ECW1102_final_exam_suggestions_SAfrica_2009[1].docx -...

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INSTRUCTIONS TO CANDIDATES The exam consists of 7 questions. All questions are compulsory. Include correct, labelled diagrams where appropriate. Page 1 of 4
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QUESTION 1 10 MARKS STATE WHETHER THE FOLLOWING STATEMENTS ARE TRUE OR FALSE . PROVIDE A BRIEF EXPLANATION FOR YOUR ANSWER. EACH QUESTION IS WORTH 2 MARKS . a. Purchase of a car by households is classified as consumption while a similar purchase of car by the state government is classified as investment. b. In a closed economy, net exports are equal to zero (NX=0) but in an open economy net exports are always positive (NX>0). c. If foreign prices and domestic prices do not change, an appreciation of nominal exchange rate leads to an appreciation of the real exchange rate. d. Money should have intrinsic value to be accepted in exchange of goods and services. e. The sacrifice ratio reflects that the process of reducing inflation would lead to an increase in unemployment. I NCLUDE CORRECT , LABELLED DIAGRAMS WHERE APPROPRIATE IN ANSWERS FOR Q UESTION 2 TO Q UESTION 7. QUESTION 2 10 MARKS a. Explain the effect of an increase in number of discourage works on the unemployment rate and the labour force participation rate. (3 marks)
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