Q.1.1 Which of the following statements is correct? (2)
(a) Imports represent an injection into the circular flow while exports represent a withdrawal from the circular flow.
(b) A closed economy is one in which anyone is free to participate.
(c) Firms purchase in the factor market and sell in the goods market while households purchase in the goods market and sell in the factor market.
(d) Consumption is a stock variable.
Q.1.2 Spending on capital goods is called capital formation or _______________, and this is primarily undertaken by _________________ in the economy. (2) (a) Investment; households;
(b) Capital accumulation; households;
(c) Investment; firms;
(d) Capital accumulation; firms and households.
Q.1.3 In the event of high levels of inflation, the government can: (2)
(a) Implement a restrictive fiscal policy by raising interest rates;
(b) Implement a restrictive fiscal policy by decreasing interest rates;
(c) Implement a restrictive fiscal policy by raising tax rates and decreasing government expenditure;
(d) Implement a restrictive fiscal policy by decreasing tax rates and increasing interest rates.
Q.1.4 Which of the following represent injections into the circular flow of income and spending? (2)
(a) Investment and exports;
(b) Government spending and taxation; The Independent Institute of Education (Pty) Ltd
(c) Government spending and imports;
(d) Investment and imports.
Q.1.5 Which of the following represent stock variables? (2)
(a) Wealth, saving and unemployment
(b) Gold reserves held by the South African Reserve Bank and investment;
(c) Income, profit and investment;
(d) Wealth, assets and liabilities.
Q.1.6 If total output (production) remains the same and all prices double, then real Gross Domestic Product (GDP): (2)
(a) Is constant and nominal GDP doubles;
(b) And nominal GDP are both constant;
(c) Is constant and nominal GDP is reduced by half;
(d) Doubles and nominal GDP is constant.
Q.1.7 An appreciation of the rand against the dollar: (2)
(a) Will worsen the current account balance but domestic prices will fall;
(b) Will improve the current account balance but domestic prices will rise;
(c) Will improve the current account balance but domestic prices will fall;
(d) Will worsen the current account balance but domestic prices will rise.
Q.1.8 The __________ is a quantitative measure of the degree of inequality in the distribution of income. (2)
(a) Lorenz curve;
(b) Consumer price index;
(c) Gini co-efficient;
(d) Business cycle.
Q.1.9 From a firm's perspective, the lower the interest rate: (2)
(a) The higher the expected return on investment;
(b) The higher the expected profits; (c) The lower the expected profits;
(d) The lower the expected return on investment. © The Independent Institute of Education (Pty) Ltd
Q.1.10 In the Keynesian macroeconomic model, the equation for the savings function is given as: S = -420 + 1/4Y. Based on this information, which of the following statements is correct? (2)
(a) The marginal propensity to consume is ¼;
(b) The level of autonomous savings is 420;
(c) At an income level of R1 000, the value of savings is 250.
(d) At an income level of R1 000, the level of savings is -170
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