MEMO TEST 1.pdf - ATTENDANCE FORM\/PRESENSIEVORM Surname Initials Student number Venue GENERAL INSTRUCTIONS 1 Do not remove the staple 2 Tear off(remove

# MEMO TEST 1.pdf - ATTENDANCE FORM/PRESENSIEVORM Surname...

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ATTENDANCE FORM/ PRESENSIEVORM GENERAL INSTRUCTIONS 1. Do not remove the staple. 2. Tear off (remove) only the top page (this page), and hand it in together with this paper at the end. 3. Check that your paper has 16 numbered pages . 4. Write your student number on every page . Surname Initials Student number Venue 1 EKN3B TEST1 08/2014
Date August 2014 Marks 70 Time 1 ½ hours Examiners Christie Schoeman, Mashapa Sekome and Rooderick September Internal moderator: Arnold Wentzel ECONOMICS 3B / EKONOMIE 3B Semester Test 1 DEPARTMENT OF ECONOMICS Surname Initials Student number Marks Total A 10 B4 10 B1 15 B5 10 B2 15 B3 10 GRAND TOTAL / 65 2
Section A – Multiple Choice [10] Answer the multiple choice questions on the attached answer sheet on page 5 . Mark the correct option clearly with a big cross. Do not remove the staple or any of the pages. 1. What is the relationship between money and the GDP of a country? [A] they are related in the short run . [B] they correlate perfectly. [C] they do not have anything in common. [D] they are related only under very strict conditions. 2. A money economy functions more efficiently in an uncertain economic environment than a primitive barter system because: [A] Transactions are less and transaction costs lower. [B] More information is needed to conclude a transaction. [C] Both alternatives above. [D] Products are divisible into very infinitely small amounts. 3. The supply curve of gold can be changed by: [A] By changing the real rate of return. [B] By changing the money rate of return. [C] Both actions ([A] and [B]) are needed. [D] Not one of the above alternatives. 4. The supply of money in a fiat money system is: [A] More sensitive to the money rate of interest than that of money in a commodity exchange system. [B] Much harder to be affected by monetary policy. [C] No different from that of money in a commodity exchange standard. [D] Not one of the above alternatives is true. 5. Inflation in a commodity system is uncommon in the long run because: [A] Of the unique nature of gold. [B] It is much easier to be affected by monetary policy. [C] Commodity production costs reflect the real value of the commodity. [D] Its face value can differ from its intrinsic value in the long run. 6. Inflation in a fiat money system may be common even in the long run because: [A] Of the endogenous nature of fiat money supply. [B] Of the interest inelastic nature of the supply of fiat money. [C] Commodities’ nominal production costs are not affected by fiat. [D] Fiat face value differs from its intrinsic value only in the short run. 7. Which of the following truisms describes the Keynesian theory the best: [A] MV PT. [B] MV PY. [C] M kPY. [D] kY. 8. What effect will the sale of dollars by the SARB in the SA money market have on liquidity in the South African money market: [A] Will have no effect on liquidity on the market.

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