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NATIONAL

SENIOR CERTIFICATE

GRADE 12

ECONOMICS
ECONOMICS
PAPER
P1 1
MACROECONOMICS & ECONOMIC PURSUITS
NOVEMBER 2019
MARCH 2016

MARKS: 150

TIME: 2 hours

This question paper consists of 12 pages.

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Economics/P1 2 DBE/November 2019
NSC

INSTRUCTIONS AND INFORMATION

1. Answer FOUR questions as follows in the ANSWER BOOK:

SECTION A: COMPULSORY
SECTION B: Answer TWO of the three questions.
SECTION C: Answer ONE of the two questions.

2. Answer only the required number of questions. Answers in excess of the


required number will NOT be marked.

3. Number the answers correctly according to the numbering system used in this
question paper.

4. Read the questions carefully.

5. Start EACH question on a NEW page.

6. Leave 2–3 lines between subsections of questions.

7. Answer the questions in full sentences and ensure that the format, content
and context of your responses comply with the cognitive requirements of the
questions.

8. Use only black or blue ink.

9. You may use a non-programmable pocket calculator.

10. Write neatly and legibly.

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SECTION A (COMPULSORY)

QUESTION 1 30 MARKS – 20 MINUTES

1.1 Various options are provided as possible answers to the following questions.
Choose the answer and write only the letter (A–D) next to the question
numbers (1.1.1 to 1.1.8) in the ANSWER BOOK, e.g. 1.1.9 D.

1.1.1 A period when there is a general increase in economic activities is


known as a(n) …

A downswing.
B upswing.
C depression.
D recession.

1.1.2 National income will increase when …

A G + I + X > S + T + M.
B G + I + X < S + T + M.
C G + I + X = S + T + M.
D S + T + M > G + I + X.

1.1.3 Indicators that change at the same time and in the same direction
as the economy changes are known as … indicators.

A leading
B lagging
C composite
D co-incident

1.1.4 Where one country can produce goods or services cheaper than
another country within a given time period it is called …

A comparative advantage.
B absolute advantage.
C terms of trade.
D free trade.

1.1.5 The Laffer curve shows the relationship between …

A tax revenue and tax rate.


B income and expenditure.
C nominal and real figures.
D tax revenue and wages.

1.1.6 Production, as an economic indicator, relates to …

A foreign trade.
B inflation.
C money supply.
D real GDP.

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1.1.7 The Department of Trade and Industry initiative that focuses on


improving competitiveness in production is called the …

A National Industrial Policy Framework.


B National Research and Development Strategy.
C Integrated Manufacturing Strategy.
D Small Business Support Programme.

1.1.8 The demand-side policy relates to …

A a reduction in costs.
B improving the efficiency of inputs.
C the influence on inflation and unemployment.
D improving the efficiency of markets. (8 x 2) (16)

1.2 Choose a description from COLUMN B that matches the item in COLUMN A.
Write only the letter (A–I) next to the question numbers (1.2.1 to 1.2.8) in the
ANSWER BOOK.

COLUMN A COLUMN B
1.2.1 Leakages A estimate figures or trends in future
from facts that are known
1.2.2 Exogenous approach
B a country's export prices are
1.2.3 Human Development compared to its import prices
Index
C the removal of laws, regulations and
1.2.4 Extrapolation bylaws by government
1.2.5 Portfolio investment D independent factors that influence
business cycles and originate outside
1.2.6 Terms of trade the economy
1.2.7 Gross domestic product E a trade policy where the state
discourages the import of certain
1.2.8 Deregulation
goods and services to protect local
industries

F outflow of money from the economy

G total value of final goods and services


produced within the boundaries of
a country for a specific period

H buying of financial assets such as


shares in companies on the stock
exchange of another country

I the well-being of people determined


by health, education and income
(8 x 1) (8)

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1.3 Give ONE term for each of the following descriptions. Write only the term next
to the question numbers (1.3.1 to 1.3.6) in the ANSWER BOOK.
Abbreviations, acronyms and examples will NOT be accepted.

1.3.1 The initial change in spending produces a proportionately larger


increase in national income

1.3.2 The point where the economic contraction is at its lowest

1.3.3 A transfer of functions and ownership from the public sector to the
private sector

1.3.4 An increase in the price of a currency in terms of another currency


due to market forces

1.3.5 The movement of imports and exports between countries without


any restrictions

1.3.6 The social indicator that relates to the size of the country's
population (6 x 1) (6)

TOTAL SECTION A: 30

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Economics/P1 6 DBE/November 2019
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SECTION B

Answer any TWO of the three questions in this section in the ANSWER BOOK.

QUESTION 2: MACROECONOMICS 40 MARKS – 30 MINUTES

2.1 Answer the following questions.

2.1.1 Name TWO types of business cycles that occur in a market


economy. (2 x 1) (2)

2.1.2 Why would an increase in import tariffs benefit the South African
economy? (1 x 2) (2)

2.2 Study the information below and answer the questions that follow.

Eish! It looks like I will have


to revise the medium-term
expenditure framework.

