAL trial)
3.1
Name TWO features that are used to distinguish the different market
structures.
(4)
© Gauteng Department of Education
21 3.2
Study the graphs below and answer the questions that follow:
a.
b.
Identify the kind of profit or loss that is made by each of the above firms.
Explain the difference between point Y in Firm B and point X in Firm C.
3.3
Study the graph below and identify the different points indicated i.e. point a, b,
c, d, and e:
(5)
© Gauteng Department of Education
(6)
(4)
22 3.4
Study the graph below and answer the questions that follow:
(ADAPTED FROM DBE, FEBR 2010)
THE FIRM
a.
b.
c.
d.
At what point is profit maximised in the long term?
At what point is profit maximised in the short term?
Why did the price drop from P1 to P?
What type of profit is made in the short term and in the long term?
(2)
(2)
(2)
(4)
QUESTION 4 10 MINUTES (Taken from NOV. 2013 KWAZULU NATAL trial)
4.1
Study the picture below and answer the questions that follow.
http://www.sowetanlive.co.za/news/2013/02/28
a.
b.
c.
Define the market structure depicted by the above picture.
(2)
Give a name for the institution that regulates the distribution of electricity in
South Africa.
(2)
What is the problem faced by the man in the picture?
(2)
© Gauteng Department of Education
23 d.
Briefly analyse the nature of the product produced by this firm.
(4)
4.2
Discuss non-price competition as a marketing strategy of a monopolistic
competitive business.
(8)
QUESTION 5
15 MINUTES
(Taken from DoE, febr. 2009)
5.1
Study the graph below and answer the questions that follow:
a. Define the term imperfect market.
(2)
b. Is the above graph indicating a short-term or a long-term equilibrium?
Give a reason.
(3)
c. What determines the optimum production level in this monopoly market? (2)
d. Indicate the economic profit area, on the graph, by using the letter labelling
system indicated on the graph.
(3)
5.2
Explain why the AR and MR curves are two different curves in this type of
market.
(8)
5.3
Distinguish between merit and demerit goods as a reason for market failures.
(8)
© Gauteng Department of Education
24 QUESTION 6
6.1
10 MINUTES
(TAKEN from DBE, EXEMPLAR 2014)
Study the graph and answer the questions:
a. Define the concept long run as used in economics.
b. Identify the optimum production level.
c. Explain why the marginal revenue (MR) curve will always lie below the
demand curve (DD) in this type of market.
d. Calculate the profit or loss of this monopolist. Show ALL calculations.
6.2
(2)
(4)
Explain how natural and artificial monopolies act as barriers to other producers
wanting to enter the market.
(8)
QUESTION 7
5 minutes
Study the graph and answer the questions:
(Taken from DBE, NOV. 2012)
(2)
(2)
© Gauteng Department of Education
25 a. Which market structure is represented in the graph above?
(2)
b. What type of demand curve is illustrated in the graph?
(2)
c. Explain why the producer will not decrease the price in order to improve sales.
(4)
d. What illegal behaviour can result among producers in this type of market if
they want to increase their profits?
(2)
QUESTION 8
5 minutes
(Taken from DBE, NOV. 2013)
Distinguish between price leadership and cartels as forms of collusion
(8)
Learner Note
The Competition Commission
In terms of section 21 of the Competition Act, the Competition Commission has a
range of functions which are stated as follows:
Ø The investigation of anti-competitive conduct in contravention of the
Competition Act.
Ø The assessment of the impact of mergers and acquisitions on competition.
Ø Monitoring competition levels and market transparency in the economy.
Ø Identifying impediments to competition.
Ø Playing an advocacy role in addressing these impediments.
The Commission must balance issues related to competition with broader social and
economic goals such as employment, international competitiveness, efficiency,
technological gains and the ability of small and medium-sized enterprises to
compete.
The Commission is independent, but its decisions may be appealed to the
Competition Tribunal and the Competition Appeal Court. Improves equity in markets.
The Competition Tribunal
Ø Granting exemptions.
