MAIN ONLINE SUMMATIVE ASSESSMENT PROGRAMME Bachelor of Business Administration Bachelor of Public Administration Bachelor of Commerce in Accounting Bachelor of Commerce in Retail Management Bachelor of Commerce in Project Management Bachelor of Commerce in Financial Management Bachelor of Commerce in Entrepreneurship Bachelor of Commerce in Marketing Management Bachelor of Commerce in International Business Bachelor of Commerce in Supply Chain Management Bachelor of Commerce in Financial Management Bachelor of Commerce in Information and Technology Management MODULE Economics 1B YEAR One (1) INTAKE July 2021 DATE 13 May 2022 TOTAL MARKS 100 SECTION A [100 MARKS] Answer ALL questions. Choose the most appropriate answer. 1.1 Read the following extract and answer questions 1.1 and 1.2. Pay rises offered despite Bank of England plea for restraint over inflation Employers are set to increase wages at their fastest pace in almost a decade this year despite a plea for pay restraint from the governor of the Bank of England. Some 46 per cent of companies struggling to keep hold of workers have already raised the pay of incumbent staff, according to research, and 40 per cent are planning to do so in future. Source: https://www.thetimes.co.uk/article/pay-rises-offered-despite-bank-of-england-plea-for-restraint-over-inflation-xhf8dbn5b Accessed: 14/02/222 Which of the following macroeconomic objectives is being pursued by the Bank of England? (4 Marks) a) Price stability b) Full employment c) Economic growth d) Wage rate stability 1.2 As companies in England increase wages, the greatest impact on economic growth will be on which of the following sources of growth? (4 Marks) a) Labour supply b) Human capital c) Productivity d) Capital stock 1.3 Read the following extract and answer the question. Twin deficits key concern for next PH president The next CEO of the Philippines will have to grapple with "twin deficits" that may return this year, as the government spends more to rebuild the economy and the demand for foreign exchange expands with the resumption of investment spending coming out of a prolonged pandemic. This is according to JP Morgan economist Nur Raisah Rasid, who sees a return to twin deficitsreferring to a simultaneous deterioration in the government's budget position and widening of the country's current account deficit as foreign exchange transactions with the rest of the world increase. Source: https://business.inquirer.net/340890/twin-deficits-key-concern-for-next-ph-president Accessed: 14/02/222 Which of the following macroeconomic objective is measured by the variable(s) discussed in the above extract? (4 Marks) a) Price stability b) Redistribution of income c) Full employment d) Balance of payments stability 1.4 Read the following extract and answer questions 1.4-1.5. Politics and economics are set to collide over welfare payments in the world's most unequal nation. The first clue over which will prevail may come in South African President Cyril Ramaphosa's State-Of-The-Nation address on Thursday. Record unemployment and deepening poverty has fuelled calls for the government to move toward a basic income grant, which would be the biggest of its kind globally, or to at least extend a temporary stipend of 350 rand ($23) a month paid to the unemployed during the pandemic permanent at that level or slightly higher. That measure added 10.3-million people to the welfare net. Source: https://www.engineeringnews.co.za/article/south-africa-torn-over-multibillion-cost-of-fighting-inequality-2022-02-09/rep_id:4136 Accessed: 14/02/222 The theoretical argument in support for a Basic Income Grant, is based in which of the following government objectives? (4 Marks) a) Full employment b) Balance of payments stability c) Redistribution of income d) Economic growth 1.5 Suppose that the South African Economy is in a recession, the policy response in the extract above would be inline with which of the following schools of economic thought? (4 Marks) a) Keynesian theory b) Classical theorists c) Marxists economics d) Monetary economics 1.6 In the Simple Keynesian Macroeconomic Model, which of the following will determine the level of autonomous spending by South African households? (4 Marks) a) The level of economic growth b) The level of risk and or uncertainty c) The level of the interest rate d) Savings and or credit 1.7 Read the following extract and answer the question that follows. Construction data fudging kills reliability of official statistics Revelations about irregularities in the way the infrastructure ministry collected and compiled key construction data have delivered a devastating blow to the credibility of government statistics as a whole. The facts have left no doubt that the ministry must take strong action to prevent a recurrence. But they have also underscored the need for a fundamental review of the entire government's systems for compiling and reporting official statistics... Source: https://www.dandc.eu/en/article/big-issue-africas-most-populous-country-worsening-poverty Accessed: 14/02/22 The problem illustrated in the above extract is that of... (4 Marks) a) Data revision b) Economic welfare c) Unrecorded activity d) Non-market production 1.8 Which of the following methods of calculating GDP would NOT be accurate when the information on the sale and purchases of intermediate goods and services is not