Ecs2602 Tut.101.2013

ECS2602/101/3/2013
Tutorial letter 101/3/2013

Macroeconomics 2
ECS2602
Semesters 1 and 2
Department of Economics
IMPORTANT INFORMATION:
This tutorial letter contains important information
about your module.
CONTENTS
1 INTRODUCTION AND WELCOME ...................................................................................................... 3
1.1 Tutorial material .............................................................................................................................. 3
2 PURPOSE OF AND OUTCOMES FOR THE MODULE ....................................................................... 4
2.1 Purpose .......................................................................................................................................... 4
2.2 Outcomes ....................................................................................................................................... 4
3 LECTURERS AND CONTACT DETAILS ............................................................................................. 4
3.1 Lecturers ......................................................................................................................................... 4
3.2 Department ..................................................................................................................................... 5
3.3 University ........................................................................................................................................ 5
4 MODULE RELATED RESOURCES ..................................................................................................... 5
4.1 Prescribed book .............................................................................................................................. 5
4.2 Recommended books ..................................................................................................................... 5
4.3 Electronic Reserves (e-Reserves) .................................................................................................. 5
5 STUDENT SUPPORT SERVICES FOR THE MODULE ...................................................................... 5
6 MODULE-SPECIFIC STUDY PLAN ..................................................................................................... 6
6.1 Assignments and learning .............................................................................................................. 6
6.2 General remarks ............................................................................................................................. 7
6.3 Feedback on assignments .............................................................................................................. 7
6.4 Learning strategy and proposed study programme ........................................................................ 7
7 PRACTICAL WORK AND WORK INTEGRATED LEARNING ............................................................ 10
8 ASSESSMENT...................................................................................................................................... 10
8.1 Assessment plan ............................................................................................................................ 10
8.1.1 Assessment of assignments .................................................................................................. 10
8.1.2 Assessment of examination................................................................................................... 10
8.2 General assignment numbers ......................................................................................................... 11
8.2.1 Unique assignment numbers ................................................................................................. 11
8.2.2 Due dates of assignments ..................................................................................................... 12
8.3 Submission of assignments ............................................................................................................ 13
8.4 Assignments ................................................................................................................................... 14
9 OTHER ASSESSMENT METHODS ..................................................................................................... 89
10 EXAMINATIONS ................................................................................................................................... 89
10.1 Examination period......................................................................................................................... 89
10.2 Examination paper ......................................................................................................................... 89
10.3 Previous examination papers ......................................................................................................... 89
10.4 Tutorial letter with information on the examination ......................................................................... 89
11 FREQUENTLY ASKED QUESTIONS .................................................................................................. 89
12 SOURCES CONSULTED ..................................................................................................................... 90
13 CONCLUSION ...................................................................................................................................... 90
ECS2602/101
INTRODUCTION AND WELCOME
Dear Student
We are pleased to welcome you to this Macroeconomics module and hope that you will find it both
interesting and rewarding. We shall do our best to make your study of this module successful. You
will be well on your way to success if you start studying early in the semester and resolve to do the
assignments properly.
You will receive a number of tutorial letters during the semester. A tutorial letter is our way of
communicating with you about teaching, learning and assessment.
1.1
Tutorial material
The Department of Despatch should supply you with the following study material for this module
soon after registration:
Tutorial Letters 101 and 102

Tutorial Letters 301
A study guide
A CDROM entitled Macroeconomics
Some of this study material may not have been available when you registered. Study material that
was not available when you registered will be posted to you as soon as possible, but is also
available on myUnisa.
Please note that the 200 series tutorial letters (Tutorial Letters 201, 202, 203 and 204) contain the
discussions of the assignments and will therefore only be available after the closing date of the
specific assignment.
If you have access to the internet, you can view and download the study guides and tutorial letters
for the modules for which you are registered on the universitys online campus, myUnisa, (under
the official study material folder) at https://my.unisa.ac.za. Please note that you must be registered
on myUnisa to be able to submit assignments, to gain access to the library functions and various
learning resources, download study material, "chat" to your lecturers or fellow students and
participate in online discussion forums.
This Tutorial Letter 101 contains important information about the study programme, resources and
assignments for this module. We urge you to read it carefully and to keep it at hand when working
through the study material, preparing the assignment(s) and for the examination and addressing
questions to your lecturers.
You will also find the assignments, assessment criteria as well as instructions on the preparation
and submission of the assignments. This tutorial letter also provides all the information you need
with regard to the prescribed study material and other resources and how to obtain it. Please study
this information carefully and make sure that you obtain the prescribed material as soon as
possible.
We have also included certain general and administrative information about this module. Please
study this section of the tutorial letter carefully.
3
Tutorial Letter 301 contains all the information regarding the contact details of the department.
Right from the start we would like to point out that you must read all the tutorial letters you receive
during the semester immediately and carefully, as they always contain important and, sometimes,
urgent information.
PURPOSE OF AND OUTCOMES FOR THE MODULE
2.1
Purpose
Macroeconomics will be useful to students who intend to follow a career (academic or otherwise)
in economic analysis or wish to understand the functioning of the macroeconomic system.
2.2
Outcomes
The main outcomes of this module are the following:
To describe the determination of the level of output and income in closed and open
macroeconomic models
To assess the impact of stabilisation policy measures such as fiscal and monetary policy on
the economy in terms of the above models
More detailed module outcomes can be found at the beginning of each study unit in the study
guide.
LECTURERS AND CONTACT DETAILS
3.1
Lecturers
We, the lecturers who are responsible for this module, are available to assist you with any
enquiries concerning the prescribed content. You may contact us as follows:
LECTURER
Serfontein, FHB. Mr
Uys, MD. Mrs
BUILDING &
OFFICE
NUMBER
Club 1
Room 1-09
Club 1
Room 1-07
TELEPHONE
NUMBER
012 429-4005 or
012 433-4687
012 429-4652 or
012 433-4702
Email ADDRESS
serfofhb@unisa.ac.za
uysmd@unisa.ac.za
You can also contact us by e-mail via myUnisa.

All queries that are not of a purely administrative nature but are about the content of this
module should be directed to us. Please have your study material with you when you contact us.
ECS2602/101
3.2
Department
The Department of Economics has moved to Hazelwood. The physical address is Club 1 Building,
Corner of Dely Road and Pinaster Avenue, Hazelwood, Pretoria.
You will find the department's contact details in Tutorial Letter 301. You can also contact the
department's coordinator, Mr Themba Mzangwa at 012 433-4661 or 012 429-4350.
3.3
University
If you need to contact the university about matters not related to the content of this module, please
consult the publication: my Studies @ Unisa which you received with your study material or visit
Unisa website at http://www.unisa.ac.za. The brochure and the website contain information on
how to contact the university (e.g. to whom you can write for different queries, important telephone
and fax numbers, addresses and details of the times certain facilities are open).
Always have your student number at hand when you contact the university.
MODULE RELATED RESOURCES
4.1
Prescribed book
Your prescribed textbook for this module for this year is:
Blanchard, O. 2009 Macroeconomics. 4th or 5th or 5th revised edition. Pearson, Prentice
Hall: United Kingdom.
Please refer to the list of official booksellers and their addresses in my Studies @ Unisa brochure.
Prescribed books can be obtained from the University's official booksellers. If you have difficulty
locating your book at these booksellers, please contact the Prescribed Book Section at telephone
012 429-4152 or e-mail vospresc@unisa.ac.za
4.2
Recommended books
There are no recommended books for this module.

4.3
Electronic Reserves (e-Reserves)
There are no e-Reserves for this module.
STUDENT SUPPORT SERVICES FOR THE MODULE
For information on the various student support systems and services available at Unisa (e.g.
student counselling, tutorial support programme and classes, language support), please consult
the publication my Studies @ Unisa that you received with your study material.
5.1
Contact with fellow students: Study groups
It is advisable to have contact with fellow students. One way to do this is to form study groups.
You can get the names of other students in your area for the same modules by contacting the
Department of Student Admission and Registration. For further information, please consult the my
Studies @ Unisa brochure.
5.2
myUnisa
If you have access to a computer that is linked to the internet, you can quickly access resources
and information at the university. The myUnisa learning management system is Unisa's online
campus that will help you to communicate with your lecturers, with other students and with the
administrative departments of Unisa all through the computer and the internet.
To go to the myUnisa website, start at the main Unisa website, http://www.unisa.ac.za, and then
click on myUnisa link on the top right-hand side of the screen. This should take you to the
myUnisa website. You can also go there directly by typing in https://my.unisa.ac.za.
Please consult the my Studies @ Unisa brochure for more information.
5.3
Discussion classes
There are no discussion classes for this module.

5.4
Tutorial support programme
Unisa offers tutor services for students as additional academic support at the various Unisa
regional learning centres throughout the country.
A tutorial is an organised session where students and tutor(s) meet regularly at a common venue
and at scheduled times to discuss course material. The main purpose of the tutorial services is to
facilitate student learning by developing the students independent learning skills and assisting
students to become motivated and independent learners. Tutorials help the students to develop
and enhance their learning experience and academic performance through interaction with the
tutor and fellow students. Tutorials are not compulsory. Interested students are advised to
consult a learning centre closest to them to enrol for tutorials. For further information on
learning centres and tutorials consult the brochure my Studies @ Unisa.
Note that tutors are not necessarily available for all modules and/or at all learning centres. The
Department of Economics has no means of providing you with any tutorial support if you did not
follow the abovementioned steps.
MODULE-SPECIFIC STUDY PLAN
6.1
Assignments and learning
Assignments are seen as part of the learning material for this module. As you do the assignment,
study the texts, consult other resources, discuss the work with fellow students or tutors or do
research, you are actively engaged in learning.
ECS2602/101
Looking at the assessment criteria given for this module, the four assignments will help you to
understand what is required of you more clearly.
If you have access to the internet, you can view and download the study guides and tutorial letters
for the modules for which you are registered on the universitys online campus, myUnisa, (under
the official study material folder) at https://my.unisa.ac.za.
6.2
General remarks
You will find in your my Studies @ Unisa brochure contact details regarding enquiries about
assignments (e.g. whether or not the university has received your assignment or the date on which
an assignment was returned to you). You might also find information on myUnisa.
Use your my Studies @ Unisa brochure for general time management and planning skills.
6.3
Feedback on assignments
You will receive the correct answers automatically for multiple-choice questions. For written
assignments, markers will comment constructively on your work. However, feedback on assignments will be sent to all students registered for this module in a follow-up tutorial letters, and
not only to those students who submitted the assignments. The tutorial letter numbers will be 201,
202, 203 and 204.
As soon as you have received the feedback, please check your answers. The assignments and
the feedback on these assignments constitute an important part of your learning and should help
you to be better prepared for the next assignment and the examination.
6.4
Learning strategy and proposed study programme
In this module, the emphasis is very much on the development of your understanding of different
theories regarding the determination of output and income. Therefore, you will be exposed to a
number of different concepts, such as the different assumptions which underlie the theoretical
models, the interaction between the various macroeconomic variables, the different analytical
tools, and the economic policy implications of each model.
It is important that you have a thorough understanding of the different building blocks of the
various models so as to gain a comprehensive picture of how the economy works. Towards the
end of the module, this picture will become clearer and logical.
Approach each study unit in the study guide as follows: First read the study unit outcomes which
will help you to focus on the important aspects and issues in that unit. Work through each section
of the study guide together with the relevant chapter in the textbook. Remember that the study
guide serves to assist you to work through the contents of the text book. Make notes or summaries
as you go along. Work through the activities provided in TL 102.
You will see that the activities test your understanding of the content and cover a range of the
different type of questions that will be examined. You should also check your answers against the
solutions provided. If you are not clear on certain concepts or theories, revise them before
proceeding to the next study unit.
To help you to work on this module regularly and systematically, we provide a proposed study
programme below and four assignments (see section 8.4 of this tutorial letter). The proposed
study programme is based on the assumption that first-semester students will commence their
studies before or during the last week of January and second-semester students before or during
the third week of July. In each semester the period from the last day of registration to the start of
the examination consists of only 15 weeks. Hence, it is critical that you should start working as
soon as possible and continue to work regularly and systematically throughout the semester.
ROPOSED STUDY PROGRAMME: FIRST SEMESTER
STUDY
WEEK
Week starting
STUDY UNIT(s) or study

instruction
28 January
1 and 2
4 February
2 and 3
11 February
Complete and submit

compulsory Assignment 01
Closing date: 18 February
18 February
25 February
4 March
5
Complete and submit
compulsory Assignment 02:
Closing date: 11 March
11 March
5 and 6
18 March
6 and 7
25 March
10
1 April
Complete and submit

Assignment 03:
Closing date: 8 April
11
8 April
12
15 April
13
22 April
Complete Assignment 04
It is a self-assessment
assignment
Do not submit assignment
04
14
29 April
Prepare for examination
15
6 May
ECS2602/101
PROPOSED STUDY PROGRAMME: SECOND SEMESTER
STUDY
WEEK
Week starting
STUDY UNIT(s) or study

instruction
15 July
1 and 2
22 July
2 and 3
29 July
Complete and submit

compulsory Assignment 01
Closing date: 5 August
5 August
12 August
19 August
5
Complete and submit
compulsory Assignment 02:
Closing date: 2 September
26 August
5 and 6
2 September
6 and 7
9 September
10
16 September
Complete and submit