[Adapted from Google images.com]

2.2.1 Name any ONE state-owned enterprise in the country. (1)

2.2.2 What is the current VAT rate in South Africa? (1)

2.2.3 Briefly describe the term Medium-Term Budget Policy Statement. (2)

2.2.4 Explain the relationship between the main budget and the MTEF. (2)

2.2.5 What can the government do to solve the current financial challenges
of state-owned enterprises? (2 x 2) (4)

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2.3 Study the table below and answer the questions that follow.

FINAL CONSUMPTION EXPENDITURE BY HOUSEHOLDS


at constant 2010 prices
2012 2015 2018
Durable goods 175 675 183 493 192 049
Semi-durable goods 153 492 172 570 187 892
Non-durable goods 673 670 693 594 711 569
Services 765 528 804 000 845 886
TOTAL 1 768 365 1 853 657 1 937 396
[Source: Quarterly Bulletin, SA Reserve Bank, March 2019]

2.3.1 Identify the year currently being used by the Reserve Bank as a
base year. (1)

2.3.2 Give any ONE example of a non-durable good. (1)

2.3.3 Briefly describe the term at constant prices. (2)

2.3.4 Why is there a rise in household expenditure while unemployment


is steadily increasing? (2)

2.3.5 How will an increase in the repurchase (repo) rate affect the
economy? (2 x 2) (4)

2.4 Use the graph below to explain the impact of an increase in exports to China
on the value of the rand.

Price of yuan
in terms of rand D S

S1

R2,00

R1,40

S D

S1

0 100 150
Quantity of Chinese yuan

(4 x 2) (8)

2.5 With reference to the Phillips curve, analyse the relationship between inflation
and unemployment. (8)
[40]

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QUESTION 3: ECONOMIC PURSUITS 40 MARKS – 30 MINUTES

3.1 Answer the following questions.

3.1.1 Name TWO types of economic indicators related to price changes.


(2 x 1) (2)

3.1.2 What can local governments do to prevent service delivery


protests? (1 x 2) (2)

3.2 Study the extract below and answer the questions that follow.

CLEAN ENERGY IN AFRICA FACES SHORT-CIRCUIT

There is a high demand but a shortage of trained workers. In Sub-Saharan


Africa, where more than 600 million people still lack access to electricity,
off-grid renewable power is seen as one of the fastest ways to get energy to
where it is needed, especially to remote and rural areas.

However, there are only a few trained workers able to plan, install and
maintain clean energy systems. In Sub-Saharan Africa there are only
16 000 people working in renewable energy outside South Africa. This
accounts for 0,1% of the global renewable energy workforce which impacts
globalisation.

[Adapted from Sunday Times, 3 February 2019]

3.2.1 Which economic indicator is addressed in the above extract? (1)

3.2.2 Name the social indicator that includes 'access to electricity'. (1)

3.2.3 Briefly describe the term globalisation. (2)

3.2.4 What impact will a shortage of trained workers have on global trade? (2)

3.2.5 How could education, as a social indicator, reduce inequalities


experienced worldwide? (2 x 2) (4)

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3.3 Study the dialogue below and answer the questions that follow.

Yes, that might be true,


I agree. Since but the National
democracy (1994), Development Plan (NDP)
policies, like the GEAR, holds much promise!
RDP and AsgiSA, have
failed us.

I feel that
government
policies have not
done much for
economic
development …

[Adapted from Google images.com]

3.3.1 Identify the first government policy implemented in 1994 to address


the imbalances of the past. (1)

3.3.2 Give ONE aim of the National Development Plan. (1)

3.3.3 Briefly describe the term economic development. (2)

3.3.4 Why did AsgiSA fail? (2)

3.3.5 How will South Africa benefit in a dynamic global environment if the
NDP succeeds? (2 x 2) (4)

3.4 Explain the role of international institutions in the standardisation of a


country's indicators. (4 x 2) (8)

3.5 How can unequal standards of living related to the North-South divide
be addressed? (8)
[40]

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QUESTION 4: MACROECONOMICS AND ECONOMIC PURSUITS


40 MARKS – 30 MINUTES

4.1 Answer the following questions.

4.1.1 Name TWO types of markets that form part of the financial system.
(2 x 1) (2)

4.1.2 Why is it important to use moving averages to forecast business


cycles? (1 x 2) (2)
4.2 Study the extract below and answer the questions that follow.

WORLD POWERS WARN SOUTH AFRICA

The presidency received an unprecedented memo on corruption in which the


five world powers warned the leaders of the country that the investment drive
could fail unless South Africa started to take action against perpetrators of
state capture, corruption and other serious crimes.

The governments of the United Kingdom and Switzerland stated that political
commitment to honest and ethical business practices should prevail. The UK
and Switzerland, together with three other countries, account for 75% of
foreign direct investment in South Africa that might definitely affect the
balance of payments negatively.

[Adapted from Sunday Times, 3 February 2019]

4.2.1 Identify the country in the extract that belongs to the G8 countries. (1)

4.2.2 What is the impact of corruption on full employment as a


macroeconomic objective? (1)

4.2.3 Briefly describe the term balance of payments. (2)

4.2.4 Why would public sector failure lead to economic instability? (2)

4.2.5 How could foreign direct investments influence the growth rate in
South Africa? (2 x 2) (4)

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4.3 Study the cartoon below and answer the questions that follow.

