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ECS1601 EXAM PACK
Past paeprs 2011- May 2013 plus bouns Nov 2007
Worked and compiled by
Rungano Luciano
For
And on behalf of
Only for UNISA students doing the module Economics 1B
© March 2014
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MAY / JUNE 2011
SECTION A QUESTION 1
(i) Gini coefficient Quantile ratio Luffer curve
(ii) Taxes (T)
Government spending (G) Proportional income tax (t)
(iii) Domestic demand (C + I + G)
Export demand (x) Import substitution
QUESTION 2
(i)
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(ii)
P1
P0
E1
E0
S
ST
D
Q1 Q0
Quantity
Price
A1 (for C1> C )
A (for C)
Income
Total Demand
450
om
e Y0 Y1
0
0
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(iii)
QUESTION 3
(i) MPS = Δ𝑆
Δ𝑌 =
450−300
2500−2000 =
150
500 = 0.3
MPS + MPC = 1
Income
P1
P0
Y1 Y0
E0
E1
AD
AS
AS1
0
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0,3 + MPC = 1 MPC = 1 – 0, 3 = 0, 7
(ii)
(iii) α = 1
1−𝑐 ( 1−𝑡)𝑡 𝑚 =
1
1 − 910 ( 1− 1 3 ⁄ )1
10⁄⁄ =
11
2⁄ = 2
Y =α = 2 X [ 400 + 500 + 1280 + 900 + 600 ]
= 7360
Income
A = C+1
0
450
30
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QUESTION 4
Refer to May / June 2013 (Q4 (i) )
(ii) Refer to May / June 2013 ( Q4 (ii)
(iii) Refer to May / June 2013 Q4 (iii)
(iv) Refer to May / June 2013 Q4 (iv)
(v) Increase in interest rate will reduce the investment and total demand, the aggregate
demand declines and shift to the left.
At new equilibrium the level of production is lower and the price level declines.
(vi) Structural unemployment – to address there is need of career guidance programs for
students to select appropriate education programsneeded in the economy.
SECTION B
Calculations involved
20. Option 4 : % increase = ( 135−125
125 ) x 100
= 8 %
21. Labour Force = 50 – 20 – 9 – 1 = 20
Unemployment rate = unemployed
labor force x 100
= 4
20 x 100
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= 20%
Que # Solution Que # Solution
1 4 21 3
2 4 22 1
3 4 23 4
4 2 24 1
5 1 25 4
6 1 26 4
7 1 27 2
8 2 28 3
9 4 29 3
10 2 30 4
11 1 31 1
12 1 32 2
13 2 33 3
14 4 34 4
15 2 35 2
16 1 36 2
17 2 37 3
18 3 38 3
19 3 39 1
20 4 40 4
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OCTOBER / NOVEMBER 2011
SECTION A
QUESTION 1 ( i) Is the total goods and services produced in the country over a period of one year. It includes exports and excludes imports. (ii) Inflation is general increase in the price level. QUESTION 2
L,M
Interest
0
i1
i0 E0
MS
Ei
L0
L1
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(ii)
Quantity of US$
Exchange Rate
SUS$
DUS$ D1
US$
Q0 0
E1
E0
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(iii)
QUESTION 3
α = 1
1−𝐶 (1−𝑡 )+ 𝑚 =
1
1−0.8 (1−0.2 )+ 0.1 =
1
0.46 = 2.17
y = α Â = 2.17 x [400 +450+300+600-200] = 3363.5 Induced Imports = m Y = 0.1 X 3363.5 = 336.35 Net exports = X – Z
Price
Quantity
AS
AD
AD1
Y0 Y1 0
P1
P0
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=600 – (200 +336.5) =63.65
QUESTION 4 (i) Foreign investment + income for exports will increase for Lilangeni (appreciates)
Diamond will increase exports. Demand for Lilangeni rise Then the currency appreciates (lilangeni).
(ii) (ii) Active balance = precautionary purposes + transaction purposes
Passive balance = speculation purpose
A = c+1+G+X-Z
y
A
1550
335.50
450
0
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(iii) Increase in repo rate will have the following impact through the monetary transmission mechanism: Investment will decrease because it will be more expensive to borrow Aggregate demand decrease, AD shifts to the left At new equilibrium production is lower. Price level decrease
(iv) Demand management policies are inflationary
When demand increase the production increase at the expense of inflation. The supply side factors which increase productivity without increasing remuneration are also needed, so as to avoid increase in price when production increase.