Assignment 03:
Closing date: 30 September
11
23 September
12
30 September
13
7 October
Complete Assignment 04
It is a self-assessment
assignment
Do not submit assignment
04
14
14 October
15
21 October
PRACTICAL WORK AND WORK INTEGRATED LEARNING
There are no practicals for this module.
ASSESSMENT
8.1
Assessment plan
Assessment will be done by the module leader and, where applicable, the module team and/or the
examiner(s). The name(s) of examiner(s) will also be indicated on examination question papers.
8.1.1 Assessment of assignments
Assessment criteria used for the assignments will done as follows: the multiple-choice questions in
Assignments 01 and 03 will be marked electronically in accordance with mark-reading masters
provided to the Assignment section by the module leader. No marks will be deducted for incorrect
answers. Assignment 02 is a written assignment. Assignment 04 is a self-assessment assignment.
Note that both assignment 01 and 02 are compulsory. The first assignment will contribute 25% to
the semester mark and the second assignment 50%. The third assignment will contribute 25%
towards your semester mark.
Please note:
Although students may work together when preparing assignments, each

student must write and submit his or her own individual assignment. In
other words, you must submit your own ideas in your own words,
sometimes interspersing relevant short quotations that are properly
referenced. It is unacceptable for students to submit identical assignments
on the basis that they worked together. That is copying (a form of
plagiarism) and none of these assignments will be marked. Furthermore,
you may be penalised or subjected to disciplinary proceedings by the
university.
8.1.2 Assessment of examination

For general information and requirements as far as examinations are concerned, see the brochure
my Studies @ Unisa which you received with your study material.
Please note that the applications for, and the administration of re-marks of examination scripts are
handled solely by the Examination department and not academic departments.
Examination admission
Please note that submission of Assignment 01 is compulsory to gain admission to the
examination. The second assignment is also compulsory. Three assignments will contribute
towards the semester and final marks.
10
ECS2602/101
How will this work in practice?

Semester mark
Your semester mark is based on your assignment marks. The three assignments that you submit
during the semester contribute towards your semester mark. Different weights are allocated to the
assignments. The first assignment contributes 25%, the second assignment 50% and the third
assignment 25% to your semester mark.
If an assignment is not submitted or submitted late (for whatever reason), zero marks are awarded
for such assignment.
The examination mark
The percentage achieved in the examination is used in the calculation of your final mark.
Final mark
The weight of the assignments will be 10% while the examination's weight is 90%.
Your final mark is calculated as follows:
Semester mark (out 100) x 10% + Examination mark (out 100) x 90%
For example:
Suppose your semester mark is 46% and you get 60% in the examination. Your final mark will be:
(46 x 10%) + (60 x 90%)
= (46 x 0.1) + (60 x 0.9)
= 4.6 + 54
= 58.6%
8.2
General assignment numbers
Assignments are numbered consecutively per module, starting from 01. In this module there are
four assignments per semester, namely 01, 02, 03 and 04.
8.2.1 Unique assignment numbers
In addition to the general assignment number (e.g. 01 or 02), each assignment (multiple-choice
questions and written assignments) must have its own unique assignment number (e.g. 102717).
In this module assignments 01 and 03 consist of only multiple-choice questions and therefore
must be completed on a marking-reading sheet with an own unique assignment number.
Assignment 02 is a written assignment and has its own unique assignment number as well. Please
fill in this unique assignment number on the cover page of the assignment in the space provided
for it. Assignment 04 is a self-assessment assignment and therefore it has no unique number and
must not be submitted.
11
8.2.2 Due dates of assignments

Please note that the due dates for the submission of assignments to Unisa are indicated in the
proposed study programme as well.
The last ten questions of Assignment 01 and the last twelve questions of Assignment 03 are
designed to obtain information required for the compilation of a student profile for this module.
Your kind cooperation is requested, as this information assists the department in its ongoing
efforts to ensure quality tuition. Your marks for this assignment will be based on your answers to
content questions.
SEMESTER 1: ASSIGNMENT SUBMISSION DATES
Assignment
number
Unique
number
Closing date
01
674379
2013/02/18
Study units 1 to 3
Multiple-choice
02
884074
2013/03/11
Study units 1 to 4
Written
03
856915
2013/04/08
Study units 5 to 7
Multiple-choice
Selfassessment
Study units 8 to 9
Please do not
submit
Multiple-choice
No unique
number
04
Contents of
assignments
Type of
assignment
SEMESTER 2: ASSIGNMENT SUBMISSION DATES
12
Assignment
number
Unique
number
Closing date
Contents of
assignments
Type of
assignment
01
801715
2013/08/05
Study units 1 to 3
Multiple-choice
02
851052
2013/09/02
Study units 1 to 4
Written
03
829713
2013/09/30
Study units 5 to 7
Multiple-choice
04
No unique
number
Selfassessment
Study units 8 to 9
Please do not
submit
Multiple-choice
ECS2602/101
8.3
Submission of assignments
You may submit written assignments and assignments completed on mark-reading sheets either
by post or electronically via myUnisa. Assignments may not be submitted by fax or e-mail.
For detailed information on assignments, please refer to the my Studies @ Unisa brochure.
To submit an assignment via myUnisa:
Go to myUnisa.
Log in with your student number and password.
Select the module.
Click on "Assignments" in the menu on the left-hand side of the screen.
Click on the assignment number you wish to submit.
Follow the instructions.
13
8.4
Assignments
SEMESTER 1
COMPULSORY ASSIGNMENT 01
STUDY UNITS 1 TO 3
DUE DATE: 2013/02/18
UNIQUE NUMBER: 674379
This assignment contributes 25% towards your semester mark.

Please ensure that this assignment reaches the university before the due date.
Answer all questions on a mark-reading sheet.
1.
Which one of the following statements is not a macroeconomic issue?

1.
2.
3.
4.
5.
2.
The main focus of this macroeconomics module is the study of .

1.
2.
3.
4.
5.
3.
the determinants of the short, medium and long-term growth potential of the economy.
only the interaction between the goods market and the financial market.
different theories on the determination of the level of output and income in a closed
economy in the short term only.
only the determination of the level of output and income and the impact of fiscal and
monetary policy on the financial, labour and foreign exchange markets.
the determination of the level of output and income and the impact of fiscal and
monetary policy on the level of output and income.
Adding up the total value of production (or output) of all firms in the economy
1.
2.
3.
4.
5.
14
The unemployment rate in South Africa, according to the strict definition, was 24.8% in
2010.
The unexpected rainfalls in the Lowveld reduced the total banana crop and caused the
price of bananas to rise.
The annual inflation in South Africa declines from 7.1% in 2009 to 4.3% in 2010.
The fluctuations in the South African business cycle can be smoothed by using fiscal
and/or monetary policies.
The annual percentage change in real GDP decreases from 3.6% in 2008 to -1.7% in
2009.
yields gross domestic product (GDP) at market prices.

yields gross domestic product (GDP) at constant prices.
yields real per capita gross domestic product (GDP).
may overestimate the value of production in the economy.
may underestimate the value of production in the economy.
ECS2602/101
4.
Which of the following would be included in the calculation of gross domestic product (GDP)
of South Africa?
a.
b.
c.
d.
e.
A citizen from Zimbabwe (foreign country) earns a wage at a gold mine in South Africa.
A farmer from Gauteng (South Africa) buys his neighbour's tractor.
Ford Motor Company of America builds an assembly plant in the Eastern Cape (South
Africa).
Exports of agricultural products to Britain.
Imports of motorcars from Japan to South Africa.
1.
2.
3.
4.
5.
5.
Expenditure on the gross domestic product (GDP) of South Africa is spending on goods and
services produced inside the borders of South Africa
1.
2.
3.
4.
6.
excluding exports and including imports.

excluding imports and including exports.
including exports and imports.
excluding exports and imports.
If a positive relationship exists between income (Y) and consumption (C), it means that an
1.
2.
3.
4.
7.
a, b, c, d and e
Only a, c and d
Only b, c and e
Only a and c
Only b and e
increase in consumption spending will increase income.

increase in consumption spending will decrease income.
increase in income will increase consumption spending.
increase in income will decrease consumption spending.
The difference between induced consumption and autonomous consumption is that

1.
2.
3.
4.
induced consumption is influenced by the level of disposable income while autonomous

consumption changes with a change in income.
induced consumption is influenced by the level of disposable income while autonomous
consumption is not influenced by the level of income.
induced consumption reflects the influence of non-income determinants of consumer
spending while autonomous consumption can be regarded as consumption that is
financed from sources other than income.
induced consumption is not influenced by the level of disposable income while
autonomous consumption is influenced by the level of income.
15
8.
Which of the following statements is/are correct?

An autonomous (or exogenous) variable in our model means that the variable
a.
b.
c.
d.
is not determined by the level of output and income in the economy.

is determined by exogenous factors such as business confidence, regulations and
political influences.
is determined by the level of output and income in the economy.
increases or decreases if income in the economy increases or decreases.
1.
2.
3.
4.
5.
9.
Only a
Only b
Only c
Only d
a and b
Expansionary fiscal policy means that government spending has to be

1.
2.
3.
4.
increased and/or taxes have to be decreased in order to increase aggregate demand in

the economy.
decreased and/or taxes have to be increased in order to increase aggregate demand in
the economy.
decreased and/or taxes have to be increased in order to stimulate economic activity by
increasing the aggregate demand in the economy.
increased and/or taxes have to be decreased in order to "cool down" economic activity
by decreasing aggregate demand in the economy.
Given the following information, answer questions 10 and 11.

Autonomous consumption
Investment spending
Government spending
Taxes
Marginal propensity to consume
= R100 million
= R300 million
= R200 million
= R60 million
=
10. Which of the following statements are correct?

a.
b.
c.
d.
Autonomous spending = R660.

The multiplier = 4.
Consumer spending will decrease by R7.5 million if the government increases taxes
from R60 to R80 million.
The marginal propensity to consume of means that if Y = 100, C = 75.
1.
2.
3.
4.
5.
16
Only a, b and c
Only b, c and d
Only a and b
Only b and d
a, b, c and d
ECS2602/101
11. The equilibrium level of income and output is

1.
2.
3.
4.
5.
R138.75 million.
R2 640 million.
R2 220 million.
R416.25 million.
R2 580 million.
12. If total production is R500 million and aggregate demand is R550 million
1.
2.
3.
4.
excess demand occurs and producers will cut back on production until equilibrium
attained.
excess supply occurs and producers will cut back on production until equilibrium
attained.
excess demand occurs and producers will increase production until equilibrium
attained.
excess supply occurs and producers will increase production until equilibrium
attained.
is
is
is
is
13. If the current level of income (Y0) is less than the full-employment level of income (YF) in a
goods market model of a closed economy ,
a.
b.
c.
d.
e.
an increase in investment will move the economy to full employment.

an increase in the marginal propensity to consume will move the economy to full
employment.
an increase in government spending will move the economy to full employment.
a decrease in taxes will move the economy to full employment.
an increase in any autonomous spending component will move the economy to full
employment.
1.
2.
3.
4.
5.
Only a, b, c and e
Only b, c and d
Only a, c and d
Only b, d and e
a, b, c, d and e
14. Given a marginal propensity to consume of 0.8, an increase of 100 in government spending
and an increase of 80 in taxes will cause the level of output and income to ...
1.
2.
3.
4.
5.
increase by 180.
be unchanged.
increase by 100.
increase by 80.
decrease by 80.
17
Questions 15 to 23 are based on the following approximate figures for the South African economy
in 2011:
Real GDP
Estimated population
Estimated labour force
Multiplier
Government debt
Government deficit
= R1 895 000 million

= 50 million
= 20 million
= 1.4
= R667 040 million (35.2% of real GDP)
15. How many people were unemployed in South Africa in 2011?

1.
2.
3.
4.
5 million.
12.5 million.
30 million.
20 million.
16. If government increases its expenditure by R100 million by how much will real GDP increase?
1.
2.
3.
4.
5.
R100 million.
R40 million.
R140 million.
R240 million.
R71 million.
Read the following and answer the questions that follow:

A positive relationship exists between economic growth and employment creation. The larger the
employment intensity of economic growth the more jobs are created for a given economic growth
rate. An employment intensity of 0.2 indicates that for a 1% economic growth rate employment
increases by 0.2% while an employment intensity of 0.4 indicates that for a 1% economic growth
rate employment increases by 0.4%. The following data indicates the relationship between
employment intensity and the economic growth rate needed to create 500 000 new jobs in South
Africa.
Employment intensity
0.2
0.4
0.6
0.8
1
18
% Change in GDP needed to create 500 000 new

employment opportunities
18%
8%
6%
4%
3%
ECS2602/101
17. Assuming an employment intensity of growth of 0.4 the % increase in real GDP must be
approximately ____ to create 500 000 new jobs.
1.
2.
3.
4.
5.
4%
6%
8%
10%
12%
18. By how much should real GDP increase to create 500 000 new jobs?
1.
2.
3.
4.
5.
R113 700 million.