Ø Authorising or prohibiting large mergers.
Ø Adjudicating on any conduct prohibited by the Act.
The Competition Appeal Court
Ø The Competition Appeal Court has a similar status to the High Court of South
Africa.
Ø The court may review any decision of the Competition Tribunal.
The Competition Appeal Court may confirm, amend or set aside any decision
or order that is subject to appeal or review by the Competition Tribunal to
separate the assets of parties that have merged in contravention.
MICROECONOMICS:
MARKET FAILURES
MICROECONOMICS: DYNAMICS OF MARKETS -
Learner Note
Market failure takes place if the market is not efficient, e.g. when the required
production levels are not achieved or resources are not efficiently allocated.
Sometimes free markets fail to produce the quantities of goods and services that
people want. Governments cannot just allow markets to fail as it will be bad for the
people in the country. They therefore intervene to limit the consequences of market
failure, so it can therefore be said that government intervention is a positive
consequence of market failure.
© Gauteng Department of Education
26 QUESTION 1
5 minutes
(Taken from DBE, FEBR. 2012)
Explain how government intervention can improve income distribution when markets
fail.
(8)
QUESTION 2
25 MINUTES
(Taken from DoE, NOV. 2013 KWAZULU NATAL trial /adapted to caps)
Discuss the causes of market failures and conclude by giving a brief analysis of
government’s intervention strategies, dealing with market failures.
(40)
Each essay question carries 40 marks allocated as follows:
— Introduction
— Body – Main part: Causes of market failures
— Body – Additional part: Government’s intervention strategies
— Conclusion
(2 Marks)
(26 Marks)
(10 Marks)
(2 Marks)
Organize your essay in paragraphs with headings.
QUESTION 3
5 minutes
Differentiate between productive inefficiency and allocative inefficiency.
(8)
QUESTION 4
10 minutes
(Taken from DoE, febr. 2009)
Study the table below and then answer the questions that follow:
COST AND BENEFITS IN THE SUPPLY OF CLEAN WATER TO A COMMUNITY
ALTERNATIVES ECONOMIC COSTS ECONOMIC BENEFITS
A
1 000 000
500 000
B
1 500 000
2 000 000
C
1 200 000
2 000 000
D
800 000
100 000
a) Define the term cost-benefit analysis.
(3)
b) Use the information in the above table, draw a well-labelled bar graph, indicating
cost and benefit for each alternative:
Vertical axis: Costs R (millions)
Scale: 1 cm = 200 000
Horizontal axis: Alternatives
(8)
c) Calculate the cost-benefit ratio of A and B by using the following formula:
BCRA(B) = Present value of economic benefits/Present value of economic costs.
Which alternative should the community adopt?
(5)
d) Draw a comparison between a cost-benefit analysis done by the government and
the private sector.
(4)
© Gauteng Department of Education
27 EXTRA SESSION 3:
TOPIC:
•
•
•
ECONOMIC PURSUIT
Economic Pursuit are tested in Paper 1 written on the 4th of November 2014,
with Macro-economics as discussed in SSIP Session 1.
Economic Pursuit includes Economic growth and development, Industrial
develop policies, Economic indicators and Social Indicators.
In this session the key is South Africa and what is done to increase economic
growth and development in South Africa. All the measures and policies are
important. A lot of new Caps work is in this session. PLEASE learn well.
TYPICAL EXAM QUESTIONS
SECTION A (COMPULSORY)
QUESTION 1: MULTIPLE-CHOICE QUESTION
10 Minutes
1.1 Various options are given as possible answers to each question. Choose the
answer and write only the letter (A - C) next to the question number (1.1.1 – 1.1.5) in
the ANSWER BOOK.
1.1.1
1.1.2
1.1.3
1.1.4
1.1.5
The policy that was introduced to increase employment, promote
economic growth and redistribute income.
A
Asgisa
B
GEAR
C
RDP
(2)
Its objective is to encourage greater investment in training and to
stimulate the development of new skills.
