SUPPLEMENTARY EXAMINATION
Bachelor of Business Administration;
Bachelor of Commerce in Human Resource Management;
Bachelor of commerce in Marketing Management;
Bachelor of Commerce in Entrepreneurship;
PROGRAMME Bachelor of Commerce in Financial Management;
Bachelor of Commerce in Information and Technology Management;
Bachelor of Commerce in Retail Management;
Bachelor of Commerce in Supply Chain Management;
Bachelor of Commerce in Public Administration
MODULE Economics 1B
YEAR One (1)
INTAKE Jan 2017
11 January 2018
DATE
09h00-12h0
TIME
DURATION 3 hours
TOTAL MARKS 100
INSTRUCTIONS TO THE CANDIDATE
1. Questions must be attempted in the answer book provided.
2. All queries should be directed to the invigilator; do not communicate or attempt to communicate with any other
candidate.
3. You have THREE HOURS to complete this paper. You are not allowed to leave the examination room within
the first hour and in the last 15 minutes of this examination.
4. This is a CLOSED BOOK examination.
5. Read ALL instructions carefully.
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SECTION A [40 MARKS]
Answer ALL questions in this section.
QUESTION ONE (20 Marks)
Choose the most appropriate answer. Write down the question number and the correct letter next to it. E.g. 1.11 A
1.1 Which of the following is NOT an objective of macroeconomic policy?
a) Price stability.
b) Full employment.
c) Control over money creation.
d) Economic growth.
e) Equitable income distribution.
1.2 In the simple circular flow of economic activity, goods and services flow via:
a) factor markets to goods markets.
b) factor markets from households to firms.
c) goods markets from households to firms.
d) factor markets from firms to households.
e) goods markets from firms to households.
1.3 If 2010 is the base year for real GDP calculations, we know for certain that nominal GDP:
a) is less than real GDP in 2010.
b) is greater than real GDP in 2010.
c) equals real GDP in 2010.
d) in 2009 was greater than real GDP in 2010.
e) in 2009 was less than real GDP in 2010.
1.4 If government spending is higher than current government revenue, this is known as:
a) a deficit on the current account of the balance of payments.
b) the budget deficit.
c) the public debt.
d) money financing.
e) good fiscal management.
1.5 Which one of the following statements about the consumption function is incorrect?
a) Consumption spending cannot be positive if income is zero.
b) Consumption spending increases as income increases.
c) Consumption spending decreases as income decreases.
d) When income increases, consumption increases, but by less than the increase in income – part of the additional
income is saved.
e) Autonomous consumption is that part of consumption spending which is independent of the level of income.
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1.6 If inflation was 5.4% in 2014 and you received a 5% increase in income during the same year, then over the year
your:
a) real and nominal income both fell.
b) real and nominal income both rose.
c) real income fell, but nominal income rose.
d) real income rose, but nominal income fell.
e) nominal income rose, but real income was unchanged.
1.7 Which one of the following statements is incorrect?
a) The M1 money stock consists largely of demand deposits.
b) The M2 money stock consists largely of notes and coins.
c) M3 is the most comprehensive measure of money.
d) M1 includes everything that normally serves as a means of payment.
e) M3 relates to the store of value function rather than to the means of payment function of money.
1.8 Classical economists who preceded Keynesians believed that:
a) increases in the quantity of money could alter the level of production in the economy.
b) as demand increases, supply increases.
c) economies that do not suffer from government interference will reach full employment equilibrium.
d) increases in government spending are necessary during times of recession.
e) full employment is not achievable in any circumstances.
1.9 A monetary system where exchange rates are freely determined in response to the demand and supply for foreign
currencies may best be described as a:
a) fixed exchange rate system.
b) managed float.
c) floating exchange rate system.
d) pegged exchange rate.
e) purchasing power parity system
1.10 Which one of the following is not a problem associated with GDP?
a) GDP pertains only to production inside the country.
b) The estimation of the value of production that is not sold in a market.
c) Many activities are not recorded.
d) GDP data are inevitably revised as more and better information become available.
e) GDP is not a good measure of economic welfare.
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QUESTION TWO (20 Marks)
Match the economic concepts given in COLUMN A with its description in COLUMN B. Write down the question numbers
and correct answer next to it, for example: 2.11 A
COLUMN A COLUMN B
2.1 Seasonal unemployment A All the people who live together and who make joint economic decisions
or who are subjected to others who make such decisions for them.
2.2 Nominal GDP B Non-market oriented instruments
2.3 Privatisation C This method is the summation of the value added at each phase of
production.
2.4 Open market policy D Total output in an economy expressed in current year prices
2.5 Induced consumption E The transfer of ownership of assets from the public sector to the private
sector
2.6 Economic growth F The behaviour of governments in raising money to
fund current spending and investment
2.7 Classical view G Consumption which is determined by the level of income and is
indicated by the slope of the consumption function
2.8 Fiscal Policy H Trigger or intensify a particular inflation process
2.9 Households I Occurs when employees only work during a certain time(s) of the year
2.10 Production Method J The economy is inherently stable and business cycles are caused by
exogenous disturbances
K Government takes over the ownership or management of private
enterprise
L Total output in an economy expressed in base year prices
M The economy is inherently cyclically unstable, business cycles are
endogenous to private market economies
N The annual rate of increase in total production or income in the
economy.
O Purchase or sale of domestic financial assets by the Central
bank in order to exert a specific influence on interest rates and the
quantity of money.
P This approach adds up the value of all transactions once they have
reached their final destination.
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SECTION B [60 MARKS]
Answer ANY THREE (3) questions in this section.
QUESTION THREE (20 Marks)
3.1 Describe the THREE (3) functions of money. (6 marks)
3.2 Identify and explain ANY FOUR (4) functions of the South African Reserve Bank. (8 marks)
3.3 Differentiate between the open market policy and the accommodation policy as instruments of monetary policy.
(6 marks)
QUESTION FOUR (20 Marks)
4.1 Briefly explain the term unemployment and comment about the shortcomings of this definition. (5 marks)
4.2 Describe ANY FOUR (4) types of unemployment. (8 marks)
4.3 Discuss the costs and consequences associated with unemployment in your country. (7 marks)
QUESTION FIVE (20 Marks)
5.1 With the aid of a clearly labelled diagram, explain the FOUR (4) phases of a business cycle. (10 marks)
5.2 Differentiate between absolute advantage and comparative advantage using examples. (6 marks)
5.3 Differentiate between an exchange rate and a foreign exchange market. (4 marks)
QUESTION SIX (20 Marks)
6.1 Distinguish between economic growth and economic development. (5 marks)
6.2 Explain ANY THREE (3) sources of economic growth for an economy. (6 marks)
6.3 Discuss the arguments for and against economic growth. (9 marks)
END OF PAPER
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