R189 500 million
R75 800 million.
R151 600 million.
R227 400 million.
19. If this increase in GDP is to be achieved through an increase in government spending on

infrastructure by how much should government increases its spending?
1.
2.
3.
4.
5.
R54 143 million.

R812 214 million.
R108 286 million.
R135 357 million.
R94 750 million.
20. Assuming that tax revenue of the government is unchanged and given the increase in
government spending in question 19 government deficit as a percentage of real GDP is ____
and government debt as a percentage of real GDP is _____.
1.
2.
3.
4.
5.
6.8%; 36.6%
8.0%; 37.3%
8.7%; 37.9%
9.2%; 37.9%
10.3%; 39.1%
21. If the creation of 500 000 new jobs is to be achieved by a decrease in taxes by how much
should taxes, given a marginal propensity to consume of 0.6, decrease?
1.
2.
3.
4.
5.
R108 286 million.

R180 476 million.
R113 700 million.
R157 917 million.
R54 143 million.
19
22. Given the decrease in taxes in question 21 government deficit as a percentage of real GDP is
____ and government debt as a percentage of real GDP is _____.
1.
2.
3.
4.
5.
6.8%; 36.6%
8.0%; 37.3%
8.7%; 37.9%
11.8%; 41.4%
12.7%; 41.4%
23. How many people will be unemployed if government spending increases as indicated in
question 19 and taxation decreases as indicated in question 21?
1.
2.
3.
4.
5.
4 million.
4.5 million.
5 million.
5.5 million.
6 million.
24. To calculate an individual's financial wealth, the following different kinds of assets will form
part of it:
1.
2.
3.
4.
salary, bonds, interest received from bonds and the value of his/her house.
salary, balance on cheque account, bonds and interest received from bonds.
money, bonds, residential land, gold coins, cash and the outstanding balance on his/her
home loan.
balance on cheque account, cash, bonds, shares, the value of his/her house and
paintings.
25. If income increases, the demand for money

1.
2.
3.
4.
20
decreases and the money demand curve will shift to the left.
increases and the money demand curve will shift to the right.
increases and there will be an upward movement along the money demand curve.
increases and there will be downward movement along the money demand curve.
ECS2602/101
Question 26 is based on the diagram below:

a.
b.
c.
d.
The money supply is a demand-determined money supply that implies that the supply
of money depends on the demand for money and the interest rate.
At point a the quantity of money demanded is equal to the quantity of money supplied
and it represents an equilibrium position in the financial market.
If money supply increases, a movement from point a to point b implies that the central
bank sells treasury bills on the open market in order to decease the interest rate.
In terms of a chain of events the diagram presented the following:
Ms: DB PB i
1.
2.
3.
4.
5.
Only b and d
Only b, c and d
Only a, b and d
Only a, c and d
a, b, c and d
27. Assuming that the face value of the treasury bill is R150 000, the price paid for the bill is
R140 000 and the date to maturity is one year, the rate of return is
1.
2.
3.
4.
7.14% and it will decrease if the price paid for it decreases to R135 000.
7.14% and it will increase if the price paid for it decreases to R135 000.
6.67% and it will decrease if the price paid for it increases to R145 000.
6.67% and it will increase if the price paid for it increases to R145 000.
21
Questions 28 and 29 are based on the diagram below which represents changes in the supply of
money:

At the initial interest rate of 10% a(n)
a.
b.
c.
d.
increase in the supply of money from MS to MS1 results in a surplus of money of R50.
increase in the supply of money from MS to MS1 results in a shortage of money of R50.
decrease in the supply of money from MS to MS2 results in a surplus of money of R50.
decrease in the supply of money from MS to MS2 results in a shortage of money of R50.
1.
2.
3.
4.
a and d
b and d
a and c
b and c
29. A shift from MS to MS2 represents the impact of a(n)

1.
2.
3.
4.
22
expansionary monetary policy where the central bank buys treasury bills on
market and consequently the interest rate increases.
expansionary monetary policy where the central bank sells treasury bills on
contractionary monetary policy where the central bank sells treasury bills on
contractionary monetary policy where the central bank buys treasury bills on
the open
the open
the open
the open
ECS2602/101
30. A decrease in income with simultaneous expansionary open market operations by the central
bank shifts the
1.
2.
3.
4.
demand for money curve to the left and the money supply curve to the right.
The equilibrium interest rate is higher.
demand for money curve to the right and the money supply curve to the left.
The equilibrium interest rate is higher.
demand for money curve to the left and the money supply curve to the right.
The equilibrium interest rate is lower.
demand for money curve to the right and the money supply curve to the left.
The equilibrium interest rate is lower.
The following questions are for information purposes and does not count any marks.
31. The sections of the study guide that I had to study to complete this assignment
1.
2.
3.
4.
5.
helped me to work through the textbook systematically.

did not help me to understand the study material in the textbook better.
was totally irrelevant to the assignment questions.
I did not use the study guide at all although I have one.
I have not received a study guide.
32. Indicate the value being added by the CDROM during your completion of this assignment.
1.
2.
3.
4.
5.
It was very helpful.

It was fairly helpful.
It did not add any value.
I did not use it.
I did not use it as it is not part of the prescribed material.
33. Indicate the value being added by the video clips on the myUnisa webpage during your
completion of this assignment.
1.
2.
3.
4.
5.

I did not use it as I did not know about them.
34. Indicate the value being added by the www.econom.co.za website during your completion of
this assignment.
1.
2.
3.
4.
5.

23
35. Which one of the following describes your situation best?

1.
2.
3.
4.
5.
I worked through all the prescribed study material before attempting this assignment.
I quickly glanced through the prescribed study material before attempting this
assignment.
I did not study the prescribed study material before attempting the assignment, but
looked for the answers in the study material.
I could answer the questions without referring to the study material.
I just chose my answers randomly.
36. Where/how do you plan to submit this assignment?

1.
2.
3.
4.
Through myUnisa.
At one of the Unisa post boxes.
I will make use of the postal service.
I will make use of a private courier service.
37. Which one of the following best describes your access to a computer?
1.
2.
3.
4.
5.
38
I have unlimited access to a computer.

I have access to a computer but do not know how to use it for study purposes.
I have to pay to use a computer (e.g. internet caf).
I can only use a computer as a favour.
I do not have any access to a computer.
Which one of the following best describes your internet access?

1.
2.
3.
4.
5.
I have unlimited access to the internet.

I have limited access but can access the internet using my mobile phone.
I have limited access but can access the internet more than once a week at work/the
place where I study.
I have very limited access to the internet, e.g. at an internet caf.
I do not have any access to the internet.
39. Concerning the module website on myUnisa:

1.
2.
3.
4.
5.
40
Concerning the module discussion forum on myUnisa:

1.
2.
3.
4.
5.
24
I am not aware of the website.

I am aware of the website but have not visited it.
I visited the website once but did not find it helpful.
I visit the website regularly and find it helpful.
I visit the website only when I receive an announcement that there is something new.
I am not aware of the discussion forum.

I am aware of the discussion forum but do not use it.
I visited the discussion forum at least once but did not find it interesting.
I visit the discussion forum regularly and take part.
I would like to take part in the discussion forum but do not know how to.
ECS2602/101
SEMESTER 1
STUDY UNITS 1 TO 4
DUE DATE: 2013/03/11
This is a written assignment which you can either post to the university or submit electronically on
myUnisa.
Answer all the questions. (Total marks: 70) (Take note that not all the questions will necessarily
be marked.)
Question 1 (7 marks)
Identify the exogenous and endogenous variables in the goods market model.
Use the goods market model to explain the impact of an increase of 200 in government spending
and an increase of 200 in taxes on the level of output and income.
Use the goods market model to explain what happens to savings in the economy if the marginal
propensity to consume increases.
Use the financial market model to explain why the impact of an increase in income and an
increase in the money supply on the interest rate is indeterminate.
Use the following information to derive the IS-curve:
An increase in the interest rate from 6% to 7% decreases investment by 500.
The level of autonomous spending before the increase in the interest rate is 2 500.
The multiplier is 3.
The following data pertains to the South African economy:
25
% cha
ange
At con
nstant 200
05 prices
Datte
Gross dom
mestic
product att mark
prices
Fin
nal consumpttion
expenditure by
ho
ouseholds
(C))
Fina
al consumption
expenditure by
gov
vernment
(G)
Grross fixed
ca
apital formatio
on
(I)
200
08/01
2.9
9
0.4
11.9
17.1
200
08/02
4.5
5
1.4
-2
12.5
200
08/03
1.8
8
0.5
9.2
20.7
200
08/04
-1.7
7
-1.1
8.9
200
09/01
-6.3
3
-4.8
7.1
-13.9
200
09/02
-2.8
8
-3.3
0.6
-10.6
200
09/03
1.8
8
1.1
8.2
-14
200
09/04
3.5
5
3.2
1.2
-3.2
2010/01
6.1
2.8
6.1 Identify the

t period during which a recesssion took place in th
he South A
African economy.
(2)
6.2 What ha
appened with the follo
owing spen
nding components du
uring the re
ecession?
i.
ii.
iii
Co
onsumption
n spending by househ
holds
Invvestment spending
Go
overnment spending
6.3 Use the

e goods market
m
mo
odel to ind
dicate the impact th
he change
e in inves
stment
spending
g had on th
he level of output and
d income during
d
the recession..
(2)
(2)
(2)
(6)
6.4 Use the

e IS-LM model
m
to explain how
w stabilisa
ation policies were u
used durin
ng the
recessio
on.
(7)
Que
estion 7 (8
8 marks)
Use
e the IS-LM
M model to
o compare
e the impa
act of an ex
xpansiona
ary moneta
ary policy with
w that of
o an
exp
pansionary fiscal policcy on the variables
v
in
n the IS-LM
M model.
Que
estion 8 (8
8 marks)
Use
e the IS-LM
M model to
o identify the
t variables that willl have an impact on
n the effecttiveness of
o an
exp
pansionary fiscal pollicy to inccrease the level of output
o
and
d income and expla
ain how th
hese
variiables influ
uence the effectivene
e
ess of fisca
al policy.
26
ECS2602/101
SEMESTER 1
ASSIGNMENT 03
STUDY UNITS 5 TO 7
DUE DATE: 2013/04/08
Openness in goods and financial markets
1.
In the case of South Africa, a change from R1 = $0.30 to R1 = $0.35 implies

a.
b.
c.
d.
e.
f.
an increase in the nominal exchange rate.

a decrease in the nominal exchange rate.
a depreciation in the domestic currency.
an appreciation in the domestic currency.
more rands are now needed to buy a dollar.
fewer rands are now needed to buy a dollar.
1.
2.
3.
4.
5.
2.
Only b and c
Only a and d
d and e
a, d and f
b, c and e
The real exchange rate between the rand and the dollar is:

a.
b.
c.
d.
Assume that the increase in P* and the increase in P are the same and the rand
depreciates against the dollar. Then, the nominal exchange rate is higher, the real
exchange rate increases and a real appreciation takes place. Therefore, the USA goods
are relatively cheaper than before the change in the nominal exchange rate.
If the increase in the relative price of SA goods is greater than the increase in the price
of USA goods, the real exchange rate increases and a real appreciation takes place.
If the increase in the relative price of SA goods is greater than the increase in the price
of USA goods, the real exchange rate decreases and a real depreciation takes place.
USA goods are relatively more expensive if the nominal exchange rate is unchanged
and the increase in the price of USA goods is greater than the increase in the price of
SA goods, because a real depreciation takes place.
27
1.
2.
3.
4.
5.
Only a
Only b
Only c
Only d
b and d
Que
estions 3 to
o 6 are bassed on the
e following information:
Rea
al exchang
ge rate forr South Affrica
Nominal Exchange
E
e rate (R/$))
28
ECS2602/101
3.
Which one of the following

f
sttatements is correct?
?
The real exchange
e rate for South
S
Africca _____ from 2005
5 to 2008 and _____
_ from 200
08 to
2010.
1.
2.
3.
4.
5.
deccreased; decreased
d
inccreased; inccreased
inccreased; de
ecreased
deccreased; in
ncreased
wa
as unchang
ged; increa
ased
29
4.
Which one of the following statements is correct?