A
Spatial Development Initiatives
B
Industrial Development Zones
C
Skills Support Programme
(2)
The Maputo Corridor is found in the … province.
A
Eastern Cape
B
Gauteng
C
Mpumalanga
(2)
South Africa has a … economy.
A
developed
B
closed
C
developing
(2)
This act provides the legal basis for the transformation of the South
African economy.
A Black Economic Empowerment
B Employment Equity Act
C Minimum Wages Act
© Gauteng Department of Education
(2)
28 1.2
Choose a description from COLUMN B that matches the item in COLUMN A.
Write only the letter (A-I) next to the question number ( 1.2.1 – 1.2.5 ) in the
ANSWER BOOK.
1.3
1.2.1
COLUMN A
Red tape
COLUMN B
Subsidies are given to acquire land
A
1.2.2
Social capital
B
1.2.3
Land restitution
Official rules that seem more complicated
than necessary and that can prevent things
from being done quickly
1.2.4
Export promotion
C
Refers to all non-government, non-financial
contributions to production or services.
1.2.5
Urbanisation
D
a process where communities move from
rural to urban areas
E
Return of land to those who lost them
because of discriminatory laws
F
Incentives to increase sales abroad
( 5 x 1) (5)
Give the economic term/concept for each of the following descriptions. Write
only the term/concept next to the question number ( 1.3.1 – 1.3.5 ) in the
ANSWER BOOK.
1.3.1 Strategies, rules and regulations aimed at affecting import and
export in a country.
1.3.2 The economic value of the labour force; this will depend on the
quantity and quality of the labourer (i.e. their values and training)
available in an economy.
1.3.3 The level of wealth, goods and services that is available to different
groups within a population.
1.3.4 Aimed at decreasing imports by encouraging the replacement of
imported goods with locally produced goods.
1.3.5 A national development finance institution set up to promote
economic growth and industrial development.
( 5 x 1 ) (5)
TOTAL SECTION A: 20
SECTION B
QUESTION 2:
2.1
15 Minutes
Answer the following questions
2.1.1 List TWO factors taken into account when compiling the HDI.
2.1.2 ... grants are used to improve the living conditions of the poor.
© Gauteng Department of Education
2 x 1 (2)
1 x 2 (2)
2.2
29 Read the article below and answer the questions that follow:
Minister’s industrial policy initiative aimed to boost manufacturing
“The 2012 – 2013 Industrial Policy Action Plan would help create jobs.” Trade and
Industry Minister Rob Davies said. “The government has deployed a range of
complementary and integrated measures to grow the economy and create jobs.
The aim of the programme is to encourage investment by manufacturers now and to
reap the rewards later. An addition to the programme is a section on special
economic zones.
In the automotive industry, more than R15 billion in investment commitments had
been secured from assemblers and component suppliers. The industry had
experienced an increase in vehicle assembly volumes and localisation of
components. In the clothing, textile and footwear industry, the Clothing and Textile
Competitiveness programme of 2009 had brought retailers and manufacturers closer
together. “Despite the fact that implementation of the programme overlapped with the
global economic crisis, the programme managed to arrest employment losses in the
sector by 2010 with a modest increase in 2011,” Davies said
Better alignment between trade and industry policies allowed new sectors,
particularly in environmentally friendly industrial initiatives, to grow. The programme
had been implemented in turbulent economic time globally, which slowed demand for
South Africa’s key traditional export markets, Europe and the US. In addition local
producers had been subjected to electricity price increases over the past three years,
and some of the highest port charges in the world.
[Hint: read the article carefully and underline key word. Most of the answers
are in the article]
2.2.1 What is the purpose of the IPAP?
(2)
2.2.2 Mention TWO successes of the programme in various sectors of the economy,
as explained in the article.
(2)
2.2.3 Explain the challenges that the programme has to deal with.
(4)
2.2.4 What does the abbreviation FIGs stand for and what does this industrial
development policy do?