Oh-oh, perhaps this is not the BRICS


best time to establish our own should
trade protocol!!! succeed!!!

[Adapted from Google Images, 2019]

4.3.1 Name any ONE country that is a member of BRICS. (1)

4.3.2 What is the purpose of BRICS? (1)

4.3.3 Briefly describe the term recession. (2)

4.3.4 Why would a recession affect emerging market economies more


than developed economies? (2)

4.3.5 How can countries benefit from international trade agreements?


(2 x 2) (4)

4.4 Briefly explain the role of households and the business sector in the circular
flow model. (2 x 4) (8)

4.5 How can the monetary policy contribute to economic growth? (8)
[40]

TOTAL SECTION B: 80

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SECTION C

Answer any ONE of the two questions in this section in the ANSWER BOOK.

Your answer will be assessed as follows:

MARK
STRUCTURE OF ESSAY
ALLOCATION
Introduction
The introduction is a lower-order response. Max. 2
 A good starting point would be to define the main concept related to the
question topic.
 Do not include any part of the question in your introduction.
 Do not repeat any part of the introduction in the body.
 Avoid mentioning in the introduction what you are going to discuss in the
body.
Body
Main part: Discuss in detail/In-depth discussion/Examine/Critically discuss/ Max. 26
Analyse/Compare/Evaluate/Distinguish/Differentiate/Explain
Additional part: Give own opinion/Critically discuss/Evaluate/Critically evaluate/
Draw a graph and explain/Use the graph given and explain/Complete the given
graph/Calculate/Deduce/Compare/Explain/Distinguish/Interpret/Briefly debate/ Max. 10
How/Suggest
Conclusion
Any higher-order conclusion should include: Max. 2
 A brief summary of what has been discussed without repeating facts already
mentioned
 Any opinion or value judgement on the facts discussed
 Additional support information to strengthen the discussion/analysis
 A contradictory viewpoint with motivation, if required
 Recommendations
TOTAL 40

QUESTION 5: MACROECONOMICS 40 MARKS – 40 MINUTES

 Examine South Africa's export promotion trade policy. (26 marks)


 Evaluate the success of protectionism as a trade policy to protect industries against
foreign competitors. (10 marks) [40]

QUESTION 6: ECONOMIC PURSUITS 40 MARKS – 40 MINUTES

 Discuss in detail the South African endeavours (initiatives) in regional


development. (26 marks)
 How successful has the government been in promoting industrial development in
South Africa? (10 marks) [40]

TOTAL SECTION C: 40
GRAND TOTAL: 150

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NATIONAL
SENIOR CERTIFICATE

GRADE 12

ECONOMICS P1

NOVEMBER 2019

MARKING GUIDELINES

MARKS: 150

This marking guideline consists of 20 pages.

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Economics/P1 2 DBE/November 2019
NSC – Marking guideline

SECTION A (COMPULSORY)

QUESTION 1

1.1 MULTIPLE-CHOICE QUESTIONS

1.1.1 B – upswing 
1.1.2 A – G + I + X > S + T + M 
1.1.3 D – co-incident 
1.1.4 B – absolute advantage 
1.1.5 A – tax revenue and tax rate 
1.1.6 D – real GDP 
1.1.7 C – Integrated Manufacturing Strategy 
1.1.8 C – the influence on inflation and unemployment  (8 x 2) (16)

1.2 MATCHING ITEMS

1.2.1 F - Outflow of money from the economy 

1.2.2 D - Independent factors that influence business cycles and originate


outside the economy 

1.2.3 I – The well-being of people determined by health, education and


income 

1.2.4 A – Estimate figures or trends in future from facts that are known 

1.2.5 H - Buying of financial assets such as shares in companies on the


stock exchange of another country 

1.2.6 B - A country's export prices are compared to its import prices 

1.2.7 G – Total value of final goods and services produced within the
boundaries of a country 

1.2.8 C - The removal of laws, regulations and bylaws by government 


(8 x 1) (8)

1.3 GIVE THE TERM

1.3.1 Multiplier effect 


1.3.2 Trough 
1.3.3 Privatisation 
1.3.4 Appreciation 
1.3.5 Free trade 
1.3.6 Demographics  (6 x 1) (6)

TOTAL SECTION A: 30

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NSC – Marking guideline

SECTION B
Answer TWO of the three questions in this section in the ANSWER BOOK.
QUESTION 2: MACROECONOMICS

2.1 Answer the following questions.

2.1.1 Name TWO types of business cycles that occur in a market


economy.

• Kitchin cycle 
• Juggler cycle 
• Kuznets cycle 
• Kondratieff cycle  (2 x 1) (2)

2.1.2 Why would an increase in import tariffs benefit the South African
economy?

An increase in import tariffs would benefit the economy because it


will:
• reduce imports thereby saving on foreign exchange 
• lead to an increase in domestic production 
• increase revenue to government through direct and indirect
taxation 
• improve the balance of payments through reduced imports 
• protect local industries from being forced out through
uncompetitive pricing 
(Accept any other correct relevant response) (1 x 2) (2)

2.2 DATA RESPONSE

2.2.1 Name any ONE state-owned enterprise in the country.

SAA / Eskom / Transnet / Post Office / SA Express / Denel 


(Accept any other correct relevant response) (1)

2.2.2 What is the current VAT rate in South Africa?

15%  (1)

2.2.3 Briefly describe the term Medium Term Budget Policy


Statement.