The nominal R/$ exchange rate _____ during 2009 and 2010 and _____ during 2011.
1.
2.
3.
4.
5.
5.
appreciated; depreciated
unchanged; depreciated
depreciated; depreciated
depreciated; appreciated
depreciated; was unchanged

Compared to the United States of America the inflation rate in South Africa during 2008 to
2010 was _____
1.
2.
3.
6.
Which one of the following is a possible cause for the change in the real exchange rate for
the rand during the period 2008 to 2010?
1.
2.
3.
4.
7.
higher.
lower.
the same.
The appreciation of the rand and the inflation differential between the USA and South
Africa both increased the real exchange rate.
The impact of the appreciation of the rand outweighs the negative impact of the inflation
differential between the USA and South Africa and the real exchange rate increased.
The depreciation of the rand and the inflation differential between the USA and South
Africa both decreased the real exchange rate.
The impact of the depreciation of the rand outweighs the inflation differential between
the USA and South Africa and the real exchange rate decreased.
Which of the following statements are correct regarding the current account of the South
African balance of payments?
a.
b.
c.
d.
e.
The money spent by tourists visited South Africa is included in service receipts.
A trade balance deficit indicates that exports exceeded imports.
Income receipts refer to income earned by South African residents in the rest of the
world, while income payments refer to income earned by non-residents in South Africa.
To calculate the trade balance net gold exports is included.
The rand value of net gold exports is included in the merchandise exports figure.
1.
2.
3.
4.
5.
30
a, b and d
a, c and d
b and c
Only a and d
b and e
ECS2602/101
8.
Which of the following statements are correct?

a.
b.
c.
d.
e.
When the inflow of investment from the rest of the world exceeds the outflow of
investment to the rest of the world, a financial account deficit occurs.
Unrecorded transactions serve to ensure that the balance of payments actually
balances.
To increase a countrys foreign reserves, the authorities can borrow from institutions
such as the International Monetary Fund.
International transactions in assets and liabilities are recorded in the financial account
of the South African balance of payments.
The three main components of the financial account are direct investment, portfolio
investment and other foreign reserves investment.
1.
2.
3.
4.
5.
9.
a, b, c and d
b, c, d and e
Only b, c and d
a and e
Only c and d
Given the following information:

Interest rate on RSA bonds: 6%
Interest rate on USA bonds: 4%
1.
2.
3.
4.
If the expected depreciation of the rand is more than 2% financial market participants
will buy RSA bonds.
If the expected depreciation of the rand is more than 2% financial market participants
will buy USA bonds.
If the expected depreciation of the rand is 3% financial market participants will be
indifferent between RSA and USA bonds.
If the expected appreciation of the rand is 3% financial market participants will buy USA
bonds.
The goods market in an open economy

10. Which of the following statements is/are correct?
a.
b.
c.
d.
e.
Exports can be regarded as exogenous because it is determined by the domestic level

of output.
Exports will increase if there is an increase in the output level of our trading partners.
The real exchange rate will influence the level of imports as well as the level of exports,
but in opposite directions.
When domestic output in the economy increases, it leads to an increase in imports.
When domestic output in the economy decreases, it leads to a decrease in exports.
31
1.
2.
3.
4.
5.
b, c and d
a and e
a, c and d
Only c and d
None of the options 1 to 4
Question 11 is based on the following diagram.

a.
b.
c.
d.
e.
At an income level of R180 million, imports are more than exports.

At an income level of R100 million a trade deficit occurs.
A trade surplus occurs at an income level of R100 million because imports are more
than exports.
Point b is the trade balance point because exports equal imports.
At an income level higher than the income level of R120 million, a trade deficit occurs
because imports are higher than exports.
1.
2.
3.
4.
5.
a, b, d and e
b, c and d
Only d and e
a, c and d
Only a, d and e

a.
b.
c.
d.
e.
32
Equilibrium output is associated with a trade deficit only.

Equilibrium output is associated with a trade surplus only.
Equilibrium output is associated with a trade deficit or a trade surplus.
The goods market is in equilibrium when domestic output is equal to the demand for
domestic goods.
The goods market is in equilibrium when domestic output is equal to the domestic
demand for goods.
ECS2602/101
1.
2.
3.
4.
5.
a and c
b and c
a and d
b and d
c and d
13. Which one of the following statements is correct?

At any income level lower than R80 million a trade surplus occurs because if
1.
2.
3.
4.
5.
Y IM NX
Y IM NX
Y X NX
Y X NX
Y IM NX

A decrease in domestic demand, for instance through a decrease in government spending,
can be presented by the following chain event:
1.
2.
4.
5.
5.
G
G
G
G
G
Z
Z
Z
Z
Z
Y
Y
Y
Y
Y
IM NX
IM NX
X NX
X NX
IM NX
15. An increase in exports

1.
2.
3.
4.
is the result of an increase in the real exchange rate.

is recorded on the financial account of the balance of payments.
gives rise to a trade deficit.
increases the demand for domestic goods.
33

The above diagram illustrates the following chain of events:
1.
2.
3.
4.
5.
G Z Y IM NX
G Z Y IM NX
X Z Y IM NX
X Z Y IM NX
Y G Z Y IM NX
Output, the interest rate and the exchange rate: the IS-LM model for an open economy
a.
b.
c.
d.
Goods market equilibrium occurs where output and income is positively related to the
nominal interest rate and negatively related to the nominal exchange rate.
The IS curve implies: i Y and E Y.
The impact of a decrease in the nominal interest rate (i) is that it leads to an increase in
investment, the demand for goods and the level of output.
A depreciation of the nominal exchange rate (E) results in an increase in exports, the
trade balance improves, an increase in the demand for goods and the level of output.
1.
2.
3.
4.
5.
34
a, b, c and d
Only a, b and c
Only b, c and d
Only a, b and d
ECS2602/101
18. A decrease in the South African interest rate relative to that of the rest of the world, leads to
a(n)
a.
b.
c.
d.
depreciation of the rand.

appreciation of the rand.
capital inflow and a higher demand for rands on the foreign exchange market.
capital outflow and a lower demand for rands on the foreign exchange market.
1.
2.
3.
4.
5.
a and c
b and c
a and d
b and d
Only a
19. If the exchange rate changes from R1 = $0.25 to R1 = $0.30 this could be the result of
because of a(n)
a.
b.
c.
d.
increase in the supply of dollar; an increase in the South African interest rate relative to
that of the rest of the world.
decrease in the supply of dollar; an increase in the South African interest rate relative to
that of the rest of the world.
increase in the demand for dollar; an increase in the South African interest rate relative
to that of the rest of the world.
decrease in the demand for dollar; an increase in the South African interest rate relative
to that of the rest of the world.
1.
2.
3.
4.
5.
Only a
a and c
a and d
b and c
b and d
20. In the IS-LM model for an open economy, an increase in the interest rate causes a(n)
a.
b.
c.
d.
e.
appreciation of the exchange rate and a decrease in exports.

increase in both government spending and the demand for goods.
decrease in investment, the demand for goods and the level of output and income.
depreciation of the exchange rate and an increase in exports.
capital inflow, higher demand for rands and an appreciation of the exchange rate.
1.
2.
3.
4.
5.
a, c and d
c and e
b and d
a and e
35
Questions 21 and 22 are based on the following diagram of an IS-LM model for an open economy:
21. The above diagram illustrates a(n) ...

1.
2.
3.
4.
decrease in the money supply, a decrease in the interest rate and a depreciation of the
exchange rate.
increase in the money supply, an increase in the interest rate and an appreciation of the
exchange rate.
decrease in government spending, a decrease in the interest rate and a depreciation of
the exchange rate.
increase in government spending, a decrease in the interest rate and a depreciation of
the exchange rate.
22. The above diagram illustrates the impact of a(n) ...

1.
2.
3.
4.
contractionary fiscal policy on the exchange rate.

contractionary monetary policy on the exchange rate.
expansionary monetary policy on the exchange rate.
expansionary fiscal policy on the exchange rate.
23. An expansionary fiscal policy (e.g. G) causes an increase in the demand for goods and the
level of output and income (Y) and consequently ...
1.
2.
3.
4.
36
an increase in the demand for money and the interest rate; an appreciation
domestic currency and the trade balance deteriorates as exports increases.
an increase in the demand for money and the interest rate; a depreciation
domestic currency and the trade balance improves as exports increases.
a decrease in the demand for money and the interest rate; a depreciation
domestic currency and the trade balance improves as exports increases.
an increase in the demand for money and the interest rate; an appreciation
domestic currency and the trade balance deteriorates as exports decreases.
of the
of the
of the
of the
ECS2602/101
S-LM mode
el for an op
pen econom
my moneta
ary contracction implie
es that the
24. In the IS
a.
b.
c.
d.
LM
M curve will shift to the
e left and the
t interest rate incre
eases.
LM
M curve will shift to the
e right and
d the intere
est rate deccreases.
nom
minal exch
hange rate
e decrease
es and a depreciatio
on of the domestic currency take
t
pla
ace.
nom
minal exch
hange rate
e increases and an appreciation of the domestic currency take
t
pla
ace.
1.
2.
3.
4.
a and c
a and d
b and c
b and d
estions 25 to 32 are based on the

t followin
ng informa
ation about the econo
omy for Bra
azil.
Que
37
A contractiona
ary moneta
ary policy has been followed
f
and in 2011
1 the intere
est rate in Brazil wass the
hest intere
est rate of any
a major economy.
e
high
Govvernment spending
s
h increassed steadilly over the years.
has
25. Which one of the following
f
sttatements is correct?
?
In 2011 ...
1.
2.
3.
38
Bra
azil experie
enced a de
eficit on the
eir current account.
Bra
azil experie
enced a su
urplus on th
heir curren
nt account.
the
e current acccount wass balanced
d in Brazil.
ECS2602/101
Questions 26 and 27 are based on the following:

During 2011 government spending increased in Brazil. Using the following model the impact of an
increase in government spending in Brazil on the level of output and the current account can be
explained as follows:

.
The possible impact on the level of output and income is that the
1.
2.
3.
4.
increase in government spending increased the demand for goods. This is indicated by
an upward shift of the demand for goods curve and the level of output and income
increases.
a downward shift of the demand for goods curve and the level of output and income
decreases.
an upward movement along the demand for goods and the level of output and income
increases.
a downward movement along the demand for goods curve and the level of output and
income decreases.
39

The possible impact on the NX curve of the increase in government spending is that the
1.
2.
3.
4.
5.
increase in the level of output and income increased imports and

equilibrium level of output and income a current account deficit arises.
This is indicated by a leftward shift of the NX curve.
increase in the level of output and income increased exports and
This is indicated by a rightward shift of the NX curve.
increase in the level of output and income increased imports and
This is indicated by a downward movement along the NX curve.
increase in the level of output and income decreased imports and
This is indicated by an upward movement along the NX curve.
decrease in the level of output and income decreased exports and
This is indicated by a downward movement along the NX curve.
at the higher
at the higher
at the higher
at the higher
at the higher
Questions 28 to 32 are based on the following additional information:

During 2011 Brazil followed a contractionary monetary policy.
Using the IS-LM model for an open economy which of the following correctly describes the impact
of such a policy on the interest rate, level of output and income, exchange rate and current
account.
The contractionary monetary policy causes a ...
1.
2.
3.
4.
rightward shift of the LM curve, the interest rate decreases and the
increases.
leftward shift of the LM curve, the interest rate increases and the
declines.
rightward shift of the IS curve, the interest rate increases and the
increases.
leftward shift of the IS curve, the interest rate decreases and the
declines.
level of output
level of output
level of output
level of output

According to the IS-LM model for an open economy an increase in the interest rate will ...
1.
2.
3.
40
cause an appreciation of the nominal exchange rate.

cause a depreciation of the nominal exchange rate.
leave the nominal exchange rate unchanged.
ECS2602/101

Due to the change in the interest rate in Brazil during the first six months of 2011 the USA
Dollar/Brazilian Real
1.
2.
3.
appreciated.
depreciated.
remained unchanged.

According to the IS-LM model for an open economy an appreciation of the exchange rate will
1.
2.
3.
4.
increase exports and decrease imports and the current account improves.
decrease exports and increase imports and the current account worsens.
increase exports and decrease imports and the current account worsens.
decrease exports and increase imports and the current account improves.

The change in the USA Dollar/Brazilian Real during the first six months of 2011 ...
1.
2.
3.
caused the current account to improve.

caused the current account to worsen.
left the current account unchanged.
33. Did you make use of private tuition (Damelin, Varsity College, Boston and others)?
1.
2.
3.
4.
5.
No.
Yes and I paid less than a R1 000 for the tuition.
Yes and I paid between R1 000 and R2 500 for the tuition.
Yes and I paid more than R5 000 for the tuition.
34. Did you make use of the econom.co.za website to study for the module?
1.
2.
3.
4.
5.
Yes.
No, because it is not part of the prescribed material.
No, because I have not sufficient access to the WWW.
No, because the printed study material was sufficient for me to understand the work.
No, because I did not have the time to use it.
41
35. Which one of the following best describes your use of the econom.co.za website?
1.
2.
3.
4.
5.
I did not use the website.

I first studied the chapter in the text book and then visit the website.
I first visited the website and then studied the chapter in the text book.
I used the website only when I had a problem with a chapter in the text book.
I watched it occasionally.
36. Did you make use of the CDROM to study for the module?
1.
2.
3.
4.
5.
Yes.
No, because I have not sufficient access to a computer.
37. Which one of the following best describes your use of the CDROM?
1.
2.
3.
4.
5.
I did not use the CDROM.

I first studied the chapter in the text book and then used the CDROM.
I first used the CDROM and then studied the chapter in the text book.
I used the CDROM only when I had a problem with a chapter in the text book.
I used the CDROM occasionally.
38. Did you make use of video clips on myUnisa?

1.
2.
3.
4.
5.
Yes.
No, because I do not have access to the internet.
No, because I was unable to download and view the video clips.
39. Did you make use of the discussion forum on myUnisa?

