UNISA Exam Memo May/June 2013 ECS1601 SECTION A (50 MARKS) QUESTION 1 (9 MARKS) (i)
(4 marks)
the total value of all final goods and services produced within the boundaries of a country in a particular year Most important barometer of the performance of the economy. Real GDP takes into account inflation, i.e. adjusted for changes in the price level Nominal GDP is not adjusted for inflation Nominal GDP and GDP at current prices are synonyms.
(3 marks) neutrality, equity and administrative efficiency.
(2 marks) Current account Capital account
(ii)
(iii)
QUESTION 2 (9 MARKS) (i)
(3 marks)
1
(ii)
(3 marks)
(iii)
(3 marks)
2
QUESTION 3 (11 MARKS) (i)
(3 marks) ∆Y =500 (2500 -2000) ∆S = 150 (450 -300) ∆C = ∆Y - ∆S = 500-150 = 350
=
MPC =
(ii)
= 0, 7
(7 marks) the size of the multiplier (2 marks)
α=
(
=
)
(
)
=
( )
=
= =2
the equilibrium level of income (3 marks)
Ā=Č+Ī+Ḡ+Ẋ-Ẑ =100 + 200 + 150 + 200 – 150 = 500 Equilibrium income Yo = αĀ
=2 x 500 =1000 =
the value of induced imports at equilibrium level of income (2 marks) =
= 166, 667 ≈ 166, 67
QUESTION 4 (22 MARKS) (i)
(4 marks)
X due to stronger rand;
D for fruit;
D for fruit-pickers;
structural unemployment 3
(ii)
(3 marks)
Need constant prices (real GDP) to measure real growth in economy;
current prices (nominal GDP) includes inflation and provides a distorted picture of economic growth
(iii)
(3 marks)
Will increase the size of the multiplier (α) due to less money being spent abroad and more locally;
(iv)
also increase Y
(4 marks)
decrease in Yd (disposable income);
decrease in multiplier;
A-curve becomes flatter;
decrease in Ye
4
(v)
(8 marks) Monetary policy can be defined as the measures taken by the monetary authorities to influence the quantity of money or the rate of interest with a view to achieving stable prices, full employment and economic growth. Demand-pull inflation refers to inflation that occurs when the aggregate demand for goods and services exceeds the aggregate supply. Demand-pull inflation is usually accompanied by a simultaneous increase in the general price level and output level.
is combated with contractionary monetary policy Contractionary monetary policy involves increasing the interest rate and decreasing money supply Monetary policy is determined and enforced by the central bank. Its tools are: accommodation policy, open-market policy, public debt management and intervention in foreign exchange rates. An expansionary monetary policy involves reducing interest rate and increasing the quantity of money available, while contractionary monetary policy deals with increasing interest rate and decreasing the quantity of money available.
5
SECTION B (50 MARKS) 1.4
21.2
2.2
22.3
3.4
23.4
4.1
24.2
5.2
25.3
6.4
26.4
7.1
27.4
8.2
28.3
9.4
29.4
10.2
30.4
11.1
31.1
12.3
32.2
13.2
33.3
14.4
34.3
15.2
35.2
16.2
36.2
17.3
37.4
18.4
38.3
19.2
39.1
20.4
40. 4
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