available? (4 Marks) a) The income method b) The expenditure method c) The production method d) The cost method 1.9 Read the following extract and answer questions 1,9 and 1.10. FIRSTRAND BANK, WESBANK AND TFS REFERRED TO COMPETITION TRIBUNAL FOR COLLUSION JOHANNESBURG - The Competition Commission said that it had referred FirstRand Bank, WesBank and Toyota Financial Services (TFS) South Africa to the Competition Tribunal for collusion. An investigation by the commission has found that WesBank and TFS agreed to divide markets by allocating customers or suppliers in the market for provision of vehicle finance, which is anti-competitive behaviour. The companies also agreed to stop WesBank from offering financing for some Toyota models for people who wanted to buy them from authorised Toyota dealerships. Source: https://www.wsj.com/articles/china-unveils-new-rules-targeting-anticompetitive-practices-by-internet-companies-11629199116 Accessed: 23/08/21 The actions above taken by the Competition Commission... (4 Marks) a) ...are an example of government failure aimed at ensuring market failure. b) ...are an example of market failure aimed at ensuring an efficient allocation of resources. c) ...are an example of government intervention aimed at an efficient allocation of resources. d) ...are an example of government intervention aimed at reducing market failure. 1.10 The decision taken by the Competition Commission, is aimed at ensuring which of the following views of an economy? (4 Marks) a) Marxist economics b) Socialist economics c) Keynesian economics d) Free market economics 1.11 Read the following extract and answer the question. Government takes Huawei South Africa to court over employment equity violations The Department of Employment and Labour has filed court papers against Huawei Technologies South Africa due to non-compliance with employment equity policies. Huawei Technologies South Africa was audited in 2020 and found to be non-compliant in that they employ approximately 90% foreign nationals, which violates the Employment Equity Policy (EAP), the department said in a statement on Friday (11 February)... Source: https://businesstech.co.za/news/technology/557498/government-takes-huawei-south-africa-to-court-over-employment-equity-violations/ Accessed: 14/02/22 The above action by President Cyril Ramaphosa is an example of... (4 Marks) a) Market participation. b) Public provision of goods and services. c) Regulation. d) Government spending. 1.12 Read the following extract and answer the question that follows. CBK tips new digital shilling to take on high M-Pesa charges The proposed Central bank digital currency (CBDC) will help bring down the transaction fees currently charged on digital payments in what could make it the biggest competitor to Kenya's mobile money sector. The banking regulator says the virtual currency that will be exchangeable on a one-to-one basis with physical cash would work in a similar way to the existing mobile money product in the market, with users able to transfer it between wallets or accounts. Source: https://www.businessdailyafrica.com/bd/economy/cbk-tips-new-digital-shilling-to-take-on-high-m-pesa-charges-3715540 Accessed: 14/02/22 The Kenyan Central Bank in its aim above will ultimately... (4 Marks) a) ... reduce the amount of M2 money. b) ... reduce the amount of bank notes and coins in circulation. c) ... increase the amount of M1 money. d) ... reduce the amount of bank notes and coins. 1.13 Read the following and answer question 1.13, 1.14. SA hits record unemployment rate South Africa's unemployment rate reached a record 34.9% for the third quarter - half a percentage point higher than in the second quarter. This is the highest number since the start of the Quarterly Labour Force Survey (QLFS) in 2008. The quarter's economic performance was hit by civil unrest in July affecting Gauteng and KwaZulu-Natal - these two provinces account for half of the country's economic activity. Source: https://www.news24.com/fin24/economy/sa-hits-record-unemployment-rate-20211130 Accessed: 18/02/22 The increase in the unemployment rate as a result of the civil unrest is referred to as... (4 Marks) a) Cyclical unemployment b) Structural unemployment c) Seasonal unemployment d) Frictional unemployment 1.14 Given the information in the extract, the Simple Keynesian Macroeconomic Model concludes the following about the South African economy. (4 Marks) a) Excess demand b) Excess supply c) Macroeconomic equilibrium d) Aggregate spending is less than output 1.15 Read the following extract and answer question 1.15-1.18. SA inflation eases slightly in January Inflation eased to 5.7% in January, down from 5.9% the month prior which was a hair's breadth away from the ceiling of the South African Reserve Bank's target range of 3% to 6%, it was announced on Wednesday. According to Statistics South Africa, the main contributors to the 5.7% annual inflation rate were food and non-alcoholic beverages, housing and utilities, transport and miscellaneous goods and services. The 5.9% annual increase in December was the highest since March 2017, when the rate was 6.1%. The January slowdown in inflation was helped by lower fuel prices. South Africa's inflation numbers come as advanced economies post record figures, which have served as further proof that elevated prices are a stubborn feature of the recovery from the Covid-induced economic slump... Elevated inflation, which central banks have said will be transitory, is the result of Covid-related supply bottlenecks. Source: https://mg.co.za/business/2022-02-16-sa-inflation-eases-slightly-in-january/ Accessed: 18/02/22 Which of the following presents the view of inflation depicted above? (4 Marks) a) The monetarist approach. b) Cost pull inflation. c) Demand push inflation. d) The conflict approach. 