1.
2.
3.
4.
5.
Yes.
No, because I did not know about it.
No, because it is too unstructured.
No, because it contains too little discussion on module content.
40. Did you make use of past exam papers which are posted on myUnisa?
1.
2.
3.
4.
5.
42
Yes.
No, because I was unable to download it.
No, because I do not think it is important.
ECS2602/101
41. Did you read the weekly communication that was send to your myLIfe e-mail address?
1.
2.
3.
4.
5.
Yes.
No, I did not activate myLife e-mail address.
No, I do not have weekly access to the internet.
No, I do not have access to the internet.
No, I did not have time to read it.
42. Did you make use of other resources on the WWW?

1.
2.
3.
4.
5.
Yes.
No, because of the cost of using the internet.
No, because I did not have the time to do it.
43. If you have made use of the CDROM, econom.co.za website and video clips which one did
you find the most useful in your studies?
1.
2.
3.
4.
The CDROM.
The econom.co.za website.
The video clips.
Not applicable since I did not use all of them.
44. If broadband access to the WWW is a prerequisite to study this module I would
1.
2.
3.
4.
not be able to do the module.

be able to spend 0-1 hours per week on-line.
be able to spend more than 2 hours per week on-line.
43
SEMESTER 1
ASSIGNMENT 04
STUDY UNITS 8 AND 9
SELF-ASSESSMENT ASSIGNMENT
DO NOT SUBMIT THIS ASSIGNMENT
The Labour Market
1.
Our analysis of the labour market implies the following:

a.
b.
c.
d.
There is a negative relation between the real wage and the unemployment rate.
The higher the unemployment rate, the weaker the workers' position in bargaining.
The higher the unemployment rate, the lower the real wage.
An improvement in the bargaining position of workers' makes it possible to bargain for
higher wages.
1.
2.
3.
4.
5.
2.
Which of the following factor(s) will increase the bargaining position of workers?
a.
b.
c.
d.
The more expensive it is to dismiss workers.

A higher level of output and a lower unemployment rate.
An increase in unemployment benefits.
Labour laws that protect workers from being dismissed.
1.
2.
3.
4.
5.
44
a, b, c and d
Only a, b and c
Only a, c and d
Only b, c and e
None of the options 1 to 4 is correct
Factors a, b, c and d
Only factors a, b and c
Only factors b, c and d
Only factor b
None of the factors
ECS2602/101
3.
On which of the following do prices set by firms in an imperfectly competitive market depend?
a.
b.
c.
d.
e.
The nature of the production function.

The relation between the inputs used in production and the quantity of output produced.
The prices of the inputs.
The nominal wage per unit of output.
The markup of the firm.
1.
2.
3.
4.
5.
4.

a.
b.
c.
d.
The price level in the economy is partly the outcome of nominal wage bargaining and
the price setting behaviour of firms in the economy.
An increase in the nominal wage is enough to ensure an increase in the real wage.
A decrease in the mark-up by firms causes an increase in real wages.
The PS curve will shift upwards if the markup by firms decreases.
1.
2.
3.
4.
5.
5.
Only a, b, d and e
Only b, c and d
Only a, c, d and e
a, b, c, d and e
a, b, c and d
Only c and d
Only a, c and d
Only b, c and d
Only a and d

A positive relationship exists between the
a.
b.
c.
d.
e.
expected price level and the bargained nominal wage.

unemployment rate and the bargained nominal wage.
markup and the price per unit.
nominal wage and the price per unit.
better unemployment benefits and the nominal wage.
1.
2.
3.
4.
5.
a, b, c, d and e
Only b, c and d
Only c, d and e
Only a, c, d and e
Only a, c and d
45
6.
Which of the following statement(s) is/are correct?

The WS curve will shift to the left because of
a.
b.
c.
d.
e.
a lower markup.
a lower unemployment rate.
lower nominal wages.
labour laws that provide workers with less protection against layoffs.
better unemployment benefits.
1.
2.
3.
4.
5.
7.
a and c
b and d
Only b
Only c
Only d
The PS curve will shift downwards because of a

a.
b.
c.
d.
lower markup.
higher markup.
lower unemployment rate.
higher unemployment rate.
1.
2.
3.
4.
5.
a and c
a and d
b and c
b and d
Only b
Question 8 is based on the following wage-setting and price-setting relationships.
46
ECS2602/101
8.

At point C the
a.
b.
c.
d.
unemployment rate is higher which decreases the bargaining position of workers and
the nominal wage they can bargain for decreases.
unemployment rate is lower which increases the bargaining position of workers and the
real wage implied by price setting increases.
targeted real wage is lower than the implied real wage.
targeted real wage is higher than the implied real wage.
1.
2.
3.
4.
5.
9.
b, c and d
a, b and c
Only a and c
Only b and c
Only a
A decrease in the level of output will cause the following events on the labour market:
1.
2.
3.
4.
The level of unemployment decreases causing an increase in the bargaining position of

workers which enables them to bargain for a nominal wage increase.
The level of unemployment increases which causes a decline in the bargaining position
of workers resulting in a lower bargained nominal wage.
The natural level of unemployment decreases causing an increase in the bargained real
wage.
The natural level of unemployment increases causing a decrease in the bargained real
wage.
10. Which one of the following chain of events describes the impact of an increase in output on
the labour market?
1.
2.
3.
4.
5.
Y u N W
Y N un W
Y N u W
Y N u W
W N u
AS-AD model
11. The AS curve has a positive slope because of which the following chain of events?
1.
2.
3.
4.
5.
Y u N W P
Y N un W P
W N u P
Y u N W P
Y N u W P
47
12. Which of the following events is/are represented by the AS curve?

a.
b.
c.
d.
e.
Y u N W P
Y N un W P
Y N u W P
Y u N W P
W N u P
1.
2.
3.
4.
5.
Only a
Only b
Only c
Only d
b and c
13. Which of the following events is represented by the AD curve?

a.
b.
c.
d.
P M/P i I Z Y
Ms M/P i I Z Y
Ms M/P i I Z Y
P M/P i I Z Y
1.
2.
3.
4.
5.
Only a
Only b
Only c
Only d
Questions 14 and 15 are based on the following AS curve:
14. At point B compared to point A the expected price level is

1.
2.
3.
48
lower than the actual price level.

higher than the actual price level.
the same as the actual price level.
ECS2602/101
15. Which one of the following events describes the adjustment from the short to the medium to
long run if the economy is at point B?
1.
2.
3.
4.
The expected price level is lower than the actual price level. Workers respond to this by
increasing their nominal wage demands and the AS curve shifts to the right.
The expected price level is higher than the actual price level. Workers respond to this
by increasing their nominal wage demands and the AS curve shifts to the left.
The expected price level is lower than the actual price level. Workers respond to this by
increasing their nominal wage demands and the AS curve shifts to the left.
The expected price level is higher than the actual price level. Workers respond to this
by increasing their nominal wage demands and the AS curve shifts to the right.
16. Which of the following factor(s) will cause a shift to the left of the AS curve?
a.
b.
c.
d.
e.
An increase in real wages.

An increase in the expected price level
An increase in the actual price level.
A decrease in the nominal money supply.
A decrease in government spending.
1.
2.
3.
4.
5.
Only factor b
Factors a and b
Factors c, d and e
Factors b, d and e
Only factor c
17. Which one of the following applies when the aggregate demand curve (AD-curve) is derived?
1.
2.
3.
4.
A decrease in the nominal money supply causes an increase in the interest rate which
in return causes a decrease in investment spending, the demand for goods and the
level of output.
A decrease in the price level decreases the real money supply which causes an
increase in the interest rate which in return causes a decrease in investment spending,
the demand for goods and the level of output.
An increase in the price level decreases the real money supply which causes an
increase in the interest rate which in return causes a decrease in investment spending,
the demand for goods and the level of output.
An increase in government spending causes an increase in the interest rate which in
return causes a decrease in investment spending, the demand for goods and the level
of output.
18. Which of the following factors cause a shift in the AD curve?

a.
b.
c.
d.
A change in wages.
A change in the price level.
A change in the nominal money supply.
A change in government spending.
49
1.
2.
3.
4.
5.
Factors a, b and c
Only factors b and d
Only factors a and c
Factors b, c and d
Only factors c and d
19. Which one of the following events describes the adjustment from the short to the medium to
long run in the case of an expansionary monetary policy?
Labour market
Pe < P: W P
Pe < P: W P
Pe > P: W P
Pe > P: W P
Pe < P: W P
1.
2.
3.
4.
5.
Financial market
Ms M/P i
M/P i
M/P i
M/P i
M/P i

An increase in the price of oil (a supply shock) will
a.
b.
c.
d.
e.
shift the PS curve upwards.

lead to a lower real wage.
lead to higher natural rate of unemployment.
shift the AS curve to the right.
lead to a lower natural level of output.
1.
2.
3.
4.
5.
50
a, b, c and e
b, c, d and e
Only b and c
Only b, d and e
Not one of the options 1 to 4
Goods market
I Z Y
I Z Y
I Z Y
I Z Y
I Z Y
ECS2602/101
SECOND SEMESTER ASSIGNMENTS

SEMESTER 2
STUDY UNITS 1 TO 3
DUE DATE: 2013/08/05
1.
A difference between microeconomics and macroeconomics is that .

1.
2.
3.
4.
5.
2.
microeconomics studies businesses while macroeconomics studies people.

microeconomics studies what is happening in the economy currently while macroeconomics studies what happened in the past.
microeconomics studies the performance of the private sector while macroeconomics
studies the performance of the government.
microeconomics studies the overall price level while macroeconomics studies price
determination in a single industry.
microeconomics studies individual decision makers while macroeconomics studies the
economy's overall performance.

Gross domestic product (GDP)
a.
b.
c.
d.
is the total value of all goods and services produced within the boundaries of a country
in a particular period.
is the broadest, best-known and most used measure of economic activity.
includes imports of goods and services.
can be expressed in real or nominal prices.
1.
2.
3.
4.
5.
a, b and d
Only b and d
b, c and d
a, c and d
Only d
51
3.
The overall balance of payments position in the balance of payments is reflected by the
1.
2.
3.
4.
5.
4.
Gross domestic expenditure, which is the total value of spending on final goods and services
within the borders of a country
1.
2.
3.
4.
5.
2.
3.
4.
The four major spenders in the economy are households, government, private firms and
the foreign sector.
Final consumption expenditure by households (C) is classified in terms of durable,
semi-durable, and nondurable goods and services.
Transfers payments and interest on debt are included in final consumption expenditure
by government (G) since they are part of the purchase of final goods and services.
Gross capital formation is the spending by households, private firms and government
on residential and non-residential capital goods.
When an economist refers to investment, he or she usually means

1.
2.
3.
4.
52
includes imports but excludes exports.

excludes imports but includes exports.
includes both imports and exports.
excludes both imports and exports.
Which one of the following statements is incorrect?

1.
6.
balance on the current account.

balance on the financial account.
balance on the capital transfer account.
balance of unrecorded transactions.
change in foreign reserves.
financial investment, in other words, investment in shares and other financial

instruments.
financial investment, in other words, spending on additions to the capital stock, such as
machinery and structures.
real investment, in other words, investment in shares and other financial instruments.
real investment, in other words, spending on additions to the capital stock, such as
machinery and structures.
ECS2602/101
7.

a.
b.
c.
d.
Induced consumption is equal to R100 if income is R200.

The marginal propensity to consume is equal to 0.15. It means that if the income of
households increases by R100 million, the increase in consumer spending will be R15
million.
An increase in autonomous consumption will influence the slope of the consumption
curve.
If the marginal propensity to save by households increases, the marginal propensity to
consume will be lower. In other words, the slope of the C curve will be flatter.
1.
2.
3.
4.
5.
8.
a, b and c
a, b and d
Only b and d
Only a and d
Only b and c
Given that co = 800, = 600, G = 700, c = 0.8 and T = 400 the equilibrium level of output and
income is ...
1.
2.
3.
4.
5.
R12 500
R12 100
R8 900
R2 100
R1 424
53
Question 9 is based on the following diagram below.
9.
Given a demand for goods curve ZZ

a.
b.
c.
d.
at point d the demand for goods exceeds the level of output; therefore excess supply
occurs and producers will cut back on production to move back to Y0.
at point d the level of output exceeds the demand for goods; therefore excess supply
occurs and producers will cut back on production to move back to Y0.
at point c the demand for goods exceeds the level of output; therefore excess demand
occurs and producers will increase production to move back to Y0.
at point c the level of output exceeds the demand for goods; therefore excess demand
occurs and producers will increase production to move back to Y0.
1.
2.
3.
4.
a and c
a and d
b and c
b and d
10. If the multiplier is 3 and income increased by R72 million, the increase in autonomous
spending must have been
1.
2.
3.
4.
R72 million.
R24 million.
R0.04 million.
R216 million.
11. Given that co=R50, =R230, G=R300, c=, T=R100 and YF=R3 000 the equilibrium level of
output and income is ... and in order to reach the full-employment level of income,
government spending must increase by
1.
2.
3.
4.
54
R2 320 million and G must increase by R170 million.