(2)
© Gauteng Department of Education
30 2.2 Study the cartoon below and answer the questions that follow:
[Hint: Look carefully at the shapes on the animals as well as their conditions
and think about the two animals involved. (Fat pig and cash cow being milked)]
2.3.1 Who is represented by the pig and who by the cow?
2.3.2 Explain TWO indicators that may be used to show the differences in
development between countries.
2.3.3 Explain the North-South-Divide
(2)
(4)
(4)
2.4
Evaluate TWO of the demand-side approaches to economic growth and
development.
2 x 4 (8)
2.5
Discuss Spatial development initiatives (SDI’s) in detail.
4 x 2 (8)
TOTAL SECTION B: 40
SECTION C:
MARK ALLOCATION FOR ESSAY RESPONSES
STRUCTURE OF ESSAY
Introduction
Body:
• Main part:
For example discuss/distinguish/
differentiate/explain/analyse/
evaluate/assess
• Additional part: For example draw a graph/deduce/
Outline/briefly explain/expand on/your
own opinion/support
Conclusion
Interpretation
TOTAL
© Gauteng Department of Education
MARK
ALLOCATION
Max 3
Max 20
Max 10
Max 2
Max 5
40
31 QUESTION 3:
30 Minutes
Discuss the following economic indicators, which are used in measuring the
performance of the economy:
• Production (real GDP)
• Employment/Unemployment
• Money supply
• The inflation rate (CPI)
(8)
(8)
(10)
(10)
TOTAL SECTION C:
GRAND TOTAL:
40
100
EXTRA SESSION 4:
TOPIC: CONTEMPORARY ECONOMIC ISSUES
•
•
•
Contemporary Economic issues are tested in Paper 2 written on the 11th of
November 2014, with Micro-economics as discussed in SSIP Session 2.
Contemporary Economic issues include Inflation, Tourism and Sustainable
development.
A lot of definitions, policies and abbreviations are involved in this section.
TYPICAL EXAM QUESTIONS
SECTION A (COMPULSORY)
10 Minutes
QUESTION 1:
MULTIPLE-CHOICE QUESTION
1.1 Various options are given as possible answers to each question. Choose the
answer and write only the letter (A - C) next to the question number (1.1.1 – 1.1.5)
in the ANSWER BOOK.
1.1.1
1.1.2
1.1.3
Stagflation is a combination of …
A
deflation and unemployment.
B
inflation and unemployment.
C
inflation and employment.
An example of South African indigenous uniqueness is represented
by …
A
Ushaka Marine World.
B
Robben Island.
C
the Addo Elephant Park.
The unadjusted CPI inflation rate is also known as … inflation.
A
core
B
CPIX
C
Headline
(2)
© Gauteng Department of Education
(2)
(2)
32 1.1.4
1.1.5
Foreign tourists coming to South Africa are also known as …
tourists.
A
outbound
B
inbound
C
domestic
(2)
A positive consequence of inflation is that it …
A
improves the value of money.
B
benefits debtors.
C
benefits creditors.
(2)
5 x 2 (10)
1.2
Choose a description from COLUMN B that matches the item in COLUMN A.
Write only the letter (A-I) next to the question number ( 1.2.1 – 1.2.5 ) in the
ANSWER BOOK.
1.2.1
COLUMN A
M3
1.2.2
Terms of trade
1.2.3
Bracket creep
1.2.4
World heritage
sites
1.2.5
A
COLUMN B
an agreement which addresses issues
regarding the ozone layer
B
The cash in circulation outside the banking
sector, plus demand and short-term,
medium-term and long-term deposits with
the bank
C
Places that are listed by the United Nations
Educational, Social and Cultural
Organisation (UNESCO) for their
outstanding cultural or natural significance
to humanity
D
ratio of export prices and import prices
E
A situation in which employees who
receive salary increases to keep up with
inflation move into higher tax brackets.
F
Goldreef City
Montreal Protocol
( 5 x 1) (5)
1.3
Give the economic term/concept for each of the following descriptions. Write
only the term/concept next to the question number ( 1.3.1 – 1.3.5 ) in the
ANSWER BOOK.