The MTBPS adjusts to changes in the economy since the main


budget / It is based on the MTEF and shares the developments in
public policy that will shape the next and forthcoming budgets 
(Accept any other correct relevant response) (2)

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2.2.4 Explain the relation between the main budget and the MTEF.

The main budget is guided by the MTEF which estimates income


and expenditure for a three-year period 
(Accept any other correct relevant response) (2)

2.2.5 What can the government do to solve the current financial


challenges of State Owned Enterprises?
The current financial challenges can be solved by:
• ensuring that fiscal and monetary management is improved

• ensuring that proper human capital is correctly sourced or
obtained 
• strengthening the internal/external audit control systems 
• changing management to ensure accountability 
(Accept any other correct relevant response) (2 x 2) (4)

2.3 DATA RESPONSE

2.3.1 Identify the year currently being used by the Reserve Bank as a
base year.

2010  (1)

2.3.2 Name any ONE example of a non-durable good.


• Food / beverages / tobacco 
• Household fuel / power / water 
• Household consumer goods 
• Medical and pharmaceutical products 
• Petroleum products 
• Recreational and entertainment goods 
(Accept any other correct relevant response)
(Accept any goods under above mentioned categories) (1)

2.3.3 Briefly describe the term at constant prices.

Constant prices represents the real value of NI-figures where


inflation is excluded 
(Accept any other correct relevant response) (2)

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2.3.4 Why is there a rise in household expenditure while


unemployment is steadily increasing?

The increase in household expenditure due to:


• the increase in borrowing money from financial institutions 
• using savings and investments to maintain the standard of living

• increase in transfer payments e.g. social grants 
• increase in government expenditure / programmes e.g. EPWP

• an increase in informal sector activities as a source of income

(Accept any other correct relevant response) (2)

2.3.5 How will an increase in the repurchase (repo) rate affect the
economy?

An increase in the repurchase rate, will:


• force banks to adjust their interest rates upwards making credit
more expensive 
• make credit more expensive leading to less demand for goods
and services which will lower production 
• lower production results in an increase in unemployment which
will reduce tax revenue for the government 
• lead to households paying back loans and bank overdrafts will
have less money available because credit becomes more
expensive 
• lead to households earning interest on fixed deposits and
savings will enjoy the benefits of higher returns on
deposits/savings affecting the satisfaction of wants positively 
• attract foreign investment due to higher returns 
(Accept any other correct relevant response) (2 x 2) (4)

2.4 Use the graph to explain the impact of an increase in exports to China
on the value of the rand.

• An increase in South Africa's exports to China will shift the supply curve
to the right (from SS to S 1 S 1 ) causing an increase in the demand for the
rand 
• This will lead to an increase in the quantity supplied of yuan (from 100
units to 150 units) 
• The value of the yuan will depreciate from R2,00 to R1,40 / the value of
the rand appreciated 
• The situation has to be well managed, because in the long term our
appreciated currency will make our products unaffordable and exports
might decline 
• The value of the rand has increased in terms of the yuan 
(Accept any other correct relevant response) (Max 8) (8)

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2.5 With reference to the Phillips curve, analyse the relationship between
inflation and unemployment.

• The Phillips curve shows that inflation will increase if there is less unemployment
(trade-off) 
• Skills development and improved education that increases employment will create
an increased demand for goods and services leading to inflation 
• A very high inflation can lead to stagflation (high inflation and high unemployment)
due to reduced demand for goods and services which will lead to less employment

• Inflation targeting (3 – 6%) will prevent stagflation (high unemployment) 
• The demand for goods and services can be stimulated without increased
employment 
• The worker (consumer) might make use of extended credit facilities to enjoy the
same standard of living when they experience price increases 
• Various external factors may influence job creation in a country i.e. a tendency to
import final goods which might improve the choice of consumers without solving
the problem of unemployment 
• The depreciation of the rand might lead to price hikes, not necessarily lower
unemployment 
• Capital intensive production processes would not necessarily contribute to further
job creation  (Max 8)
(Accept any other correct relevant higher order response)
[40]

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QUESTION 3: ECONOMIC PURSUITS

3.1 Answer the following questions.

3.1.1 Name TWO types of economic indicators related to price


changes.
• PPI 
• CPI  (2 x 1) (2)

3.1.2 What can local government do to prevent service delivery


protests?

• Ensure that maintenance of infrastructure, clean water,


sanitation and sewage disposal is in tact 
• Municipalities should deliver excellent services to their
communities timeously 
(Accept any other correct relevant response) (1 x 2) (2)

3.2 DATA RESPONSE

3.2.1 Which economic indicator is addressed in the above extract?

Employment / production  (1)

3.2.2 Name the social indicator that includes “access to electricity”.

Services  (1)

3.2.3 Briefly describe the term globalization.

Globalization is the worldwide interfacing and interaction of


economies, with trade as an important element and information
technology making it possible 
(Accept any other correct relevant response) (2)

3.2.4 What impact will a shortage of trained workers have on global


trade?