ECS2602/101
12. Given that an economy is at equilibrium at an income level less than full employment, an
increase in the marginal propensity to consume will cause a(n) ..
1.
2.
3.
4.
5.
upward shift of the demand for goods curve.

downward shift of the demand for goods curve.
flatter slope of the demand for goods curve.
steeper slope of the demand for goods curve.
higher vertical intercept of the demand for goods curve.
13. Given a marginal propensity to consume of 0.5 an increase of 200 in government spending
and an increase of 240 in taxes will cause the level of output and income to ...
1.
2.
3.
4.
5.
decrease by 200.
increase by 240.
decrease by 160.
increase by 40.
increase by 160.
Questions 14 to 22 are based on the following approximate figures for the South African economy
in 2011:
Real GDP
Estimated population
Estimated labour force
Multiplier
Government debt
Government deficit
= R1 895 000 million

= 50 million
= 20 million
= 1.2
14. How many people were unemployed in South Africa in 2011?

1.
2.
3.
4.
5 million.
12.5 million.
30 million.
20 million.
15. If the government increases its expenditure by R100 million by how much will real GDP
increase?
1.
2.
3.
4.
5.
R100 million.
R40 million.
R140 million.
R240 million.
R120 million.
55
Read the following and answer the questions that follow:

A positive relationship exists between economic growth and employment creation. The larger the
employment intensity of economic growth the more jobs are created for a given economic growth
rate. An employment intensity of 0.2 indicates that for a 1% economic growth rate employment
increases by 0.2% while an employment intensity of 0.4 indicates that for a 1% economic growth
rate employment increases by 0.4%. The following data indicates the relationship between
employment intensity and the economic growth rate needed to create 500 000 new jobs in South
Africa.
Employment intensity
0.2
0.4
0.6
0.8
1
% Change in GDP needed to create 500 000 new

employment opportunities
18%
8%
6%
4%
3%
16. Assuming an employment intensity of 0.6 the % increase in real GDP must be approximately
____ to create 500 000 new jobs.
1.
2.
3.
4.
5.
4%
6%
8%
10%
12%
17. By how much should real GDP increase to create 500 000 new jobs?
1.
2.
3.
4.
5.
R113 700 million.

R189 500 million
R75 800 million.
R151 600 million.
R227 400 million.
18. If this increase in GDP is to be achieved by an increase in government spending on

infrastructure by how much should government increases its spending?
1.
2.
3.
4.
5.
56
R113 700 million.

R812 214 million.
R108 286 million.
R94 750 million.
R162 429 million.
ECS2602/101
19. Assuming that tax revenue of the government is unchanged and given the increase in
government spending in question 18 government deficit as a percentage of real GDP is ____
and government debt as a percentage of real GDP is _____.
1.
2.
3.
4.
5.
6.8%; 36.6%
8.0%; 37.3%
8.7%; 37.9%
11.8%; 41.1%
12.7%; 41.4%
20. If the creation of 500 000 new jobs is to be achieved by a decrease in taxes by how much
should taxes, given a marginal propensity to consume of 0.6, decrease?
1.
2.
3.
4.
5.
R108 286 million.

R180 476 million.
R113 700 million.
R157 917 million.
R54 143 million.
21. Given the decrease in taxes in question 20 and assuming government spending is
unchanged, government deficit as a percentage of real GDP is ____ and government debt as
a percentage of real GDP is _____.
1.
2.
3.
4.
5.
22.
6.8%; 36.6%
8.0%; 37.3%
8.7%; 37.9%
11.8%; 41.1%
12.7%; 41.4%
How many people will be unemployed if government spending increase as indicated in

question 18 and taxes decrease as indicated in question 20?
1.
2.
3.
4.
5.
4 million.
4.5 million.
5 million.
5.5 million.
6 million.
23. Money, which can be used for transactions, includes

1.
2.
3.
4.
5.
income, interest received from bonds, shares and money.

income, bonds, shares, checkable deposits, coins and notes.
money, checkable deposits, income and the interest rate.
investment, shares, coins and notes and checkable deposits.
coins and notes and checkable deposits.
57
24. The demand for money in an economy depends on the

1.
2.
3.
4.
supply of money and the interest rate.

marginal propensity to consume.
multiplier.
interest rate and the level of output and income.
25. Exogenously determined money supply implies that

1.
2.
3.
4.
5.
as the interest rate increases the money supply will also increase.
the supply of money is determined by the demand for money and the interest rate.
money supply is determined by the central bank.
money demand is determined by the central bank.
the money supply curve is perfectly elastic.
Question 26 is based on the figure below:

a.
b.
c.
d.
At an interest rate of 5% the quantity of money supplied is 20 if the money supply is

regarded as exogenous.
At an interest rate of 10% equilibrium occurs in the financial market; the quantity of
money supplied (=20) is equal to the quantity of money demanded (=20).
If the level of income increases, an excess supply of money exists at an interest rate of
10%.
An increase in the demand for money shifts the Ms curve to the right.
1.
2.
3.
4.
5.
58
a, b and c
a and d
b, c and d
Only b and d
Only a and b
ECS2602/101
27. An expansionary monetary policy involves the

1.
2.
3.
4.
selling of bonds by the central bank on the open market to increase

money and the interest rate will decrease.
buying of bonds on the open market by the central bank to decrease
money and the interest rate will increase.
selling of bonds on the open market by the central bank to decrease
money and the interest rate will increase.
buying of bonds on the open market by the central bank to increase
money and the interest rate will decrease.
the supply of
the supply of
the supply of
the supply of
28. If the face value of the Treasury bill is R300 000, the price paid is R280 000 with the maturity
date of one year, the rate of return is ...
1.
2.
3.
4.
5.
R20 000
7.14%
6.67%
R280 000
2.07%
29. Which one of the following chain of events represents the impact of a decrease in income on
the financial market?
1.
2
3.
4.
5.
Y I
Y i
Y Md Pb i Y
Y Md Pb i Y
Y Md Pb i

A decrease in income with simultaneous contractionary open market operations by the
central bank
a.
b.
c.
d.
e.
is represented by a shift of the demand for money curve to the left and the money
supply curve to the right.
is represented by a shift of the demand for money curve to the right and the money
supply curve to the left.
will result in an increase in the interest rate.
will result in a decrease in the interest rate.
will result in an indeterminate impact on the interest rate.
1.
2.
3.
4.
5.
Only e
a and e
b and c
b and d
b and e
59
31. The sections of the study guide that I had to study to complete this assignment
1.
2.
3.
4.
5.
helped me to work through the textbook systematically.

did not help me to understand the study material in the textbook better.
was totally irrelevant to the assignment questions.
I did not use the study guide at all although I have one.
I have not received a study guide.
32. Indicate the value being added by the CDROM during your completion of this assignment.
1.
2.
3.
4.
5.

I did not use it.
33. Indicate the value being added by the video clips on the myUnisa webpage during your
completion of this assignment.
1.
2.
3.
4.
5.

34. Indicate the value being added by the www.econom.co.za website during your completion of
this assignment.
1.
2.
3.
4.
5.

35. Which one of the following describes your situation best?

1.
2.
3.
4.
5.
60
I worked through all the prescribed study material before attempting this assignment.
I quickly glanced through the prescribed study material before attempting this
assignment.
I did not study the prescribed study material before attempting the assignment, but
looked for the answers in the study material.
I could answer the questions without referring to the study material.
I just chose my answers randomly.
ECS2602/101
36. Where/how do you plan to submit this assignment?

1.
2.
3.
4.
Through myUnisa.
At one of the Unisa post boxes.
I will make use of the postal service.
I will make use of a private courier service.
37. Which one of the following best describes your access to a computer?
1.
2.
3.
4.
5.
I have unlimited access to a computer.

I have access to a computer but do not know how to use it for study purposes.
I have to pay to use a computer (e.g. internet caf).
I can only use a computer as a favour.
I do not have any access to a computer.
38. Which one of the following best describes your internet access?
1.
2.
3.
4.
5.
I have unlimited access to the internet.

I have limited access but can access the internet using my mobile phone.
I have limited access but can access the internet more than once a week at work/the
place where I study.
I have very limited access to the internet, e.g. at an internet caf.
I do not have any access to the internet.
39. Concerning the module website on myUnisa.

1.
2.
3.
4.
5.
I am not aware of the website.

I am aware of the website but have not visited it.
I visited the website once but did not find it helpful.
I visit the website regularly and find it helpful.
I visit the website only when I receive an announcement that there is something new.
40. Concerning the module discussion forum on myUnisa.

1.
2.
3.
4.
5.
I am not aware of the discussion forum.

I am aware of the discussion forum but do not use it.
I visited the discussion forum at least once but did not find it interesting.
I visit the discussion forum regularly and take part.
I would like to take part in the discussion forum but do not know how to.
61
SEMESTER 2
STUDY UNITS 1 TO 4
DUE DATE: 2013/09/02
This is a written assignment which you can either post to the university or submit electronically on
myUnisa.
Answer all the questions. (Total marks: 65). (Please note that not all the questions will
necessarily be marked.)
Identify the exogenous and endogenous variables in the financial market model.
Use the goods market model to explain the impact of a decrease of 150 in government spending
and a decrease of 150 in taxes on the level of output and income.
Use the goods market model to explain what happens to savings in the economy if the marginal
propensity to save increases.
Use the financial market model to explain why a decrease in output and income and an increase in
the money supply decrease the interest rate.
Use the following information to derive the IS-curve:
A decrease in the interest rate from 9% to 8% increases investment by 250.
The level of autonomous spending before the decrease in the interest rate is 3 000.
The multiplier is 2.
The following data pertains to the South African economy:
62
ECS2602/101
% change
e
At cons
stant 2005
5 prices
Datte
Gross dom
mestic
product att mark
prices
Fin
nal
con
nsumption
exp
penditure
by
households
(C))
Final consu
umption
expenditure
e by
governmen
nt
(G)
Gross fixe
ed capital
formation (I)
200
08/01
2.9
0.4
11.9
1
17.1
200
08/02
4.5
1.4
-2
1
12.5
200
08/03
1.8
0.5
9.2
9
2
20.7
200
08/04
-1.7
7
-1.1
8.9
200
09/01
-6.3
3
-4.8
7.1
7
-13.9
200
09/02
-2.8
8
-3.3
0.6
0
-10.6
200
09/03
1.8
1.1
8.2
8
-14
200
09/04
3.5
3.2
1.2
1
--3.2
2010/01
6.1
2.8
6.1. Identify the

t period during which a recesssion took place in th
he South A
African economy.
(2)
6.2. What ha
appened with the follo
owing spen
nding components du
uring the re
ecession?
i.
ii.
iii.
Co
onsumption
n spending by househ
holds
Invvestment spending
Go
overnment spending
6.3. Use the goods ma

arket model to indicatte the impa
act the cha
ange in inve
estment sp
pending
t level off output an
nd income during
d
the recession.
had on the
(2)
(2)
(2)
(6)
6.4. Use the IS-LM model to explain how sttabilisation policies were
w
used d
during the recession. (6)
Que
estion 7 (8
8 marks)
Use
e the IS-LM
M model to
t compare
e the impa
act of an expansiona
e
ary moneta
ary policy with that of a
con
ntractionaryy fiscal policy on the variables in
i the IS-LM model.
Que
estion 8 (8
8 marks)
Use
e the IS-LM
M model to
o identify the
t variables that willl have an impact on
n the effecttiveness of
o an
exp
pansionary monetaryy policy to increase the
t level of output an
nd income
e and expla
ain how th
hese
variiables influ
uence the effectivene
e
ess of monetary polic
cy.
63
SEMESTER 2
ASSIGNMENT 03
STUDY UNITS 5 TO 7
DUE DATE: 2013/09/30
Openness in goods and financial markets
1.

a.
b.
c.
d.
e.
The nominal exchange rate is the relative price of domestic goods in terms of foreign
goods.
The real exchange rate is the price of the domestic currency in terms of foreign
currency.
The most popular way of measuring the openness of the goods market, is to express
the imports and exports as a percentage of GDP.
Openness in goods markets is the ability of consumers and firms to choose between
domestic goods and foreign goods.
Openness in financial markets is the ability of financial investors to choose between
domestic financial assets and foreign financial assets.
1.
2.
3.
4.
5.
2.
Which of the following refers to an appreciation of the rand?

a.
b.
c.
d.
e.
R1 = $0.30 to R1 = $0.25
R1 = $0.25 to R1 = $0.30
R1 = $0.50 to R1 = $0.55
$1 = R8 to $1 = R7
$1 = R7 to $1 = R8
1.
2.
3.
4.
5.
64
a, b, c, d and e
Only a and b
Only b, c and d
Only a, b and e
Only c, d and e
a and c
Only b and c
a and e
b, c and d
b and e
ECS2602/101
3.
Which of the follow

wing statem
ments are correct
c
reg
garding the
e real exchange rate?
?
a.
b.
c.
d.
e.
e real exch
hange rate
e is the rela
ative price of domestic goods in
n terms of foreign
f
goo
ods.
The
The
e real excchange ra
ate is the price of the
t
domesstic curren
ncy in terms of fore
eign
currrency.
If a real app
preciation has occurred it mea
ans that th
he relative
e price of South African
goo
ods compa
ared with USA
U
goodss has increased.
If a real app
ans that th
he relative
goo
ods compa
ared with USA
U
goodss has decre
eased.
If a real app
ans that th
he relative
currrency com
mpared with
h USA currency has increased.
1.
2.
3.
4.
5.
a and c
b and c
a and d
b and d
b and e
Que
estions 4 to
o 7 are bassed on the
e following information:
Rea
al exchang
ge rate forr South Affrica
65
Nominal e
exchange rate (R/$))
66
ECS2602/101
4.
Which of the following statement(s) is/are correct with regards to the real exchange rate for
the rand?
a.
b.
c.
For the period 2010 to 2011 the real exchange rate decreased.
For the period 2005 to 2008 the real exchange rate decreased.
During the period 2004 to 2005 the real exchange rate decreased.
1.
2.
3.
4.
5.
5.

