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ECS1601 QUESTIONS AND CORRECT
SOLUTIONS 100% ACCURATE
Which of the following is/are correct? a) Households are confronted with unlimited wants, but with limited resources with which to satisfy those wants b) The scarcity of resources necessitate households to make choices - Correct Answers_both a and b are correct Which of the following is/are correct regarding the distinction between macroeconomics and microeconomics? a) The price of apples at the supermarket is an example of a macroeconomic variable. b) An increase in the general price level (inflation) in the economy is an example of a macroeconomic variable. - Correct Answers_only b is correct A flow variable is defined as a variable that is measured over a period. Which one of the following variables is not an example of a flow variable?
[1] National income [2] The balance on Sibahle's savings account [3] Budget deficit [4] Total production - Correct Answers_[2] The balance on Sibahle's savings account Which of the following is not an acceptable intervention by the public sector in a mixed economy? [1] the provision of funds for public goods such as parks and streetlights [2] regulation of the pricing behaviour of monopoly industries [3] stabilisation of the economy during periods of economic instability [4] regulation of the price increases that result from changes in patterns of demand and supply in the competitive market - Correct Answers_[4] regulation of the price increases that result from changes in patterns of demand and supply in the competitive market The factors of production in an economy are ... [1] households, capital, land, entrepreneurship
[3] savings, exports, taxes area leakages, while imports, investments, government spending are injections. [4] savings, government spending, imports are leakages, while investments, exports, taxes are injections. - Correct Answers_[1] savings, imports, taxes are leakages, while investment, government spending, exports are injections. In the circular flow of goods and services ... [1] firms sell factors of production on the goods market. [2] goods and services offered for sale on the goods market are purchased by firms. [3] households combine factors of production and produce consumer goods and services. [4] households offer factors of production in the factor market. - Correct Answers_[4] households offer factors of production in the factor market. What does the letters A, B, C and D in the figure represent? a) A represents factors of production b) B represents goods and services
c) C represents foreign sector d) D represents spending by firm [1] only a is correct [2] only b and c are correct [3] only b and d are correct [4] a and b are correct, while c and d are incorrect - Correct Answers_[3] only b and d are correct Which of the following is not an injection into the economy of South Africa? [1] A domestic company in South Africa sells leather to a client that is in Italy. [2] A decision by Ruth to save a larger portion of her salary. [3] Spending by the department of health on new hospital facilities. [4] The local bakery bought a new machinery and equipment that will improve the capacity to produce more bread. - Correct Answers_[2] A decision by Ruth to save a larger portion of her salary. The circular flow model reveals that an increase in South African exports will ...
[3] The example of a correlation is when an increase in value of exports cause a fall in economic growth. [4] Causality between two variables always implies correlation. - Correct Answers_[1] Correlation between variables occurs when two variables have a relationship. Which one of the following statements is incorrect? [1] Money is different from income and wealth [2] Income refers to reward earned in exchange for offering factors of production in the production process [3] It is good to hold wealth in the form of money during periods of high inflation because the value is protected [4] Money functions as a medium of exchange because it is generally accepted in payment for goods and services - Correct Answers_[3] It is good to hold wealth in the form of money during periods of high inflation because the value is protected Which of the following statements concerning money is correct?
[1] The value of money is not based on the confidence that financial intermediaries will be able to control the supply to achieve stability and that the purchasing power does not fall. [2] Paper money was developed since specialisation between countries led to increases in trade, causing the use of coins to be inconvenient as they were difficult to handle. [3] Credit cards are money because they function as a medium of exchange. [4] Electronic money is another form of money as it can be used as means of payments. - Correct Answers_[2] Paper money was developed since specialisation between countries led to increases in trade, causing the use of coins to be inconvenient as they were difficult to handle. Which of the following statements are correct? a. The use of money eliminates the need for a double coincidence of wants associated with a barter economy. b. An economy in which goods are traded for other goods is called a barter economy. c. Money consists of notes and coins only.
[4] M2 is R500 000 - Correct Answers_[1] Long-term deposits are R700 000 Which of the following statements regarding financial intermediaries is/are correct? a) Financial institutions channel funds from surplus economic units to deficit economic units. b) Financial institutions channel funds from surplus household to deficit household units only. c) John saves a portion of his monthly income at his local bank. We can conclude that John is an example of a surplus unit. d) Sarah has a financial emergency and goes to her local bank to borrow R 000, which she will pay at a later date. We can conclude that Sarah is an example of a surplus unit. [1] only b is incorrect [2] both a and b are correct [3] both a and c are correct [4] only d is correct - Correct Answers_[3] both a and c are correct Which one of the following statements regarding the demand for money is true?
