1.1 Which statement is correct in regards to the circular flow of income and spending?

(a) Exports are leakages from the circular flow.

(b) Investment is a leakage from the circular flow.

(c) Taxes are leakages from the circular flow.

(d) Savings are injections into the circular flow.

1.2 What is the largest single component of aggregate expenditure in South Africa?

(a)Private consumption spending.

(b)Private investment spending.

(c)Government spending on consumption and investment goods.

(d)Spending on exports.

1.3 Which one of the following is INCORRECT?

Money serves as:

(a)a means of payment.

(b)a medium of exchange.

(c)a factor of production.

(d)a store of value.

1.4 Which one of the following is NOT true about the effect of a decrease in the market interest rates?

(a)It will shift the money demand curve upwards.

(b)It lowers the opportunity cost of holding money balances.

(c)It will increase the purchasing power of money.

(d)It will cause the price of bonds to increase.

1.5 Which of the following best describes the M1 measure of the money stock?

(a)It is the M3 money measure minus the M2 money measure.

(b)M1 includes cash and medium-term deposits.

(c)M1 is cash plus demand deposits.

(d)M1 is the most comprehensive measure of money stock available.

1.6 Which of the following will cause the demand curve for money to shift to the right?

(a)An increase in the quantity of money available.

(b)A decrease in the repo rate.

(c)An increase in real Gross Domestic Product (GDP).

(d)A decrease in the quantity of money available.

1.7 If government spending is lower than current government revenue, this is known as:

(a)the budget deficit.

(b)the budget surplus.

(c)the public debt.

(d)money financing.

1.8 The South African Value Added Tax (VAT) system is:

(a)regressive.

(b)proportional.

(c)direct.

(d)progressive.

1.9 Which one of the following statements is INCORRECT?

(a)Tax avoidance is illegal.

(b)Tax avoidance is legal.

(c)Tax evasion is illegal.

(d)Tax on alcohol is a sin tax

1.10 Zimbabwe has an absolute advantage over South Africa in wool production if, during a year, Zimbabwe:

(a)can produce more wool than South Africa.

(b)consumes more wool than South Africa on average.

(c)can produce less wool than South Africa.

(d)can produce more wool than South Africa with a given amount of resources.

1.11 A monetary system where exchange rates are freely determined in response to the demand and supply for foreign currencies may best be described as a:

(a)managed float.

(b)floating exchange rate system.

(c)pegged exchange rate.

(d)fixed exchange rate system.

1.12 The exchange rate is $1,00 = R5,00. If a car sells for $8 000, then its cost in Rands would be:

(a)R80 000

(b)R40 000

(c)R8 000

(d)R1 600

1.13 What is an import quota?

(a)A physical limit of the quantity of imports.

(b)A tax on imported goods.

(c)A limit on foreign property ownership.

(d)A form of tariff.

1.14 In the Keynesian model, what is the most important determinant of investment?

(a)Income.

(b)Total wealth.

(c)Government spending.

(d)Interest rates.

1.15 What relationship is measured by the marginal propensity to save?

(a)A change in savings and a change in income.

(b)A change in consumption and savings.

(c)The total level of consumption and the total level of saving.

(d)The proportion of income to savings at any given level of income.

1.16 If aggregate expenditure is greater than total income:

(a)planned saving will decrease in line with investment.

(b)output will increase to replenish depleted inventories.

(c)investment will decrease to run down excessive inventories.

(d)investment will decrease because such a high level cannot be sustained.

1.17 An increase in the price level will:

(a)shift the AS curve to the left.

(b)leave both the AD curve and the AS curve unchanged.

(c)shift the AS curve to the right.

(d)shift the AD curve to the left.

1.18 Which one of the following is NOT a channel in the broad monetary transmission mechanism?

(a)The interest rate channel.

(b)The inflation rate channel.

(c)The exchange rate channel.

(d)The asset price channel.

1.19 If the consumer price index at the end of 2018 was 115 and at the end of 2019 was 125, then the rate of inflation for 2019 was:

(a)8.00%

(b)9.20%

(c)8.70%

(d)10.00%

1.20 Inflation tends to:

(a)benefit lenders at the expense of borrowers

(b)benefit the elderly at the expense of the young.

(c)benefit taxpayers at the expense of the government.

(d)benefit debtors at the expense of creditors.