1.5 Which method of calculating GDP do illegally imported used cars distort? 14 marks] a) Production method. b) Income method. c) Value added method d) Expenditure method. 1.6 Read the following extract and answer questions 1.6 - 1.9. The European Central Bank is expected to set aside recession morries 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 exped 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 dj The conflict approach 1.7 By hiking interest rates, the European Central Bank is aiming to achieve (4 marks) a) Price stability bj Economic growth c) Full errployment dj Balance of payments stability1.10 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. N 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 3000 2500 2000 (billions of dollars per year) Expenditures 1500 1000 500 500 1060 1500 2000 2500 3060 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. ) 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. 6) 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