QUESTION 1: Multi-choice Assume that an economy is in a recovery phase, which of the following would be best if we wanted the recovery to continue?
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Fiscal policy intervention such as an increase in government expenditure.
No immediate intervention as long as the situation of low inflation and low interest rates continued.
Monetary policy action in the form of increased interest rates.
Government should increase taxes in order to increase revenue.
Score:
2.
Assignment 1_002
Which of the following are correct? An economic upswing is normally associated with the following:
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Rising inflation, higher aggregate spending and current account deficits
Lower inflation, decreased spending, current account deficits, low unemployment.
Rising inflation, greater aggregate spending, current account surplus and higher unemployment.
Lower inflation, higher spending, current account surpluses, lower unemployment, less social unrest.
Rising inflation, lower aggregate spending, current account deficits and more social unrest.
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3.
Assignment 1_003
During a slump, how should the government respond if it wanted to lead the economy back into a recovery?
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Lower taxes, increased money supply, higher interest rates, and increased government spending.
Higher taxes, decreased money supply, lower interest rates and decreased government spending.
Lower taxes, increased money supply, lower interest rates and increased government spending.
Lower taxes, decreased money supply, higher interest rates and increased government spending.
Lower taxes, increased money supply, lower interest rates and decreased government spending.
Score:
4.
Assignment 1_004
In what range does the current economic growth rate in South Africa lie?
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Less than 0%.
0% - 2%.
2% - 4%.
4% - 6%.
Higher than 6%.
Score:
5.
Assignment 1_005
Which of the following can be regarded as institutions?
1. Banks. 2. Political parties. 3. Laws. 4. Churches. 5. Social norms.
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1 & 2
1, 2 & 4
3, 4 & 5
1, 2, 3, 4 & 5
Not [A], [B], [C] or [D]
Score:
6.
Assignment 1_006
Which one the following statements is incorrect?
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Consumer associations can help to inform consumers about defective and sub-standard products.
In economics, rational behaviour requires that consumers have perfect information and that their brains can easily process all available choices.
Effective stablisation policies can reduce the uncertainty faced by entrepreneurs, thereby making longer-term investment decisions easier.
NEDLAC was established in South Africa to reduce social conflict between business, labour, government and community organizations.
Socialism arises from the view that there is no need for government interference in the economy.
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7.
Assignment 1_007
Which of the following statements are correct?
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Central planning can work in the information age because government will be able to make all the decisions effectively to manage the economy.
A free press and independent judiciary are important institutions for reconciling opposing interests in society.
Unemployment insurance and social pensions are examples of institutions that ensure that property rights are protected.
Countries with representative democracies and regular elections are more prone to coups than dictatorships.
Somalia and Niger are all examples of African countries that have experienced high rates of economic growth because they have the right institutions.
Score:
8.
Assignment 1_008
Which of the following explanations seems most likely to be able to explain Africa’s poor economic performance?
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Corrupt governments have prevented the success of economies.
Regular free and fair elections together with a civil service that is relatively independent of the government has not been secured.
Social and political unrest has caused high levels of disruption.
The absence of appropriate institutions, the manipulation of existing institutions and the establishing of institutions which are not conducive to economic development have resulted in Africa’s poor performance.
Score:
9.
Assignment 1_009
Which of the following statements is correct?
1. Contract money was effectively promissory notes backed by gold or some other commodity money. 2. A fractional reserve system is one in which paper money is fully backed by “real” money such as gold. 3. The interest rate under a fractional reserve system reflects the rate of return expected by the borrowers of money. 4. The quantity of credit money adjusts to demand as long as people have confidence in its existence, but commodity money is finite and tangible.
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All the statements are correct.
Only statements 1 and 2 are correct.
Only statements 2 and 3 are correct.
Only statements 1, 2 and 4 are correct.
Not [A], [B], [C] or [D]
Score:
10.
Assignment 1_010
Which of the following statements is incorrect?
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The Reserve Bank hopes that the recent interest rate increase will reduce the rate of growth in the demand for credit and decrease inflationary pressure via the transmission mechanism.
The purchase of government bonds by the Reserve Bank injects liquidity into the money market and will reinforce the effect of interest rate reductions.
Changes to the reserve requirements of commercial banks have no noticeable impact on the supply of money in an economy.
The South African Reserve Bank has both instrument and operational independence in terms of the South African Constitution.
One of the characteristics of the modern economy is that increasing quantities of money are demanded for speculative purposes.
Score:
11.
Assignment 1_011
QUESTION 2: Longer type
2.1 Read the newspaper extract below and answer the following questions.
“It can be very negative for the South African economy if the Rand appreciates to R6 per dollar, according to Mr. Richard Downing, economist of the South African chamber of Business (SACOB). He talked at the announcement of SACOB’s business confidence index, which still shows high levels of confidence in the economy, for July. ‘The recovery in the manufacturing sector can (through a strong rand) be reversed, while the deficit on the current account will become bigger.’ Higher business confidence is further supported by …, the extension of credit to the private sector , fewer liquidations and the approval of more building plans.”
a) Identify which type of business cycle indicator (leading, coincident or lagging) is represented by each of the following:
Business confidence index
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1.
coincident
Score:
12.
Assignment 1_012
Level of credit extension in the private sector
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1.
lagging
Score:
13.
Assignment 1_013
Number of building plans approved
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1.
coincident
)
Score:
14.
Assignment 1_014
The level of manufacturing (excluding the primary sector)
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1.
leading
Score:
15.
Assignment 1_015
b) In which phase of the business cycle is a country most likely to experience a deficit on the current account?
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1.
upswing
Score:
16.
Assignment 1_016
c) What type of economic policy might the South African Reserve Bank use towards the end of the phase that you identified in (b)?
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1.
monetary policy
Score:
17.
Assignment 1_017
d) As what kind of institution could the South African Reserve Bank be classified?
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1.
monetary policy
Score:
18.
Assignment 1_018
Question 2.2
2.2 The diagram shows a portion of a possible business cycle. Answer the questions below based on this diagram.
What will happen to the following indicators in section A of the business cycle.
Residential building plans passed
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Increase
Decrease
Unchanged
Score:
19.
Assignment 1_019
Prices of shares traded on the JSE Securities Exchange
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Increase
Decrease
Unchanged
Score:
20.
Assignment 1_020
Growth in job advertisements in the Sunday Times
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Increase
Decrease
Unchanged
Score:
21.
Assignment 1_021
What will happen to the following indicators in section B of the business cycle.
Total formal non-agricultural employment
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Increase
Decrease
Unchanged
Score:
22.
Assignment 1_022
Value of new vehicles sales at constant prices
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Increase
Decrease
Unchanged
Score:
23.
Assignment 1_023
Industrial production index
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Increase
Decrease
Unchanged
Score:
24.
Assignment 1_024
What will happen to the following indicators in section C of the business cycle.