• It will reduce international trade due to increased production


cost which reduces competitiveness 
• It will increase the inequality gap between countries where
advanced economies benefit from the latest technology 
• Reducing international trade due to poor quality products being
produced 
(Accept any other correct relevant response) (2)

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3.2.5 How could education as social indicator reduce inequalities


experienced worldwide?

Education as social indicator can reduce inequality by:


• creating skills and knowledge needed for technologically
advanced economies 
• providing effective education and training to all, for example the
no fee school system / feeding-scheme / financing tertiary
education or apprenticeships 
• increasing budget allocation to provide adequate infrastructure

• constant development and in-service training to ensure life-
long learning in updating skills and knowledge  (2 x 2) (4)
(Accept any other correct relevant response)

3.3 DATA RESPONSE

3.3.1 Identify the first government policy implemented in 1994 to


address the imbalances of the past.

RDP  (1)

3.3.2 Give ONE aim of the National Development Plan.

• Eliminating unemployment 
• Eradicate poverty 
(Accept any other correct relevant response) (1)

3.3.3 Briefly describe the term economic development.

Economic development is an increase in the per capita income


which leads to an improved standard of living 
(Accept any other correct relevant response) (2)

3.3.4 Why did AsgiSA fail?

AsgiSA failed because it did not achieve its goal of halving


unemployment and poverty by 2014  because:
• an average growth rate of 6% has not been achieved although
certain economic sectors were targeted 
• stable exchange rate was not achieved 
• shortfall in skills development 
• good governance (public administration) was not achieved 
• a massive investment in infrastructure was an important
strategy of government, although a massive degrading of roads
is evident 
• focus on building small businesses to bridge the gap between
the formal and informal economies did not solve unemployment

(Accept any other correct relevant response) (2)

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3.3.5 How will South Africa benefit in a dynamic global environment


if the NDP succeeds?

If the NDP succeeds South-Africa will benefit by:


• participating in global trade and investment to reshape the world
economy and international politics 
• emerging of new consumers in developing countries that will
broaden opportunities for all economies 
• increasing demand for commodities and expanding markets 
• competing in manufacturing and information technology to
enable services by increasing international competition 
• enjoying the flow of people, capital, ideas and technology 
• participating in regional cooperation in Africa where
neighbouring countries could supply much needed water in
exchange for low-carbon energy in Southern Africa 
(Accept any other correct relevant response) (2 x 2) (4)

3.4 Explain the role of international institutions in the standardisation of a


country's indicators.

• The international institutions involved in standardisation are the


International Monetary Fund, the World Bank and United Nations 
• Bridging finance for balance of payments deficits is paid by the IMF if the
balance of payments is compiled according to their requirements 
• The IMF manually focus on government finance statistics on public
finance accounting, basing their predictions only on transactions that
have indeed taken place and those expected to happen 
• The World Bank is responsible for development aid and is the world's
largest source of financial assistance 
• The United Nations is responsible for child aid through the Unicef 
• The United Nations prescribes the use of the System of National
Accounts when compiling the production, income and expenditure
accounts 
• Economic and social indicators are important that international aid and
funding organisations have specifications on how to compile them 
• Benefits may not be given to countries if their indicators are not available,
not in line with the institutions' requirements or do not show
performances that qualify a member for aid or funding 
(Accept any other correct relevant response) (4 x 2) (8)

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3.5 How can unequal standards of living related to the North-South divide
be addressed?

Unequal standards of living can be addressed by:


• creating surpluses on GDP that countries can save and invest in their
economies, leading to higher standards of living 
• increasing the per capita income in developing countries in the South
through increased foreign investment leading to increased economic
growth 
• focusing on large-scale industrial activities and a wide variety of services
where more people could be involved in economic activities leading to a
rise in income levels 
• the government contributing more, by raising more taxes to provide better
services 
• increasing the life expectancy of developing countries suffering from
diseases and ill health, through the intervention of developed countries
where the latest research and techniques are practiced 
• focusing on the fight against malnutrition and serious illnesses like HIV and
AIDS 
• increasing the standard of education through effective interaction with the
relevant parties involved with human development 
• making available the level and effectiveness of education as expressed by
the adult literacy rate 
(Accept any other correct relevant response) (8)
[40]

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Economics/P1 11 DBE/November 2019
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QUESTION 4: MACROECONOMICS AND ECONOMIC PURSUITS

4.1 Answer the following questions.

4.1.1 Name TWO types of markets that form part of the financial
system.

• Money 
• Capital 
• Foreign exchange  (2 x 1) (2)

4.1.2 Why is it important to use moving averages to forecast


business cycles?

It removes fluctuation in economic data which makes it easier to


predict business cycles (a particular trend) 
(Accept any other correct relevant response) (1 x 2) (2)

4.2 DATA RESPONSE

4.2.1 Identify the country in the extract that belongs to the G8-
countries.

United Kingdom  (1)

4.2.2 What is the impact of corruption on full employment as a


macroeconomic objective?

