ECS2603
EXAM REVISION PACK
Written by TWP 2016
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SUGGESTED SOLUTIONS FOR 2015 MAY/JUNE
Question A1
Gross domestic expenditure
Plus
exports of goods and services
Less
imports of goods and services
Equals
Expenditure on gross domestic product (GDP @ market prices)
The diifference between basic prices, factor cost and market prices can be ascribed to:
These three sets of prices that can be used to calculate GDP.
However
market price
are used to calculate GDP according to the expenditure method
while basic prices are used when production (value added) method is applied. Lastly
factor cost is used when the income method id followed.
NB** These three methods of calculating GDP will yeild the same result merely if the same set
of prices is used in all the calculations.
Question A2
a)
442 169 − 435 389
1 782 061
× 100 = 0.38%
Shows an increase of 0.38%
b)
1 782 061 − 1 814 521
1 814 521
× 100 − 1.79%
The negative sign represents a decline in the annual real GDP from 2013 to 2014.
Question A3
