UNISA Exam Memo May/June 2012 ECS1601 SECTION A (50 MARKS) QUESTION 1 (7 MARKS)
(i)
(3 marks) Spending Taxes Transfer payments.
(4 marks) Recognition lag The decision lag Implementation lag Impact lag
(ii)
QUESTION 2 (15 MARKS) (i)
(3 marks)
The figure represents the introduction of an excise tax of R1,00 on cigarettes. The equilibrium price per packet before the introduction of the excise tax on cigarettes is R4,00. 1
(ii)
(9 marks)
Implement contractionary fiscal policy;
Decrease in G and/or increase in T. (G and/or T);
AD will decrease – shift to the left;
Pe decreases (inflation down)
Ye decreases (unemployment up and production down)
Inflation is combated but at the cost of lower production & higher unemployment
P( and Y(; lower inflation at the cost of production / Y / employment.
2
(iii)
(3 marks)
A-curve shifts (parallel) downwards
Y decreases on the Y-axis by a multiple of the decrease in autonomous A
QUESTION 3 (8 MARKS) (i)
(2 marks)
Marginal propensity to save (MPS) = 1 – c c = Marginal propensity to consume =
MPS = 1 -
(ii)
α=
(iii)
=
= 0,1
(2 marks)
(
)
=
(
)
=
(2 marks)
Autonomous spending: Ā=Č+Ī+Ḡ+Ẋ-Ẑ 3
( )
=
=
=2
=400 + 500 + 1280 + 900 – 600 =2480 The equilibrium income:
Yo = αĀ =2 x 2480 =4960
(iv)
(2 marks)
Yf = 5510
Yo = 4960 α =2 ∆Ā =
=
=
=275
Only increasing exports by 275 will have the desired effect.
QUESTION 4 (20 MARKS) (i) (2 marks) Nominal GDP – measured using current prices; includes inflation Nominal GDP refers to GDP at current prices. Thus the term nominal GDP implies that current prices were used to calculate GDP. Nominal GDP indicates the monetary value of production Real GDP – measured using constant prices; excludes inflation Real GDP is nominal GDP expressed in terms of the base-year price. Real GDP takes into account inflation, i.e. adjusted for changes in the price level. Real GDP indicates changes in physical output. (ii)
(iii)
(4 marks)
For the same Q of gold Americans would now have to supply more $
And demand more ZAR
Rightward shift of the demand for ZAR; rightward shift of the supply of $
Appreciation of the ZAR; depreciation of the $
(4 marks)
MPC (c) –marginal propensity to consume
Rate of tax (t)
MPM (z) – marginal propensity to import
Level of national income (Y)
4
(iv) (5 marks) Decrease in i% would lead to an increase in C Rightward shift of the AD-curve Pe increases Ye increases The size of the increase in Y will depend on:
The interest elasticity of investment demand (I) and The steepness of the AS-curve
(v)
(5 marks) Measures taken to raise the level of production and income(reduce unemployment) will increase the deficit on the current account of the balance of payments. Measures taken to reduce the level of income (to reduce the current deficit) will increase unemployment. Can be resolved if current account deficits are financed by inflow from foreign inflows of capital, unlikely so we have to maintain some balance between exports and imports.
5
SECTION B (50 MARKS) 1. 4
21. 4
2. 1
22. 3
3. 3
23. 3
4. 1
24. 4
5. 4
25. 1
6. 3
26. 2
7. 2
27. 1
8. 4
28. 1
9. 2
29. 1
10. 4
30. 3
11. 2
31. 2
12. 3
32. 2
13. 2
33. 4
14. 3
34. 1
15. 2
35. 1
16. 4
36. 3
17. 4
37. 2
18. 2
38. 3
19. 4
39. 3
20. 2
40. 2
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