1.13 The principle of the multiplier states that: a) any increase in aggregate spending that causes the aggregate demand curve to shift will result in a larger (4 marks) increase in national income. employment. b) in the long run, the aggregate demand curve becomes relatively flat as the economy approaches full 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. 1.14 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 1.16 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.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. Government spending. d) Public provision of goods and services. 1.12 Study the following diagram and answer the question that follows. 3500 45 3000 2500 2000 Expenditures (billions of dollars per year) 1300 1000 500 500 1000 1500 2000 2500 3060 3560 Income (billions of dollars per year) Figure 9.1 (4 marks) At an income level of $2,000 billion, a) Consumption equals $1,500 billion. b) Saving equals $0. c) The MPC equals 0.80. d) There is dissaving.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