The nominal R/$ exchange rate _____ during 2006, 2007 and 2008 and _____ during 2009.
1.
2.
3.
4.
5.
6.
appreciated; depreciated
unchanged; depreciated
depreciated; depreciated
depreciated; appreciated
depreciated; was unchanged

Compared to the United States of America the inflation rate in South Africa during 2006 to
2008 was _____
1.
2.
3.
7.
Only a and b
Only a and c
Only b and c
Not a, b or c
a, b and c
higher.
lower.
the same.
Which one of the following is a possible cause for the change in the real exchange rate for
the rand during the period 2006 to 2008?
1.
2.
3.
4.
The appreciation of the rand and the inflation differential between the USA and South
Africa both increased the real exchange rate.
The impact of the appreciation of the rand outweighs the impact of the inflation
differential between the USA and South Africa and the real exchange rate increased.
The depreciation of the rand and the inflation differential between the USA and South
Africa both decreased the real exchange rate.
The impact of the depreciation of the rand outweighs the inflation differential between
the USA and South Africa and the real exchange rate decreased.
67
8.
A maize farmer from Limpopo province imports a new tractor and a plough to use on his
farm. From a South African perspective this would represent an _________ of funds and
would be recorded under __________ in the balance of payments.
1.
2.
3.
4.
5.
9.
inflow; merchandise exports

outflow; merchandise imports
inflow; service exports
outflow; payment for services
inflow; current transfers
A trade balance surplus indicates that a country earns more on ________ than it spends on
__________ and this would be reflected as a _____________ on the trade balance.
1.
2.
3.
4.
imports; exports; improvement

exports; imports; deterioration
exports; imports; improvement
imports; exports; deterioration
10. The interest parity condition tells the investor that when he/she have to decide between
domestic or foreign financial investment he/she would consider the difference in the
_________ and the _________________________.
1.
2.
3.
4.
5.
expected changes in the exchange rate; inflation rate

interest rate; expected economic growth
level of output and income; expected changes in the exchange rate
expected changes in the exchange rate; balance of payments
interest rate; expected changes in the exchange rate.
11. Given the following information:

Interest rate on RSA bonds: 9%
Interest rate on USA bonds: 6%
1.
2.
3.
4.
68
If the expected depreciation of the rand is 4% financial market participants will be

indifferent between RSA and USA bonds.
If the expected appreciation of the rand is 4% financial market participants will buy USA
bonds.
If the expected depreciation of the rand is 4% financial market participants will buy USA
bonds.
If the expected depreciation of the rand is 4% financial market participants will buy RSA
bonds.
ECS2602/101
The goods market in an open economy

12.

a.
b.
c.
d.
Foreign demand for domestic goods is also known as exports.

Domestic demand for foreign goods is also known as imports.
Part of domestic demand falls on foreign/imported goods.
The domestic demand for goods and the demand for domestic goods are the same.
1.
2.
3.
4.
5.
a, b, c and d
Only a, b and c
Only b and d
Only c and d
Only b, c and d
13. An increase in the real exchange rate implies that

a.
b.
c.
d.
SA goods are relatively cheaper than the goods produced in the rest of the world.
SA goods are relatively more expensive than the goods produced in the rest of the
world.
exports will increase.
exports will decrease.
1.
2.
3.
4.
5.
a and c
b and c
a and d
b and d
Only d

A positive relationship exists between the
a.
b.
c.
d.
e.
real exchange rate and exports.

domestic level of output and imports.
real exchange rate and imports.
domestic level of output and exports.
level of foreign output and exports.
1.
2.
3.
4.
5.
a, b, c and d
a, b, c and e
Only b, c and e
Only a and d
c, d and e
69
15. Suppose the economy is in a recession, and the government decides to increase
government spending in order to increase domestic demand and output.
If the original equilibrium level of output corresponds with a trade balance equilibrium position
(YTB), what will be the effect on the level of output and on the trade balance?
1.
2.
3.
4.
5.
The domestic level of output will decrease and there will be a trade deficit.
The domestic level of output will decrease and there will be a trade surplus.
The domestic level of output will increase and there will be a trade deficit.
The domestic level of output will be unchanged and there will be a trade surplus.
The domestic level of output will increase and there will be a trade surplus.
16. Which of the following factors will shift the NX curve to the left?
a.
b.
c.
d.
e.
A decrease in imports.
A decrease in exports.
A decrease in government spending.
An increase in domestic demand for foreign goods.
A decrease in foreign demand for domestic goods.
1.
2.
3.
4.
5.
a, b, c and d
b, c and e
Only a, c and d
Only b and e
Only d
Questions 17 and 18 are based on the following diagram.

Given goods market equilibrium in the following diagram, what would the likely impact of a
depreciation of the domestic currency be?
70
ECS2602/101

1.
2.
3.
4.
The ZZ1 curve will shift upwards.

The ZZ1 curve will shift downwards.
The ZZ1 curve will stay constant
The ZZ1 curve will shift upwards and then downwards.

1.
2.
3.
4.
5.
The domestic level of output will increase and there will be a higher trade deficit.
The domestic level of output will decrease and there will be a lower trade deficit.
The domestic level of output will decrease and there will be a trade surplus.
The domestic level of output will be unchanged and there will be a trade surplus.
The domestic level of output will increase and there will be a lower trade deficit.
Output, the interest rate and the exchange rate: the IS-LM model for an open economy
a.
b.
c.
d.
The equilibrium condition in the financial market is Md = Ms.

Financial investors, domestic or foreign, go for the highest expected rate of return.
By using the interest parity equation and by assuming that the expected exchange rate
changes, a relationship between the domestic interest rate and the nominal exchange
rate can be derived.
A positive relationship occurs between the domestic interest rate and the nominal
exchange rate.
1.
2.
3.
4.
5.
a, b, c and d
Only a, b and c
Only b, c and d
Only a, b and d
20. Which one of the following statements is incorrect regarding the IS and LM relations in an
open economy?
1.
2.
3.
4.
5.
An increase in the interest rate has a negative impact on the exchange rate.
The LM relation is exactly the same in an open as in a closed economy and is upward
sloping.
Given the domestic interest rate and the interest parity relation, the equilibrium interest
rate determines the equilibrium exchange rate.
The LM curve is upward sloping, because given the real money supply, an increase in
output increases the interest rate.
The interest parity relations shows (given i*, e) the following relationship:
i E and i E.
71
Questions 21 and 22 are based on the following diagram of an IS-LM model for an open economy:

a.
b.
c.
d.
e.
A decrease in government spending is part of contractionary fiscal policy and will shift
the IS curve.
Monetary policy refers to changes in the money supply and will shift the LM curve.
A decrease in government spending will shift the LM curve to the right.
An increase in taxation will shift the IS curve to the left.
A change in the interest rate will shift the LM curve to the right or to the left.
1.
2.
3.
4.
5.
Only a, b and d
a, b and c
b, c, d and e
a, b, d and e
22. A decrease in government spending causes a ...

1.
2.
3.
4.
72
decrease in the demand for goods and the level of output; a decrease in the demand for
money and the interest rate; a depreciation of the domestic currency and the trade
balance improves as exports increase.
money and an increase in the interest rate; an appreciation of the domestic currency
and the trade balance improves as exports increase.
decrease in the demand for goods and the level of output; an increase in the demand
for money and the interest rate; a depreciation of the domestic currency and the trade
balance improves as exports increase.
money and the interest rate; a depreciation of the domestic currency and the trade
balance deteriorates as exports increase.
ECS2602/101
ease in the money supply cause

es a ...
23. An incre
1.
2.
3.
4.
hig
gher intere
est rate, a capital inflow, an appreciation of the
e exchange rate an
nd a
detterioration of the trad
de balance.
low
wer interesst rate, a capital ou
utflow, a depreciatio
d
on of the exchange
e rate and
d an
imp
provementt of the trad
de balance
e.
low
wer interesst rate, a capital ou
utflow, an appreciation of the exchange
e rate and
d an
imp
de balance
e.
hig
gher intere
est rate, a capital inflow, a depreciatio
d
on of the exchange
e rate and
d an
imp
de balance
e.
24. In the IS
S-LM mode
el for an op
pen econom
my fiscal co
ontraction implies tha
at the
a.
b.
c.
d.
IS curve will shift

s
to the left and th
he interest rate decre
eases.
s
to the right and the interes
st rate incre
eases.
IS curve will shift
nom
minal exch
hange rate
e decrease
es and a depreciatio
d
on of the d
domestic currency
c
ta
akes
pla
ace.
nom
minal exch
hange rate
e increasess and an appreciatio
a
on of the d
domestic currency
c
ta
akes
pla
ace.
1.
2.
3.
4.
a and d
b and d
a and c
a and d
Que
estions 25 to 27 are based on the
t followin
ng informa
ation.
73
Nominal e
exchange rate (R/$))
74
ECS2602/101

For the period July 2011 and January 2012 South Africa experienced ...
a.
b.
c.
d.
a trade surplus.
a trade deficit.
that exports exceeded imports.
that imports exceeded exports.
1.
2.
3.
4.
5.
a and c
b and d
a and d
b and c
a and b

For the period July 2011 and January 2012 the R/$ exchange rate ...
1.
2.
3.
appreciated.
depreciated.
was unchanged.

For the period July 2011 and January 2012 South African exports ...
1.
2.
3.
increased.
decreased.
were unchanged.
75
Questions 28 and 29 are based on the following information.

Using the following model the likely impact of a change in the R/$ exchange rate on the level of
output and income and the trade balance can be explained as follows:

The impact on the level of output and income is that the
1.
2.
3.
4.
depreciation of the exchange rate caused a decline in exports and the level of output
and income decreases. This is indicated by a downward shift of demand for goods
curve and the level of output and income decreases.
appreciation of the exchange rate caused an increase in exports and the level of output
increased. This is indicated by an upward shift of the demand for goods curve and the
level of output and income increases.
appreciation of the exchange rate caused a decrease in exports and the level of output
decreased. This is indicated by a downward shift of the demand for goods curve and
the level of output and income decreases.
depreciation of the exchange rate caused an increase in exports and the level of output
increased. This is indicated by an upward shift of the demand for goods curve and the
level of output and income increases.

The impact of the change in the R/$ exchange rate on the NX curve is that
1.
2.
3.
4.
76
the NX curve shifts to the left.

the NX curve shifts to the right.
an upward movement along the NX curve takes place.
a downward movement along the NX curve takes place.
ECS2602/101
Question 30 is based on the following information.

During the first quarter of 2012 the interest rate in South Africa was higher than the interest rates
of our major trading partners.
Using the IS-LM model for an open economy which of the following correctly describes the
impact of the relatively higher interest rate on the R/$ exchange rate and the trade balance?
1.
2.
3.
4.
It caused a depreciation of the R/$ exchange rate, exports increased and the deficit on
the trade balance declined.
It caused an appreciation of the R/$ exchange rate, exports decreased and the deficit
on the trade balance increased.
It caused a depreciation of the R/$ exchange rate, exports decreased and the deficit on
the trade balance increased.
It caused an appreciation of the R/$ exchange rate, exports decreased and the deficit
on the trade balance decreased.
31. Did you make use of private tuition (Damelin, Varsity College, Boston and others)?
1.
2.
3.
4.
5.
No.
Yes and I paid less than a R1 000 for the tuition.
Yes and I paid more than R5 000 for the tuition.
32. Did you make use of the econom.co.za website to study for the module?
1.
2.
3.
4.
5.
Yes.
No, because I have not sufficient access to the WWW.
33. Which one of the following best describes your use of the econom.co.za website?
1.
2.
3.
4.
5.
I did not use the website.

I first studied the chapter in the text book and then visit the website.
I first visited the website and then studied the chapter in the text book.
I used the website only when I had a problem with a chapter in the text book.
I watched it occasionally.
77
34. Did you make use of the CDROM to study for the module?
1.
2.
3.
4.
5.
Yes.
No, because I have not sufficient access to a computer.
35. Which one of the following best describes your use of the CDROM?
1.
2.
3.
4.
5.
I did not use the CDROM.

I first studied the chapter in the text book and then used the CDROM.
I first used the CDROM and then studied the chapter in the text book.
I used the CDROM only when I had a problem with a chapter in the text book.
I used the CDROM occasionally.
36. Did you make use of video clips on myUnisa?

1.
2.
3.
4.
5.
Yes.
No, because I was unable to download and view the video clips.
37. Did you make use of the discussion forum on myUnisa?

1.
2.
3.
4.
5.
Yes.
No, because it is too unstructured.
No, because it contains too little discussion on module content.
38. Did you make use of past exam papers which are posted on myUnisa?
1.
2.
3.
4.
5.
Yes.
No, because I was unable to download it.
No, because I do not think it is important.
39. Did you read the weekly communication that was send to your myLIfe e-mail address?
1.
2.
3.
4.
5.
78
Yes.
No, I did not activate myLife e-mail address.
No, I do not have weekly access to the internet.
No, I do not have access to the internet.
No, I did not have time to read it.
ECS2602/101
40. Did you make use of other resources on the WWW?