SECTION B
Calculations involved
16. Soccer balls = 12 x 10 = 120
Beer bottles = 6x4 = 24
Vuvuzelas = 30x2 = 60
Nominal GDP 204
21. S = 0.1Y = 1000X0.1 = 100
Option 4
22. y = α Â
= 2 [100 + 300 + 200 + 150 – 100]
= 1300 option 1
23. No information to calculate budget surplus
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24. Income gap = 2150 – 1300 = 850
Anything with increase income by 850 Option 4
38. Unemployment rate = ≠ 𝑢𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑑
𝐿𝑎𝑏𝑜𝑟 𝑓𝑜𝑟𝑐𝑒 =
225
675 x 100
= 33.3%
Que # Solution Que # Solution
1 4 21 3
2 4 22 1
3 2 23 2
4 3 24 4
5 1 25 4
6 2 26 3
7 3 27 4
8 3 28 1
9 1 29 3
10 2 30 1
11 2 31 4
12 2 32 4
13 3 33 3
14 3 34 1
15 3 35 4
16 4 36 4
17 4 37 1
18 4 38 3
19 3 39 2
20 1 40 4
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MAY/JUNE 2012
SECTION A
QUESTION 1
(i) Taxes (T)
Government Spending (G)
Proportional tax (t)
(ii) Implementation
Recognition
Impact
Decision
QUESTION 2
(i)
Price
P1
P0
Q1 Q0
Quantity
E0
E1
D
S
ST
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(ii)
-Use contractionary fiscal and monetary policies. Can be done by reducing government spending, which reduces total demand (A) and aggregate demand (AD) in the economy. If AD declines it shifts to the left and the new equilibrium price declines. G A AD Y
Y1 Y0
AD1
AD
AS
S
EO
E1
1 P1
P0
0 Y0
Income (Y)
Price Level
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(iii)
QUESTION 3 (i )MPC + MPS = 1 9
10⁄ + MPS = 1
0
450
A1
A
Ž
Y1 Y0 y
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MPS = 1 - 9 10⁄
= 𝟏 𝟏𝟎⁄
(ii) X =1
1−𝐶 ( 1−𝑇 )+ 𝑚 =
1
1− 910 ( 1− 1 3 ⁄ )+ 1 10⁄⁄
= 1
1− 910 𝑥 2
3 + 1 10⁄⁄⁄
= 1
1− 35 + 1 10⁄⁄
= 1
25 + 1 10⁄⁄
= 1
4+1
10
= 1
12⁄
= 2 (iii) Y0= X Â = = 2 X [ 400 + 500 + 1280 + 900 - 600 ] = 2 X 2480 = 4960 (iv) Income gap = 5510 – 4960 = 550 Y0 = XA 550 = 2X ẋ
ẋ = 5502⁄ = 275
QUESTION 4 ( i) Normal GDP is value of total goods produced in the country at current prices. Real GDP is GDP after taking into account the change in prices, at constant prices. (ii )The increase will also increase the supply of dollars.
The supplyof dollar shifts to the right.
the rand will appreciate
the dollar will depreciate. (iii) marginal propensity to consume
Income tax Income
(iv) -it happens when the expansionary monetary policy is used.
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-Decrease of interest rate will increase the investment level. -Increase investment raises the total demand and aggregate demand in the economy. -AD curve will shift to the right. -At new equilibrium the general price level and income increase. The chain of events is as: i I AD Y P
(v) This is when policy makers are confronted with a dilemma. Any measures they take to raise level of production to reduce unemployment will increase the deficit on the current account balance of payment.
Similarly measures taken to reduce level of income to reduce current account deficit will increase unemployment.
However, the dilemma can be resolved if current account deficits are financed by net inflows of foreign capital.
