1.10 Read the following extract and answer questions 1.10 and 1.11. "South Africa has banned Bain & Company from bidding for public-sector contracts for a decade, following the lead of the UK, after the consulting firm was accused of helping government officials degrade the South African Revenue Service's (SARS) ability to probe tax evasion. National treasury said in a response to queries that the ban will last for a decade and relates to the company "engaging in corrupt and fraudulent practices related to a SARS contract". The UK in August banned Bain from public contracts for three years because of allegations related to SARS. Bain was found by a judicial commission to have had ties to illegal dealings during work restructuring Sars, where senior staff were ousted and the institution's investigative capacity was gutted." The economic problem shown in the extract is that of and has the consequence of (4 marks) a) Market failure, externalities. b) Government failure, public goods being underproduced. c) Market failure, inefficient allocation of resources. d) Government failure, public goods being overproduced. 1.11 The intervention by the South African government is that of: (4 marks) a) Market participation. b) Regulation. c) Government spending. d) Public provision of goods and services.1.14 Read the following quote and answer questions 1.14-1.16 "China's central bank Monday conducted a total of 10 billion yuan (about $1.4 billion) of reverse repos to maintain liquidity in the banking system. The interest rate for the seven-day reverse repos was set at 2 percent, according to the People's Bank of China. The move aims to keep stable liquidity in the banking system, the central bank said. A reverse repo is a process in which the central bank purchases securities from commercial banks through bidding, with an agreement to sell them back in the future." The area of responsibility that China's central bank is undertaking with the above decision is that of. (4 marks) a) Fiscal policy. b) Service to the government. c) Provision of economic and statistical services. d) Maintaining financial stability. 1.15 The measure of money that will not be immediately affected by the above action by China's central bank is: (4 marks) a) M1 b) M2 C) M3 d) Quasi money The policy instrument that China's central bank is making use of here is that of. (4 marks) a) Fiscal policy b) Open market policy. c) Public debt management. d) Intervention in foreign exchange markets. 41.6 Read the following extract and answer questions 1.6 - 1.9. The European Central Bank is expected to set aside recession worries and deliver another jumbo interest rate hike this week to cool inflation, as Russia's war on Ukraine sends energy prices soaring. Inflation in the 19-nation Eurozone climbed to an all-time high of nearly 10 % in September, five times the ECB's target of two percent. The ECB's governing council last month raised its key interest rates by an unprecedented 75 basis points, and many observers expect it to repeat the move at Thursday's meeting." The view of the inflation process being expressed in the above quote is: (4 marks) a) The monetarist approach to inflation b) Cost push inflation c) Demand push inflation d) The conflict approach 1.7 By hiking interest rates, the European Central Bank is aiming to achieve: (4 marks) a) Price stability b) Economic growth c) Full employment d) Balance of payments stability 1.8 The view being reported in the extract of how the European Central Bank will deal with inflation is... (4 marks) a) Classical economics b) Keynesian economics c) The monetarist approach d) The structuralist approach 1.9 In order to cool inflation, according to the extract, the European Central Bank will make use of: (4 marks) a) Quantitative easing bj Restrictive monetary policy c) Increase government spending d) Raise taxes1.23 If two countries have differing opportunity costs of production for two goods, then: (4 marks) a) each country should specialise in the good for which it has a higher opportunity cost of production. b) only the country with an absolute advantage in the production of both goods stands to gain from trade. c) each country should purchase inputs from the other country in order to gain an absolute advantage. d) each country should specialise in the production of the good for which it has a comparative advantage. 1.24 Study the table below and answer the question that follows. Carpets Fighter aircraft Afghanistan 100 4 US 500 25 An appropriate international exchange ratio that would allow mutually advantageous trade to take place would be: (4 marks) a) 1 aircraft = 25 carpets. b) 1 aircraft = 20 carpets. c) 1 carpet = 0,04 aircraft d) 1 aircraft = 22 carpets. 