1.3.1 An extremely rapid and substantial change in the overall level of prices (in
excess of 50% per month)
1.3.2 It excludes items from the CPI basket that have highly volatile prices and items
with prices that are affected by government intervention.
© Gauteng Department of Education
33 1.3.3 Refer to the culture, history and environment that is unique to the local people.
1.3.4 Permits that allow for the emission of a certain amount of carbon dioxide.
1.3.5 The effect that results from the heat trapped in the atmosphere
( 5 x 1 ) (5)
TOTAL SECTION A:
[20]
SECTION B
QUESTION 2: 15 Minutes
2.1
Answer the questions that follow:
2.1.1
2.1.2
2.2
Name TWO of South Africa’s World heritage sites.
2 x 1 (2)
[Hint the key word is WORLD]
Why is it important to assign a weight to different expenditure items in the
CPI?
1 x 2 (2)
Study the cartoon below and answer the questions that follow:
2.2.1
2.2.2
2.2.2
2.2.2
2.2.3
Define inflation.
(2)
Who does the man in the cartoon represent at the South African Reserve
Bank? [Hint: Not referring to an individual]
(2)
Which instrument does the SARB have to “reduce some hot air”?
(2)
Which instrument does Minister Nhlanhla Nene have to help him with
controlling inflation?
(2)
[Hint: Make a list of all the new ministers involved in economics.]
Name ONE consequence of Inflation.
(2)
[Hint: do not confuse with reasons or causes.]
© Gauteng Department of Education
34 2.3
Read the article below and answer the questions that follow:
Tourism has its work cut out for it.
South African Tourism is in a healthy state, says Tourism Minister Derek Hanekom,
but cautioned the industry to keep sharpening its edge.
Speaking at the SATSA annual conference held in Spier, Hanekom said, “There is an
intensifying rivalry between destinations to attract the lucrative millennial traveller
segment.”
While the tourism industry expanded globally by 4,5% per year and South Africa’s
annual growth in foreign arrivals stands at 9,3%, Hanekom cautioned the need to
value innovation.
And while not entirely within the control of the Department of Tourism, Hanekom said
the recently implemented visa regulations as well as tourism safety remain a serious
concern for government.
The department is already piloting Visitor information Centres in six provinces and at
OR Tambo airport, a significant improvement in providing information to visitors can
be expected.
Traveller 24- 8 August 2014 13:47
2.3.1
2.3.2
2.3.3
2.3.4
What does the abbreviation SATSA stand for.
(2)
Name ONE issue, according the Minister Hanekom in this article that
could have a negative influence on Tourism to South Africa.
(2)
Name TWO reasons you think people from other countries would come to
South Africa rather than another country.
(2)
Differentiate between a domestic tourist and an international tourist. (4)
2.4
Explain the Inflation Target that South Africa implemented in 2000 in
detail.
4 x 2 (8)
2.5
Explain TWO types of expenditures that occur as a result of tourism.
2 x 4 (8)
TOTAL SECTION B:[40]
SECTION C:
30 Minutes
ANSWER ONLY ONE QUESTION FROM THIS SECTION
MARK ALLOCATION FOR ESSAY RESPONSES
STRUCTURE OF ESSAY
Introduction
Body:
• Main part:
For example discuss/distinguish/
differentiate/explain/analyse/
evaluate/assess
© Gauteng Department of Education
MARK
ALLOCATION
Max 3
Max 20
35 •
Additional part:
For example draw a graph/deduce/
Outline/briefly explain/expand on/your
own opinion/support
Conclusion
Interpretation
TOTAL
Max 10
Max 2
Max 5
40
QUESTION 3
• Discuss the measures to ensure environmental sustainability.
(26)
• The UN Millennium Development Goals: In 2000 eight development goals
for sustainable use of the environment were put forward. In your opinion
which five goals still needs to be addressed.
(10)
TOTAL SECTION C:[40]
GRAND TOTAL:100
© Gauteng Department of Education