SECTION B
Que # Solution Que # Solution
1 4 21 4
2 1 22 3
3 3 23 3
4 1 24 4
5 4 25 1
6 3 26 2
7 2 27 1
8 4 28 1
9 2 29 1
10 4 30 3
11 2 31 2
12 3 32 2
13 2 33 4
14 3 34 1
15 2 35 1
16 4 36 3
17 4 37 2
18 2 38 3
19 4 39 3
20 2 40 2
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OCTOBER /NOVEMBER 2012
SECTION A
QUESTION 1
(i) Uniformity Durability Divisibility Portability
(ii) Correct deficit of balance of payments Avoid dumping Source of government revenue Protect infant industry Creation of employment by promoting local production
QUESTION 2
(i)
Δ𝑃
𝑃
U
P
0
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(ii)
A policy which increase productivity without increasing remuneration
AS1
AS
AD
Income
Y1 Y0
P1
P0
Price
0
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(iii)
Interest
Investment
E1
E0
I
I0 I1 0
i 0
i1
Income
Price
AS
AD
E0
AD1
E1
Y1 Y0
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QUESTION 3
(i) MPC = Δ𝑐
Δ𝑦 =
8000−3200
8000−0 = 2.5
A = C + 1
Yf = α = 2.5 x 3600
= 9000
(ii) Y = ∝ Â = 2 [ 300 +200 +350+250-100] 2000
At equilibrium A = Y ˸ total spending A = 2000
QUESTION 4
(i) Nationalisation is transfer of private owned property to the public or government. Privatisation is transfer of state owned properties to the private firms or individuals.
(ii) I agree
When rand weakens it means our export goods will be cheaper compared to international prices. The demand for export goods will increase and the exporting firms will benefit.
(iii) Fiscal policy are government actions in trying to influence economic activity
through government expenditure and taxation. To raise equilibrium level of income the following takes place:
Increase in government spending, which increase total autonous spending (A) , the demand curve shift upwards and at new equilibrium total spending and income have increased.
The chain of events :
G A Y
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SECTION B Que # Solution Que # Solution
1 2 21 1
2 2 22 2
3 2 23 3
4 4 24 1
5 3 25 3
6 1 26 1
7 3 27 1
8 2 28 4
9 1 29 4
10 3 30 4
11 3 31 1
12 1 32 2
13 3 33 2
14 4 34 2
15 2 35 1
16 3 36 4
17 2 37 4
18 1 38 1
19 2 39 2
20 2 40 2
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MAY / JUNE 2013
SECTION A QUESTION 1 (i) It is the total output produced within boundaries of the country over a period of one year. It
includes exports and excludes imports. (ii) Fair
Equity Neutral
(iii)Current account Financial account QUESTION 2 (i)
L1 L0
E1
E0
M5
i0
i1
LM 0
interest
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(ii)
(iii)
450
A1 (for C1 >C
A (for C)
Y
Y1 Y0 0
A
AS1
AS
E0
AD
Income
Price
P1
P0
0 Y0 Y1
E1
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QUESTION 3
(i) MPS = Δ𝑆
Δ𝑌 =
450−300
2500−2000 =
150
500 = 0.3
MPC + MPS = 1
MPC + 0.3 = 1
MPC = 1 – 0.3 = 0.7
(ii) α = 1
1 –𝑐 ( 1−𝑡 )+ 𝑚 =
1
1 − 89 (1− 1
4 )+ 1 6 ⁄⁄⁄
= 1
1− 89 𝑥 3
4 + 1 6⁄⁄⁄
= 1
1− 23 + 1 6⁄⁄
= 1
12⁄= 2
Y0 = x = 2X [ 100 + 200 + 150 + 200 - 150 ]
= 2 X 500
1000
Induce Imports =my
= 1
6x 1000
= 166.67
QUESTION 4
(i) If Rand appreciate (become stronger ), the demand for export goods
decreases. The fruits are needed for exports, therefore demand for fruit pickers
decreases.
(ii) It’s impossible because we do not have information on :
(a) The change in prices (inflation)
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(b) The change in population
(iii) There is negative relationship between marginal propensity to consume and
multiplier.
If marginal propensity to consume decreases the size of the multiplier will
increase.
(iv) If tax rate increases, the induced consumption decreases. This will reduce total
demand (A), the total demand curve will shift down.
At new equilibrium the income level is lower.
The following chain of events takes place:
T C A Y
Also the multiplier will decrease.
(v) Monetary policy are the actions of monetary authorities which influence the level
of economic activities by changing the money supply and repo rate.
A contractionary monetary policy can be used by increasing repo – rate, which
increase interest rate and reduce investment in the economy.
If investment declines, total demand decreases and the aggregate demand will
shift to the left.
At new equilibrium the price is lower.
Repo rate I AD Y P
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SECTION B
Que # Solution Que # Solution
1 4 21 2
2 2 22 3
3 4 23 4
4 1 24 2
5 2 25 1
6 2 26 4
7 1 27 4
8 2 28 3
9 3 29 4
10 2 30 4
11 1 31 1
12 3 32 3
13 3 33 3
14 4 34 3
15 1 35 4
16 2 36 4
17 3 37 4
18 1 38 3
19 2 39 1
20 4 40 4
