Economics P1 Feb-March 2015 Memo Eng
Economics P1 Feb-March 2015 Memo Eng
Economics P1 Feb-March 2015 Memo Eng
NATIONAL
SENIOR CERTIFICATE
GRADE 12
ECONOMICS P1
FEBRUARY/MARCH 2015
MEMORANDUM
MARKS: 150
SECTION A (COMPULSORY)
QUESTION 1
1.1.1 B income
1.1.2 B extrapolation
1.1.3 A central
1.1.4 A portfolio
1.1.5 C recession
1.1.6 C progressive
1.1.7 B deficit
1.1.8 A interdependent (8 x 2) (16)
1.3.1 Devaluation
1.3.2 Merit goods/Public goods
1.3.3 Circular flow model
1.3.4 Personal income tax
1.3.5 Reconstruction and Development Programme (RDP)
1.3.6 South African Reserve Bank (6 x 1) (6)
TOTAL SECTION A: 30
SECTION B
Answer TWO of the three questions from this section in the ANSWER BOOK.
QUESTION 2 MACROECONOMICS
• Food
• Fuel
Any other relevant answer. (2 x 1) (2)
Tourists need to exchange their own currency in order to buy goods and
services in other countries.
Accept any relevant response. (1 x 2) (2)
2.2 Study the diagram and answer the questions that follow.
• Exports
• Government expenditure (Any 1 x 1) (1)
• A = Households/consumers
• B = Business sector/producers/firms (2 x 1) (2)
2.2.4 How will national income be influenced by the above leakages and
injections?
2.3 Study the table and answer the questions that follow.
2.3.1 Describe the trend in the balance on the current account from 2010 to
2012.
2.3.3 Why is gold exports listed as a separate item on the current account?
2.3.4 How can the government use our currency to improve the trade balance
of 2012?
The government can devalue the rand This will make our goods cheaper
to foreign countries which will promote exports
Accept any other relevant response. (2 x 2) (4)
Specialisation:
• The effect of increasing living standards result in the trading of more
goods and services
• Allows industries that have a comparative advantage with a lower
opportunity cost
• It increases economic efficiency and prevent wasting resources
• Each country that is best suited for specific goods and services will
engage in producing more of those goods or services (2 x 2) (4)
Economies of scale:
• Allows industries to maximise economies of scale and this will lead to
cost reduction and enhance competitiveness in world markets
• Global economies benefit effective labour distribution and creation of
economic efficiency World production and economic welfare
increase and markets grow
• Producers compete to find the best production methods that cut costs
and improve the quality of goods that will stimulate innovation and
creativity (2 x 2) (4)
(8)
It prevents dumping
• With dumping products are sold at prices so low that they undercut both
the cost of production in the country of origin and the domestic prices
• This makes it very difficult for local producers to compete
• Eventually it will force weak industries out of the market (2 x 2)
• New businesses have very high costs and low revenue when they start
up
• They will need protection against well established competition from
abroad
• Once the business has been through the infant stage and is competitive,
the need for protection reduces (2 x 2)
• Some industries, such as iron and steel, agriculture and energy amongst
others are often regarded as strategic industries
• Developing countries may feel that they need to develop these industries
in order to become self-sufficient (2 x 2)
Accept any other relevant answer (Any 2 x 4) (8)
[40]
3.1.2 Why does the Monetary Policy Committee of the South African Reserve
Bank meet every two months?
To consider inflationary conditions and adjust the repo rate to ensure price
stability
Accept any other relevant response. (1 x 2) (2)
3.2 Study the extract and answer the questions that follow.
The government role is to set up the framework for the private sector to
function (1 x 2) (2)
Yes
• New schools being built
• Textbooks / study material / website
• Feeding scheme for children
OR
No
• Insufficient classrooms
• Non-delivery of textbooks to some schools
• Poorly skilled teachers
(Any other correct response) (2 x 2) (4)
3.3 Study the cartoon and answer the questions that follow.
3.3.4 In your opinion, has the BEE policy benefited the Black people of South
Africa?
Yes No
Empowerment of indigenous people
Gender equality, more opportunities Benefits only a small part (few
for representation on all levels of individuals) of the community due to
management nepotism and corruption
Economic empowerment – spread of financial wealth
Sharp increase in economic power Most black South Africans did not
through shareholding capacity of big benefit at all – unemployed – lack of
business access to capital
Standard of living
Those who got empowered are Many black South Africans do not
enjoying a much higher standard of enjoy a higher standard of living –
living the gap between rich and poor has
increased The Gini coefficient
has worsened
Any other relevant opinion. (Any 2 x 2) (4)
• This takes the form of cash grants that is allocated to foreign companies
that wish to invest in new manufacturing businesses.
• The grant covers 15% to maximum of R3 million to the costs of moving
equipment and machinery into South Africa.
The goal of this incentive is to increase foreign investment and technologies
in the country. (Any 2 x 2) (4)
(8)
[40]
4.1.2 Why is the Gross National Product of South Africa generally lower than
that of the GDP?
4.2 Study the cartoon and answer the questions that follow.
Mr. Pravin Gordan is trying to find a balance in the distribution of the state’s
income and the needs in the critical areas of the economy.
Accept any other relevant message. (2)
• Duty-free incentives
• Tax-free cash grants (1 x 2) (2)
It refers to measures taken by government to reduce the tax burden on the tax
payers. E.g. revision of tax rates (2 x 1) (2)
4.2.4 Which part of the population will benefit the most from personal income
tax relief? Motivate your answer.