Decrease employment / Unemployment will increase 


(Accept any other correct relevant response) (1)

4.2.3 Briefly describe the term balance of payments.

It is a record of all financial transactions between one country and


the rest of the world for a specific period usually one year 
(Accept any other correct relevant response) (2)

4.2.4 Why would public sector failure lead to economic instability?

Incorrect use of fiscal policy would not:


effectively stabilise prices / correct the balance of payments /
create more employment. 
Public sector failure occurs when basic needs are not satisfied in
the country leading to a decrease in the standard of living
(inefficient allocation of resources) 
(Accept any other correct relevant response) (2)

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4.2.5 How could foreign direct investments influence the growth


rate in South Africa?

The economic growth rate would be influenced positively when:


• foreigners increase their FDI in South Africa, production of
goods and services will be stimulated, leading to increased
economic growth 
• employment increases, consumption expenditure will increase
that will stimulate further production 

The economic growth rate would be influenced negatively when:


• foreigners feel insecure due to state capture, corruption and
crime, they might withdraw their FDI in South Africa 
• production will be negatively affected and economic growth
decreased  (Any 2 x 2) (4)
(Accept any other correct relevant response)

4.3 DATA RESPONSE

4.3.1 Name any ONE member country that belongs to BRICS.

China, Brazil, South Africa, Russia, India  (1)

4.3.2 What is the purpose of BRICS?

BRICS strives towards development of all member countries /


increase investment / increase trade / to promote integration
between member countries 
(Accept any other correct relevant response) (1)

4.3.3 Briefly describe the term recession.

A negative economic growth rate for at least two consecutive


quarters / refers to a decline in the level of economic output that
lasts for 6 months or longer 
(Accept any other correct relevant response) (2)

4.3.4 Why would a recession affect emerging market economies


more than developed economies?

• During a recession developed economies tend to withdraw


financial aid from emerging market economies to try and solve
their own internal issues 
• Lack of capacity to achieve acceptable economic growth
rates 
• Emerging market economies have more challenges for example
high unemployment, lack of infrastructure and are more
vulnerable to a recession 
(Accept any other correct relevant response) (2)

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4.3.5 How can countries benefit from international trade


agreements?
Countries would benefit by:
• enjoying reduced tariffs on imports and exports 
• securing credit lines amongst member countries 
• strengthening relations in other fields than trade and investment
 for example economic cooperation, science and technology,
culture and arts and dialogue on international issues 
• improving global efficiency 
(Accept any other correct relevant response) (Any 2 x 2) (4)
4.4 Briefly explain the role of households and the business sector in the
circular flow model.

HOUSEHOLDS:

• Households are the major consumers of economic goods and services



• Households are the primary economic participants because they are the
owners of the four factors of production 
• Households sell factors of production in the factor market to firms 
• Households pay tax to the government 
• Households receive remuneration for factors of production (rent, wages,
interest and profit) 
• Households use their income to buy consumer goods and services on
product markets to satisfy their wants  (Max 4)
BUSINESS SECTOR:

• Firms purchase the factors of production from the household in the factor
market 
• Firms use the factors of production to produce goods and services 
• Businesses sell goods and services to households, government and the
foreign sector 
• Businesses receive an income from the other three participants
(households, government and foreign sector) 
• Businesses act as buyers in the factor market and sellers in the goods
market with profit as their aim  (Max 4)
(Accept any other correct relevant response) (2 x 4) (8)

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4.5 How can the monetary policy contribute to economic growth?


The monetary policy contributes to economic growth by:
• increasing the money supply to advance credit to households and
companies, affecting consumption and production positively 
• adjusting interest rates downwards to allow consumers to borrow more
money, which will stimulate demand for goods and services and influence
production positively 
• implementation of open-market transactions by buying back securities and
bonds, will increase money available for loans 
• managing exchange controls by liaising with SARB to manage the inflation
rate not to harm the economy 
• decreasing the cash reserve requirements that will allow banks to loan out
more money that will stimulate production 
• persuading commercial banks (moral suasion) to lend more money in a
recession to ensure that the production of goods do not decrease 
(Accept any other correct relevant response) (8)
[40]
TOTAL SECTION B: 80

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Economics/P1 15 DBE/November 2019
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SECTION C
QUESTION 5: MACROECONOMICS

• Examine South Africa's export promotion trade policy. (26 marks)


• Evaluate the success of protectionism as a trade policy to protect industries
against foreign competitors. (10 marks)

INTRODUCTION

• Export promotion involves providing incentives to encourage local businesses to


produce goods for export 
• When government pay incentives to encourage the production of goods that can be
exported 
(Accept any other correct relevant response) (Max 2)

BODY: MAIN PART


Methods of export promotion:
• Incentives: 
− Involves a programme administered by EMIA, aiming to compensate exporters for
costs incurred in developing export markets for South Africa 
− Also participation in National Pavilion exhibitions, where government ministers
conclude future trade agreements for business 
− Providing support in credit facilities, such as government assisting businesses to
get low interest loans by signing surety on certain loan agreements 
− The DTI is providing Business Intelligence by providing market research as well as
export opportunities overseas 
− Technical advice and expertise is provided by the DTI on matters such as product
specification, advertising and marketing 
- To provide insurance contracts for export transactions. 
Other grants
- Tax concessions on earnings from exports 
- Tax concessions on capital investments to produced export goods 
− Implementing Export-Processing Zones (EPZs) to attract export investment
firms to such zones by offering tax exemptions and less labour restrictions.
− The government supplies information on export markets in order to stimulate exports

