QUESTION 5: MACROECONOMICS 40 MARKS - 40 MINUTES The circular-flow model shows how the economy works via the various markets. Discuss the role of the various markets in the circular flow without the use of a diagram. (26 marks) Explain the multiplier concept with the aid of a well-labelled graph. (10 marks) QUESTION 6: ECONOMIC PURSUITS 40 MARKS - 40 MINUTES Government actions encourage operations and new investments to boost industrial development. Discuss South Africa's Spatial Development Initiatives (SDIs), highlighting its initiatives, objectives and Industrial Development Zones (IDZs). (26 marks) What advice would you give government to promote industrial development in South Africa? (10 marks)4.3 Study the extract below and answer the questions that follow. SA ECONOMY CLOSING IN ON A RECESSION South Africa's economy is at risk of falling into a recession, the World Bank said, as it cut the nation's growth forecast for this year to 0,8%. Growth in Africa's third-largest economy is under pressure, following a slump in commodity prices, weakening demand from China and the worst drought in more than a century. The rand has plunged 14% against the dollar in the past three months as sentiment worsened and credit-rating companies (Moody's, Standard & Poor's and Fitch) downgraded the country's credit rating because of growth risks. South Africa is projected to remain largely below the average growth rate of 4,5% for sub-Saharan Africa in 2016 to 2017. Against this backdrop, poverty in South Africa is set to rise as incomes fall. [Adapted from Fin24, February 2016] 4.3.1 Give TWO factors in the extract above that contributed to the poor performance of the South African economy. (2) 4.3.2 When is a country officially in a recession? (2) 4.3.3 What impact will a downgrading of South Africa's credit rating have on its economy? (2) 4.3.4 In your opinion, what can government do to stabilise the business cycle? (2 x 2) (4) 4.4 Briefly discuss any TWO arguments in favour of privatisation. (2 x 4) (8) 4.5 How will subsidies influence export-orientated businesses negatively? (8) [40]