4.3 Study the graph and answer the questions that follow.
4.3.1 Which province made the highest contribution to the South African
economy in 2012?
4.3.3 What is the average GDP growth rate for South Africa?
± 2.2% (1 x 2) (2)
Moral suasion
• SARB consults with the banks and persuade them to act in a –manner
• desirable to the prevailing economic conditions
Sells paper such as bills and bonds
4.5 Assess how an increase in import prices and an increase in export prices
(terms of trade) will affect the South African economy.
TOTAL SECTION B: 80
SECTION C
Answer only ONE of the two questions in this section in the ANSWER BOOK.
QUESTION 5 MACROECONOMICS
Governments' primary aim with business cycle policies is to achieve the best
possible growth rates.
INTRODUCTION
The new economic paradigm in terms of the smoothing of business cycles discourages
monetary policy makers from using monetary and fiscal policies to fine-tune the
economy but rather encourages achieving stability through sound, long term decisions
relating to demand and supply in the economy/Smoothing means to smooth out the
painful part of economic down-fall that is part of the market economy
Any other relevant definition/description of smoothing/new economic paradigm
(Max.2)
BODY: MAIN PART
The new economic paradigm is embedded in the demand and supply side policies.
Demand-side policies
• It focuses on aggregate demand in the economy.
• When households, firms and the government spend more, demand in the
economy increases.
• This makes the economy grow but can lead to inflation.
Inflation:
− Aggregate demand increases more quickly than aggregate supply and this
causes price increases.
− If the supply does not react to the increase in demand, prices will
increase.
− This will lead to inflation (a sustained and considerable increase in the general
price level)
Unemployment:
− Demand-side policies are effective in stimulating economic growth.
− Economic growth can lead to an increase in the demand for labour.
− As a result more people will be employed and unemployment will increase.
− As unemployment decreases inflation is likely to increase.
− This relationship between unemployment and inflation is illustrated in the Phillips
curve.
Supply-side policies
Reduction of cost
− Infrastructural services
Reasonable charge and efficient of Transport, communication, water services
and energy supply.
− Administration costs
These costs include inspection, reports on applications of various laws,
regulations and by-laws, tax returns and returns providing statistical
information. It adds to costs. In SA businesses carry a heavy
burden.
− Cash incentives
It includes subsidies for businesses to locate in neglected areas where
unemployment is high and compensation to exporters for certain costs they incur
in development of export markets.
Answers must be in full sentences and well described with examples to be able to
obtain 2 marks per fact.
If facts are listed the candidate will only get a maximum of 13 marks. (Max 26)
AD 1 AS
AS 1
AD
Labeling of axes = 1
Price level %
C F
AD moving to the right = 1
P AS moving to the right = 1
Correct sloping of curves = 1
mark each
AS AD 1 Equilibrium point = 1
Max 4 marks
AS 1
AD
Q Q1
Real output
Explanation:
• Aggregate demand (AD) and aggregate supply (AS) are in equilibrium at point
C.
• If aggregate demand is stimulated so that it moves to AD 1 and aggregate supply
responds promptly and relocates at AS 1 a larger real output becomes available
without any price increases.
• Supply is often sticky and fixed in the short term.
• Therefore, if aggregate demand increases to AD 1 and aggregate supply does not
respond, intersection is at point F. Real production increases but so do prices, in
other words with more inflation.
• The aggregate demand curve locates at any position to the left of AS 1 inflation
prevails.
• The solution is to create conditions that ensure that supply is more flexible.
• If the cost of increasing production is completely flexible, a great real output can be
supplied at any given price level. (Max.6)
CONCLUSION
It is clear from the discussion above that it is critically important to manage the
aggregate supply and demand to ensure stability in the economy.
Accept any relevant conclusion. (Max 2) [40]
INTRODUCTION
Economic indicators are statistical data that shows the behaviour of one or other
economic variable, usually overtime
(Accept any other relevant introduction) (Max. 2)
1. Inflation rate
- This is the general increase in the price level of goods and services in the
economy over a certain period in time. E.g. one year.
- This is therefore an indicator of the health of the economy and it is monitored in
two ways that is at the production wholesale level producer price level
(PPI)and at the retail or consumer level consumer price index (CPI).
2. Employment
Employment rate
- The number of employed persons expressed as a percentage of the EAP gives
the employment rate.
- The employment rate can also be converted into an index.
- The SA employment rate was 74.9% in 2011.
- This is low, compared to rates in developed and even some developing countries
such as Argentina and Pakistan.
- In SA the growth in the economy is not accompanied by the similar growth in
employment numbers.
Unemployment rate
- Statistics SA (SSA) obtains its labour data each year from Quarterly Labour
Surveys (QLFS)
- It uses the standard definition of the International labour Office (ILO) to calculate
unemployment.
- The strict definition of unemployment is used to calculate the unemployment
rate.
- The unemployment are those people within the economically active population
who:
o Did not work during the seven days prior to the interview
o Want to work and are available to start work within a week of the
interview
o Have taken active steps to look for work or to start some form of self-
employment in four week prior to the interview.
- In SA the official unemployment rate was 25.2% in 2012.
- In developed countries, change in the unemployment rate trigger responses
- from governments to fine-tune the economy.
- Increases require more funds for unemployment insurance (UIF) drawings.
- In developing countries, unemployment is the most important cause of
poverty.
Accept current statistical data. (Max.16)
CONCLUSION
Countries cannot survive and grow their economies if they do not pay attention to
economic indicators for their planning processes.
Accept any other relevant consideration. (Max. 2) [40]
TOTAL SECTION C: 40
GRAND TOTAL: 150
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