Q.1.1 In the circular flow of income and spending:(2)

(a) Investment results in a decrease in the volume of the income flow;

(b) Savings result in an increase in the volume of the income flow;

(c) Taxes result in an increase in the volume of the income flow;

(d) Imports result in a decrease in the volume of the income flow.

Q.1.2 Which one of the following statements is FALSE? (2)

(a) There are four broad groups of decisionmaking units in the economy:

households, firms, government and the foreign sector;

(b) Savings are an important injection into the circular flow of income and

spending in the economy;

(c) Taxes are a leakage or withdrawal from the flow of income and spending in

the economy;

(d) Spending by households on consumer goods and services is called

consumption spending.

Q.1.3 Which of the following represents stock variables? (2)

(a) Wealth, saving and unemployment;

(b) Gold reserves held by the South African Reserve Bank, and investment;

(c) Income, profit and investment;

(d) Wealth, assets and liabilities.

Q.1.4 Which of the following statements is INCORRECT? (2)

(a) M1 consists of coins, notes and demand deposits only;

(b) M3 includes short term deposits;

(c) M3 includes long term deposits;

(d) M3 = M1 + M2 + long term deposits.