1.16 From the above extract, the South African economy is in which phase of the business cycle? (4 Marks) a) The upturn phase. b) The expansion phase. c) The peaking out phase. d) The slowdown phase. 1.17 "The South African Reserve Bank's target range of 3% to 6%" is a demonstration of which of the following costs of inflation? (4 Marks) a) Distribution costs b) Economic costs c) Non-economic costs d) Social and political effects 1.18 Suppose that the bank later wishes to raise interest rates, which of the following instruments will they NOT make use of? (4 Marks) a) Accommodation policy b) Open-market policy c) Raise the Repo rate d) Raise the cost of borrowing 1.19 Read the following extract and answer questions 1.19 and 1.20. Rand's remarkable resilience inflicts pain on its doubters The rand seems to no longer follow the rules of the emerging-markets playbook, according to an expert. While many investors expected the rand to buckle in the face of rising US Treasury yields and prospects of a more aggressive pace of Federal Reserve hikes, the currency has done the opposite. The rand is sometimes referred to in currency market circles as "the rattler", because of its habit of snapping back hard in the opposite direction to a big move. There is a reason South Africa's currency is called "the rattler". While many an investor expected the rand to buckle in the face of rising US Treasury yields and prospects of a more aggressive pace of Federal Reserve hikes, the currency has done the opposite. It's just posted its fifth weekly gain, causing pain for those who have bet against it. "In a risk-off and volatile environment, the rand used to be one of the weakest currencies," said Milan-based investor Roberto Bagnato at Immobiliare Quadronno, a market veteran of more than 40 years. "It was easy to short then because the South African Reserve Bank has a tradition of making no intervention to defend the currency." Commodity play Lars Merklin, senior analyst at Danske Bank in Copenhagen, said the rand may be getting help from robust commodity prices... Source: https://www.poundsterlinglive.com/zar/15791-south-african-rand-s-dollar-and-commodity-headwinds-risk-lifting-usd-zar-to-15-0 Accessed: 26/08/21 The view held by Roberto Bagnato is that historically the $/ZAR exchange rate is... (4 Marks) a) A fixed exchange rate. b) A floating exchange rate. c) A managed floating exchange rate. d) A real exchange rate. 1.20 South Africa trades in commodities... (4 Marks) a) For political pressure b) Due to its absolute advantage in producing commodities c) Due to its comparative advantage in producing commodities d) To invest in the global economy 1.21 GDP can be calculated by all of the following methods except... (4 Marks) a) Adding up the spending on goods and services by business, government, households, and foreigners, and subtracting imports. b) Adding up the "value added" at every stage of production in the economy. c) Adding up all of the receipts of households, government, and business. d) Adding up all income and expenses by consumers and businesses. 1.22 Read the following extract and answer the question that follows. "The unemployment rate dropped to 6.6 per cent in January 2022, which is lower than the pre-pandemic levels of 7.2 per cent in January 2020. However, the reason behind the dip in unemployment is not the addition of jobs rather, it was caused by the decline in the number of people looking for jobs. The number of unemployed people fell by [6 600 000] in January 2022, as they stopped looking for jobs. Consequently, they were no longer counted as unemployed." Source: https://www.indiatoday.in/diu/story/unemployment-rate-down-jobs-creation-job-seekers-1915703-2022-02-21 Accessed: 21/02/22 The unemployment figure presented here is the... (4 Marks) a) Seasonal unemployment. b) Narrow definition. c) Expanded definition. d) Real unemployment. 1.23 Demand-pull inflation can occur when... (4 Marks) a) There is a shortage of investment and investors bid up interest rates. b) Inventories shrink and consumers bid up prices. c) There is a surplus of resources and so wages are bid up by employers. d) Undesired investment occurs. 1.24 Which of the following groups is protected from a sudden increase in inflation? (4 Marks) a) Borrowers who have loans at fixed interest rates. b) Fixed-income groups. c) Workers who receive fixed wages under the multiyear contracts. d) People who rent their homes under short-term lease agreements in comparison to those who own their homes. 1.25 The multiplier process can occur when a decrease in investment spending... (4 Marks) a) Increases household saving, causing consumers to buy more goods and services. b) Reduces household incomes, causing consumers to buy fewer goods and services. c) Increases household incomes, causing consumers to buy fewer goods and services. d) Reduces household incomes, causing consumers to buy more goods and services. END OF PAPER