1.
2.
3.
4.
5.
Yes.
No, because of the cost of using the internet.
No, because I did not have the time to do it.
41. If you have made use of the CDROM, econom.co.za website and video clips which one did
you find the most useful in your studies?
1.
2.
3.
4.
The CDROM.
The econom.co.za website.
The video clips.
Not applicable since I did not use all of them.
42. If broadband access to the WWW is a prerequisite to study this module I would
1.
2.
3.
4.
not be able to do the module.

be able to spend more than 2 hours per week on-line.
79
SEMESTER 2
ASSIGNMENT 04
STUDY UNITS 8 TO 9
SELF-ASSESSMENT ASSIGNMENT
DO NOT SUBMIT THIS ASSIGNMENT
The Labour Market
1.
In our analysis of the labour market we assume the following:

a.
b.
c.
d.
Labour is the only factor of production used in the production of output.

Labour productivity is constant.
The price of oil and other raw material stays constant.
The price of products set by firms is based on cost plus a markup.
1.
2.
3.
4.
5.
2.

a.
b.
c.
d.
Higher unemployment is associated with both a lower chance of finding a job and a
higher chance of losing your job.
An increase in the nominal wage for a given general price level will decrease the real
wage.
For a given nominal wage, an increase in the general price level prices will decrease
the real wage.
The real wage is the quantity of goods and services that can be purchased with the
nominal wage.
1.
2.
3.
4.
5.
80
a, b, c and d
Only a, b and d
Only b, c and d
Only a and b
Only c and d
a, b, c and d
Only b, c and d
Only a, c and d
Only b and d
Only a and d
ECS2602/101
3.
Institutional factors play an important role in the way wages are determined in a country.
Which of the following are institutional factors that are common in all countries?
a.
b.
c.
d.
Most workers are paid a high enough wage that they prefer being employed to being
unemployed.
The lower the unemployment rate, the higher the wages.
Wages depend on labour market conditions.
The expected price level, the unemployment rate and institutional factors will influence
the behaviour of workers when negotiating for wages.
1.
2.
3.
4.
5.
4.
Which one of the following, according to the wage-setting relationship, is not an institutional
factor that may affect the outcome of wage setting?
1.
2.
3.
4.
5.
5.
a, b, c and d
Only a, c and d
Only b, c and d
Only a, b and d
Only a, b and c
Minimum wages.
Unemployment benefits.
Labour law protection.
Unemployment rate.
Collective bargaining.
Which of the following statement(s) is/are correct?

a.
b.
c.
d.
Workers are able to determine the real wage through nominal wage bargaining.
Through an increase in their nominal wages workers are able to increase their real
wages.
An increase in the markup by firms causes a decrease in real wages.
A positive relationship exists between the markup and the price per unit.
1.
2.
3.
4.
5.
a, b, c and d
Only a, c and d
Only b, c and d
Only a and d
81
6.
Which of the following factor(s) will increase the bargaining position of workers?
a.
b.
c.
d.
A lower level of output and a higher unemployment rate.

A higher level of output and a lower unemployment rate.
1.
2.
3.
4.
5.
b, c and d
Only b and d
a, c and d
Only b and c
Only b
7.
Which factors will shift the WS curve to WS1?

a.
b.
c.
d.
e.
A higher unemployment rate.

A higher level of output.
A better bargaining position of workers.
1.
2.
3.
4.
5.
82
b, c, d and e
a, b, d and e
Only c, d and e
Only a and b
a, c, d and e
ECS2602/101
8.
The above diagram illustrates a(n)

a.
b.
c.
d.
e.
higher markup.
lower markup.
decrease in the real wage accompanied by an increase in the natural rate of
unemployment.
increase in the workers' bargaining position.
increase in the actual price level.
1.
2.
3.
4.
5.
9.
Only a and c
b and c
a, d and e
a, c and e
b, d and e
An increase in the level of output will cause the following events on the labour market:
1.
2.
3.
4.
The natural level of unemployment decreases causing an increase in the bargained real
wage.
The level of unemployment decreases causing an increase in the bargaining position of
workers which enables them to bargain for a nominal wage increase.
The level of unemployment increases which causes a decline in the bargaining position
of workers resulting in a lower bargained nominal wage.
The natural level of unemployment increases causing a decrease in the bargained real
wage.
83
10. Which one of the following chain of events describes the impact of an increase in output on
the labour market?
1.
2.
3.
4.
5.
W N u
Y u N W
Y N un W
Y N u W
Y N u W
AS-AD model
11. Which of the following events is/are represented by the AS curve?
a.
b.
c.
d.
e.
Y u N W P
Y N un W P
Y N u W P
Y u N W P
W N u P
1.
2.
3.
4.
5.
Only a
Only b
Only c
Only d
b and c
84
ECS2602/101

a.
b.
c.
d.
e.
At point c the actual price level is lower than the expected price level.
At point b the output level is higher than the natural level of output.
The real wage is the same at point a and point b.
As the level of output increases the price level rises.
The AS curve will shift to the left when the expected price level increases.
1.
2.
3.
4.
5.
a, b, c, d and e
Only a, b, d and e
Only b, c, d and e
Only a, d and e
Only a, b, c and d
13. Which of the following events is represented by the AD curve?

a.
b.
c.
d.
P M/P i I Z Y
Ms M/P i I Z Y
Ms M/P i I Z Y
P M/P i I Z Y
1.
2.
3.
4.
5.
Only a
Only b
Only c
Only d
a and d
Questions 14 and 15 are based on the following diagram.
85

Comparing point a with point b on curve AD the
a.
b.
c.
d.
e.
real money supply is higher at point b.

interest rate is lower at point b.
investment spending is higher at point b.
government spending is higher at point b.
demand for goods is higher at point b.
1.
2.
3.
4.
5.
a, b, c, d and e
Only a, b, c and e
Only b, c and d
Only b, c and e

Assume that the rightward shift of the AD is due to an expansionary fiscal policy. Comparing
point b on curve AD with point d on curve AD1 the
a.
b.
c.
d.
e.
level of government spending is higher at point d.

level of taxation is higher at point d.
demand for goods is higher at point d.
interest rate is higher at point d.
nominal money supply is higher at point d.
1.
2.
3.
4.
5.
a, b, c and d
a, c and e
Only b, c and d
Only a, c and d
b and e
16. Which one of the following events applies in the medium to long run in the case of an
expansionary monetary policy in the labour market?
1.
2.
3.
4.
5.
Pe > P:
Pe < P:
Pe < P:
Pe > P:
Pe > P:
W P
W P
W P
W P
W P
expansionary monetary policy in the financial market?
1.
2.
3.
4.
5.
86
M/P i
Ms M/P i
M/P i
M/P i
M/P i
ECS2602/101
expansionary monetary policy in the goods market?
1.
2.
3.
4.
5.
I
I
I
I
I
Z
Z
Z
Z
Z
Y
Y
Y
Y
Y
Question 19 is based on the following diagram which represents the impact of a contractionary
fiscal policy.
19. Which one of the following statements are correct?

1.
2.
3.
4.
In the short run: the increase in the interest rate in the financial market will lead to a
decrease in investment in the goods market, a decrease in the demand for goods and a
decrease in the level of output and income. This is represented by a shift from AD to
AD1.
The movement along the AD curve from point b to point c is the result of the events in
the labour market in the short run.
In the medium run, the AS curve will shift from AS to AS1 because of the following chain
of events: Pe W P.
At point c the level of output is at the natural level of output and all the real values are
equal to their original values.
87
Question 20 is based on the following AS-AD model and represents a supply shock in the
economy:

a.
b.
c.
d.
e.
1.
2.
3.
4.
5.
88
The shift from AS to AS' represents the short run impact of an increase in the price of
oil.
In the short run the increase in the price of oil will increase the price level which
decreases the real money supply (M/P) and leads to a contraction of demand and
output. This can be represented by the following chain of events: P M/P i I
Z Y.
The shift from AS' to AS" represents the medium run impact of an increase in the price
of oil where output is equal to a new lower natural level of output Y'n and the price level
is higher than before the supply shock.
At point A'' unemployment is higher and the real wage is lower.
To avoid the effect of an increase in the price of oil on the economy can firms decrease
their markup and/or labour can decrease their nominal wage demands.
a, b, c, d and e
Only a, b, c and e
Only b, c, d and e
Only c and d
Only b, c and e
ECS2602/101
OTHER ASSESSMENT METHODS
There are no other assessment methods for this module.
10
EXAMINATIONS
For general examination guidelines and examination preparation guidelines, please refer to the my
Studies @ Unisa brochure.
10.1
Examination period
This module is offered in a semester period of approximately 15 weeks. This means that if you are
registered for the first semester, you will write the examination in May/June 2013 and the
supplementary examination will be written in October/November 2013. If you are registered for the
second semester you will write the examination in October/November 2013 and the
supplementary examination will be written in May/June 2014.
During the semester, the Examination Section will provide you with information regarding the
examination in general, examination venues, examination dates and examination times.
10.2
Examination paper
The format of the examination paper is discussed in detail in Tutorial Letter 103 which you will
receive during the semester.
10.3
Previous examination papers
Some previous examination papers are available to students on myUnisa under the official study
material folder and one example of a recent examination paper will be provided in Tutorial Letter
103. Should you make use of previous examination papers, we advise you not to focus on such
old papers only as the content of modules and, therefore, examination papers may change from
year to year. To concentrate only on previous examination papers will not guarantee a pass.
You must be able to answer questions on all the prescribed work and study outcomes.
10.4
Tutorial letter with information on the examination
To help you in your preparation for the examination, you will receive Tutorial Letter 103 that will
explain the format of the examination paper, give you examples of questions that you may expect
and set out clearly what material you have to study for examination purposes.
11
FREQUENTLY ASKED QUESTIONS
The my Studies @ Unisa brochure contains an A-Z guide of the most relevant study information.
89
12
SOURCES CONSULTED
None.
13
CONCLUSION
Distance education is very tough on a student. It requires a lot of self discipline, sacrifice and hard
work. But it can be done!
Start early and work consistently throughout the semester. Do not leave it for the last two weeks
before the examination. It is not possible to master the module in two weeks. You should at least
spend a minimum of 8 hours per week on this module.
Work actively (with pen and paper) and make use of the activities in the workbook (TL102).
Do all the assignments. Dont try to do the written assignment (assignment 02) the night before the
due date. Start early by answering the questions as you finish the study units.
Tell your family, friends and other students what you have learned in this module. Even if they
dont understand it or are not interested.
Read and read and keep on reading (not only economics but other stuff as well).
We hope that you will enjoy this module and wish you all the best!
90

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ECS2602/101/3/2013

Tutorial letter 101/3/2013

INTRODUCTION AND WELCOME

Tutorial Letters 101 and 102

PURPOSE OF AND OUTCOMES FOR THE MODULE

The main outcomes of this module are the following:

LECTURERS AND CONTACT DETAILS

You can also contact us by e-mail via myUnisa.

MODULE RELATED RESOURCES

There are no recommended books for this module.

Electronic Reserves (e-Reserves)

There are no e-Reserves for this module.

STUDENT SUPPORT SERVICES FOR THE MODULE

Contact with fellow students: Study groups

There are no discussion classes for this module.

Tutorial support programme

MODULE-SPECIFIC STUDY PLAN

Assignments and learning

Learning strategy and proposed study programme

STUDY UNIT(s) or study

Complete and submit

Complete and submit

Prepare for examination

Prepare for examination

PROPOSED STUDY PROGRAMME: SECOND SEMESTER

STUDY UNIT(s) or study

Complete and submit

Complete and submit

Prepare for examination

Prepare for examination

PRACTICAL WORK AND WORK INTEGRATED LEARNING

There are no practicals for this module.

Although students may work together when preparing assignments, each

8.1.2 Assessment of examination

How will this work in practice?

General assignment numbers

8.2.2 Due dates of assignments

SEMESTER 2: ASSIGNMENT SUBMISSION DATES

This assignment contributes 25% towards your semester mark.

Which one of the following statements is not a macroeconomic issue?

The main focus of this macroeconomics module is the study of .

yields gross domestic product (GDP) at market prices.

excluding exports and including imports.

increase in consumption spending will increase income.

The difference between induced consumption and autonomous consumption is that

induced consumption is influenced by the level of disposable income while autonomous

Which of the following statements is/are correct?

is not determined by the level of output and income in the economy.

Expansionary fiscal policy means that government spending has to be

increased and/or taxes have to be decreased in order to increase aggregate demand in

Given the following information, answer questions 10 and 11.

10. Which of the following statements are correct?

Autonomous spending = R660.

11. The equilibrium level of income and output is

an increase in investment will move the economy to full employment.

= R1 895 000 million

15. How many people were unemployed in South Africa in 2011?

Read the following and answer the questions that follow:

% Change in GDP needed to create 500 000 new

R113 700 million.

19. If this increase in GDP is to be achieved through an increase in government spending on

R54 143 million.

R108 286 million.