− Other examples are research on new markets, concessions on transport charges,
export credit 
• Subsidies: 
− Incentives to encourage exporters to increase the amount of their production 
− It includes direct and indirect subsidies:
o Direct subsidies: Cash payments to exporters 
o Indirect subsidies: Refunds on import tariffs and general tax rebates 
• Trade neutrality: 
− Subsidies, equal in size to import duties, are paid 
− Neutrality can be achieved through trade liberalisation 
− Experience growth in exports if cost-raising effects of protection are neutralized by
subsidies 
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Reasons for export promotion:


• Exports helps to pay for the goods we need to import, and thus improves the BOP/it
earns foreign exchange 
• Export promotion can provide the financial assistance required by domestic efficient
firms to become more competitive 
• Export promotion can also lead to an increase in South Africa’s trade globally 
• It stimulates industrial development, which is very important for economic growth and
development in the country 
• The country achieves significant export-led economic growth 
• Export promotion enlarges the production capacity of the country because more
manufacturing industries are established 
• Export markets are much bigger than local markets and to capture them many greater
volumes need to be produced 
• More workers will be employed due to the increased volumes produced 
• Prices will be reduced due to larger volumes of goods being produced 
Advantages
• No limitations of size of scale since world market is very large 
• Production is based on cost and efficiency  organized according to comparative
advantages 
• Increased domestic production leads to growth in exports and imports (supply
foreign exchange to pay for necessary imports) 
• Exchange rates would be realistic  no exchange control or quantitative
limitations exists 
• Increased employment opportunities, which could improve income and skills 
• The increased size of domestic businesses and the increase in the number of
producers will result in increased competition, more efficient output, lower prices and
larger variety of goods/inflation could be reduced 

Disadvantages of export promotion


• The real cost of production is hidden: 
− It reduces the total costs by subsidies and incentives 
− The real cost of production is concealed by the subsidies 
− The product may thus never be able to compete in the open market 
• Lack of competition: 
− Incentives and subsidies reduce prices and force competitors who may be able to
create sustainable and profitable businesses out of the market 
− Total potential trade is therefore reduced with subsidies rather than without
subsidies
• Increased tariffs and quotas: 
− Overseas countries may retaliate with tariffs and even quotas when similar goods
are sold domestically below their real cost of production 
− Powerful overseas businesses can afford to offer similar products at much lower
prices 
− Compared to their production, the subsidised business's domestic market may be
so small that it will destroy the business who received the subsidy 
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• Protection of labour-intensive industries: 


− Developed countries often maintain high levels of effective protection for their
industries that produce labour-intensive goods in which developing countries
already have or can achieve comparative advantage 
− Export promotion results in the protection of labour-intensive industries by
developed countries 
− Increased exports could be seen as dumping, which enables foreign firms to obtain
a larger market share and force local producers out of the market 
(Max 26)
BODY: ADDITIONAL PART
Protectionism has been successful by:
• promoting industrial development by focussing on the implementing of technology
and markets (for example the NIPF) 
• achieving stable wage levels by introducing a national minimum wage applied in all
sectors of employment, affecting productivity of workers positively 
• supplying certain much needed strategic key industries like Sasol and Mittal Steel
that ensured the national independence 
• developing secondary industries for example in the provision of electricity,
mechanical services and the building industry that created a more differentiated
economy with greater economic stability 
• protecting the natural resources such as rooibos tea and safeguarding of the
indigenous knowledge that allowed the hoodia plant to be used as medicine 
Protectionism has not been successful because:
• some industries were not protected against price-cutting / dumping of foreign goods
and services  for example the dumping of chicken by the US 
• industries that have been granted protection, tend to become dependent on it and
can never survive financially without it 
• the rising of unemployment figures (29%) compromised the standard of living due
to a lower demand impacting negatively on local production 
• the disadvantages of higher prices against the advantages of lower imported prices
is difficult to weigh up in the long term 
• protection largely encourages import substitution, not the export of goods due to
lack of government subsidies. This dampens economic growth and job creation
• it is difficult for the government to determine when to phase out protection, because
if it is done too early, it will leave the industries vulnerable 
• the inflation spiral is activated, because the costs involved in protection means that
locally produced goods are more expensive than imported goods 
• it is difficult to design a policy of protection and decide whether a particular industry
is beneficial to the whole country or not 
• it is difficult to identify infant industries that maybe granted temporary protection 
(Accept any other correct relevant higher order response) (Max 10)
CONCLUSION
World economies grow and develop on better international relations with other countries
by applying different trade policies such as import substitution and free trade 
(Accept any other correct relevant response) (Max 2)
[40]

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QUESTION 6: ECONOMIC PURSUITS

• Discuss in detail the South African endeavours (initiatives) in regional


development. (26 marks)
• How successful is the government in promoting industrial development in
South Africa? (10 marks) [40]

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INTRODUCTION

Regional development refers to policies which are aimed at increasing the economic
livelihood of specific areas or regions 
(Any other correct relevant introduction) (Max 2)