[1] Economic participants hold money for transaction purposes only. [2] When money is held as an asset, it is referred to as the demand for active balances. [3] The demand for active balances depend on the level of income and the speculative demand for money depends on the level of interest rate. [4] When economic participants hold money as an asset, they earn interest - Correct Answers_[3] The demand for active balances depend on the level of income and the speculative demand for money depends on the level of interest rate. If national income increases from R billion to R200 billion, the money demand for transaction purpose will ______ and the demand curve for money will______. [1] decrease; make a leftward shift [2] increase; remain the same [3] cannot be determined; remain the same [4] increase; make a rightward shift - Correct Answers_[4] increase; make a rightward shift
[1] curves L1 and L2 to shift to the right. [2] curves L1 and L2 to shift to the left. [3] no effect on curve L1, but a rightward shift of curve L2. [4] a rightward shift of curve L1 and no effect on curve L2. - Correct Answers_[4] a rightward shift of curve L1 and no effect on curve L2. The potential of the banks to create money is decreased when ... [1] the bank lending rate increases. [2] the South African Reserve Bank increases the reserve requirement ratio. [3] the bankers borrow from the South African Reserve Bank. [4] individuals choose to deposit their funds at the bank. - Correct Answers_[2] the South African Reserve Bank increases the reserve requirement ratio. Which one of the following statements on money creation is correct? [1] the creation of money by banks is not limited by the demand for loans
[2] the central bank regulates the amount of money in circulation by controlling the tax [3] the quantity of money depends on demand for money and interest rate [4] money is created by minting and printing of notes - Correct Answers_[3] the quantity of money depends on demand for money and interest rate If the South African Reserve Bank wants to raise money supply growth, it should ... [1] increase the repo rate and sell securities [2] decrease the repo rate and buy government bonds [3] decrease the repo rate and sell securities [4] increase the repo rate and buy government bonds - Correct Answers_[2] decrease the repo rate and buy government bonds Which one of the following actions will increase the liquidity deficit in the banking sector? [1] The South African Reserve Bank decrease reserve requirement of banks.
[1] government expenditure [2] money supply [3] tax rate [4] interest rate - Correct Answers_[4] interest rate An appropriate government intervention in the economy ... [1] is to encourage a monopolistic market that satisfies the aggregate demand for goods and services by the public. [2] is to get involved in the economic sectors where the private sector is producing goods and services more efficiently. [3] involves measures to correct market failure and provision of public goods and services. [4] has to do with taking income from those with low incomes and providing income to those with higher incomes. - Correct Answers_[3] involves measures to correct market failure and provision of public goods and services. Which of the following statements is/are correct?
a) The failure of markets to produce efficient outcomes, is called government failure. b) Government may fail to have efficient outcomes due to corruption. c) Government failure arises because bureaucrats put the interest of society first. [1] b and c [2] a and b [3] a and c [4] b - Correct Answers_[4] b Which one of the following statements on nationalisation and privatisation is correct? [1] Nationalisation is the transfer of ownership from the public sector to the private sector. [2] Privatisation is the transfer of ownership from private enterprise to government. [3] One of the arguments in favour of privatisation is that the privatised firm may attract foreign direct investment. [4] Privately owned enterprises are often a burden on the taxpayer. - Correct
[1] a [2] b [3] a and b [4] a, b and c - Correct Answers_[4] a, b and c Expansionary fiscal policy refers to_______, while contractionary fiscal policy refers to_______. [1] an increase in government borrowing; decrease in government spending. [2] decrease in taxes; increase in government spending. [3] an increase in government spending; an increase in taxes. [4] demand management policy; monetary policy. - Correct Answers_[3] an increase in government spending; an increase in taxes. Which one of the following statements regarding government spending in South Africa is correct? [1] A rapid increase of people migrating from rural areas to the cities of Gauteng is one of the causes of increased government spending.
[2] Table 3.1 in the prescribed textbook shows that the total spending by general government (% of GDE) was 20,5 in 2010%. [3] The composition of government spending has remained the same over a period 1990 to 2016. [4] Political or other shocks always results in a massive decrease in spending by government and households. - Correct Answers_[1] A rapid increase of people migrating from rural areas to the cities of Gauteng is one of the causes of increased government spending. Which of the following statements regarding government spending and the financing of such spending is/are correct? a) The difference between government spending and borrowing is called the budget deficit. b) If government finances part of its spending from borrowing from the central bank, this is called inflationary financing. c) Income generated from state-owned enterprises forms part of the sources of revenue for government.