1.25 The exchange rate between the euro (6) and the US dollar ($) is $1,20 per euro. If an American tourist in Paris purchases a good valued at 60 euros, then in his own currency this would cost: (4 marks) a) $50 b) $72 C) $48 d) $720SECTION A [100 MARKS] Anewer ALL questions in this section. Choose the moat appropriate answer. Write down the letter that represents the correct answer next to each number in your online answer booklet. E.g. 26 B 1.1 Double counting can be avoided when computing GDP by. [4 marks) aj simply deducting a double-counting factor from the GDP estimates. adding the value of only the intermediate (non-final) goods and services produced. adding only the value contributed by firms at each stage of production. dj including the value of all output produced in the economy. 1.2 Which of the following conditions would not be studied by the macroeconomist? (4 marks] a) The level of national unemployment during 1986. by The effect of goverment economic policy on the inflation rate during 1987. c) The effect of changing petroleum prices on the demand for coal. d) The effect of lower income taxes on the rate of economic growth. 1.3 Read the following extract and answer questions 1.3 - 1.5. 'Illegal car imports cost the taxman as much as R8on Kia MD Gary Scott says about 55,000 of the illegal imports slip into SA every year, more than the number of new vehicles sold every month An estimated 440,000 illegally imported, used cars are travelling regularly on SA roads, costing the exchequer up to Fidon in lost taxes and posing a major risk to road safety, Kia SA MD Gary Scott said on Tuesday. He blamed slack regulations for the fact that about $5,000 "grey" imports, as they are known, slip into A each year. That's more than the number of new vehicles sold every month.." The problem being illustrated in the above extract regarding the use of gross domestic product as a measure of economic performance is... (4 marks) Data revision by Economic welfare c) Unrecorded activity d) Non-market production 1.4 The reason that illegally imported used cars are not accounted for in the measure of GDP is because they violate which element of GOP? (4 marks] a) Market value. Final goods and services. c) Economy. Specific time period. 1.5 Which method of calculating GDP do illegally imported used cars distort? (4 marks] a Production method. by Income method c) Value added method. Expenditure method.1.12 Study the following diagram and answer the question that follows. 3500 30200 2500 2000 (billions of dollars per year) Expenditures 1500 1000 560 1030 1500 2030 1560 3000 3500 Income (billions of dollars per year) Figure 9,1 At an income level of $2,000 billion, (4 marks) a) Consumption equals $1,500 billion. b) Saving equals $0 c) The MPC equals 0.80. d) There is dissaving. 3 1.13 The principle of the multiplier states that (4 marks) a) any increase in aggregate spending that causes the aggregate demand curve to shift will result in a larger increase in national income. b) in the long run, the aggregate demand curve becomes relatively flat as the economy approaches full employment. c) any increase in national income will result in a larger increase in aggregate spending. d) for any given increase in income, there will be a less than proportional increase in consumer spending.1.17 Read the following and answer questions 1.17 - 1.18. "Oregon marked a milestone last month by returning to pre-pandemic employment levels, rebounding much faster than during prior recessions. But some sectors, notably hospitality, haven't fully recovered. That's largely because of an ongoing worker shortage that has constrained businesses' ability to staff up." The unemployment being addressed in the above quote is... (4 marks) a) Cyclical unemployment b) Seasonal unemployment c) Hidden unemployment d) Frictional unemployment 1.18 The costs to the hospitality industry being presented in the above quote are... (4 marks) a) Social cost b) Economic cost Political cost d) Distribution cost 1.19 According to Keynesian economists, during a boom in economic activity... (4 marks) a) money supply should be increased b) interest rates should be cut. c) government should increase its spending. d) tax rates should be raised. 0 Interest rates are usually during the latter stages of a downswing in the South African business cycle. An improvement in economic activity is normally triggered by an increase in - Manufacturing production rises during an upswing and in the latter stages of the upswing, inflation, and interest rates (4 marks) a) low; exports; increase b) low; consumption; fall c) low; imports; fall d) high; exports; increase 1.21 Which one of the following is not a supply factor in economic growth? (4 marks) a) Consumption spending b) Natural resources c) Labour d) Capital 1.22 Which of the following statements is true? (4 marks) a) If A has an absolute advantage over B in producing good X, then A also has a comparative advantage. b) If A has a comparative advantage over B in producing good X, then A can produce X at a lower cost. c) If A has a comparative advantage over B in producing good X, then A also has an absolute advantage d) If A has a comparative advantage over B in producing good X, then A can produce X at a lower opportunity cost. 5