BODY: MAIN PART

SPATIAL DEVELOPMENT INITIATIVES 

• SDI is a policy to promote sustainable industrial development in areas where


poverty and unemployment are at their highest 
• It can be defined as a link between important economic hubs and regions in a
country 
• The intention was to grow the SDI's mostly through private sector investment 
• The state was to enhance inward investment through the granting of incentives 
• The Public Private Partnerships, promotes the economic potential of
underdeveloped areas 
• In a PPP a private business may provide the capital to build the factory and to buy
raw materials and employ labour, while the government provides the capital for the
infrastructure  e.g. roads and water 
• There are 2 types of PPPs which are compensated differently: unitary payments
and user-fees 
• The SDI involves an interdepartmental investment strategy that the DTI and the
Department of Transport (DOT) lead 
• Government’s industrial policy strives towards balance between openness and in
promoting local competitiveness by opening up the domestic economy to
international competition 
• DTI is driving force behind industrial and spatial development 
• Relies on networking with other central provincial government departments, IDC,
parastatals (like Telkom, Eskom and Transnet) and research institutions to plan
and monitor development 
• Key policy remains sustainable industrial development in areas where poverty and
unemployment are at their highest 
• SDI’s focus on high-level support on areas where socio-economic conditions
require concentrated government assistance and inherent economic potential
exists 
• SDI goal to fast-track investment and maximize synergies between various types
of investments 

Objectives of Spatial Development Initiatives


• Develop physical infrastructure such as roads and harbours 
• Stimulate economic activities in the underdeveloped areas 
• Create employment and stimulate economic growth in the underdeveloped areas

• Develop inherent economic potential in the under developed areas 
• Attract private sector and foreign direct investment (FDI) 
• Establish Public Private Partnerships (PPP) 

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INDUSTRIAL DEVELOPMENT ZONES (IDZs) 

• They are purpose-built industrial estates, physically enclosed and linked to a port
or airport 
• They are in duty-free import areas 
• This strategy was aimed at making exports internationally competitive 
• They focus on creating jobs and promoting exports 
• Goods produced in these zones should be exported to foreign countries 
• As services are provided from outside, the economy in the areas should be
stimulated 
• An IDZ offers a world-class infrastructure, enjoys a zero rate of VAT on supplies
from South African sources and reduced taxation on some products 
IDZs were located to benefit:
- investing companies through support 
- access to transport for exporting purposes 
- products produced for export by wavering import duties 
- skills training for employees by providing subsidies 
Each IDZ is designed to:
- provide location for establishment of strategic investments 
- promote and develop links between domestic and zone-based industries 
- enable exploitation of resource-intensive industries 
SPECIAL ECONOMIC ZONES 
• It creates a basis for a broader range of industrial parks and provide economic
infrastructure to promote employment 
• Geographically demarcated area where specific economic activities have been
identified to be developed 
• These areas may enjoy incentives such as tax relief and support systems to
promote industrial development 
• There are plans to reduce tax to 15% as an incentive to attract new industries 
• The aim of creating SEZ is to attract:
- only new business 
- business which are developing a new product line 
- Business which are expanding their volume 
• The DTI has indicated that the existing IDZs where special tax incentives do not
apply, would be graduated into SEZs 
CORRIDORS 
• Corridors in South Africa are spatial areas that offer specific advantages to mining,
manufacturing and other businesses 
• The advantages also include the presence of existing infrastructure and the
specialisation of products or services 
• These corridors are development areas within South Africa and are the
development priorities of all development agencies 
• The DTI provides help in support of the development corridors. e.g. the Maputo
corridor, that starts in Gauteng and extends through Mpumalanga to the Maputo
port, offers opportunity to the transport industry 
(Accept any other correct relevant response) (Max 26)

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ADDITIONAL PART
The government has promoted industrial development by:
• implementing GEAR which focused on promoting growth in the economy, although
it hasn't been successful because real GDP growth is not at the expected
levels 
• the New Growth Path (NGP) which focused on improving certain skills which would
attract global business and ensure long term economic growth, has not seen a
decrease in the number of people which are unemployed 
• the National Industrial Policy Framework (NIPF) as an appropriate policy within
best practice, although hindered by the unemployment problem 
• spending huge amounts on improvement of infrastructure through the SDI's for
example maintaining, improving, expanding infrastructure: access to suitable,
modern, reliable, effective, efficient infrastructure and services, the creation of jobs
was not enough to reduce unemployment 
• implementing IDZ's, although some IDZ's growth have been slow due to incentives
not being attractive enough to establish businesses 
• introducing the SEZ's to address the negative elements of the IDZ's by providing
additional incentives 
• promoting Small Business Development that has been reasonably successful, due
to the improved access to finance and capital which has promoted
entrepreneurship as well as efficient and competitive markets 
• promoting regional development although it is still uneven because it is still
concentrated in the four major metropoles 
(Accept any other correct relevant response) (Max 10)

CONCLUSION
It is the ultimate responsibility of the government to ensure that proper and effective
policies and policy direction is given on the entire development of the country. Every
area in the country should be considered for development and growth. The industrial
sector is earmarked as safety net for millions of jobless people in rural areas 
(Accept any other correct relevant response) (Max 2) (40)
TOTAL SECTION C: 40
GRAND TOTAL: 150
0

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