CAPRICORN SOUTH DISTRICT

NATIONAL SENIOR
CERTIFICATE

GRADE 12

ECONOMICS 2024
TEST 1 TASK 2

MARKING GUIDELINES

MACROECONOMICS

MARKS: 100

This marking guidelines consists of 18 pages including cover

Economics/Test 1 Task 2 Memo/Grade 12 2 Capricorn South District/2024
NSC

SECTION A (COMPULSORY)

QUESTION 1

1.1 Multiple choice

1.1.1. D - increase in the national income 
1.1.2. D - terms of trade 
1.1.3. B - lagging 
1.1.4. C - phillips 
1.1.5. A - depreciation  (5X2) (10)

1.2 Matching
1.2.1. D  - An incentive given to manufacturers to reduce the cost of
production.

1.2.2. G  - The minimum amount of money that the south African Reserve
Bank require banks to maintain in order to manipulate money
creation activities.

1.2.3. A  - Estimating something known from facts that are known.

1.2.4. C  - Where one country can produce goods or services cheaper

than others.
1.2.5. F  - Long term funds are borrowed or saved.

1.2.6. B  -A statement of a country's transactions with the rest of the

world. (6X1) (6)

1.3 One term

1.3.1. Multiplier 
1.3.2. Parastatals 
1.3.3. Amplitude 
1.3.4. Exchange rate  (4x1) (4)

(20)

TOTAL SECTION A: 20
Economics/ Test 1 Task 2 Memo /Grade 12 3 Capricorn South District/2024
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SECTION B
Answer any ONE of the two questions from this section.

QUESTION 2

2.1

2.1.1 Name TWO examples of leakages in the circular flow.

 Savings 
 Tax 
 Imports  (2 x 1) (2)

2.1.2 How does an increase in population affect international trade?

 As the population of the country increases, aggregate demand increase
simultaneously thus stimulating the demand for international goods. 
 An increase in population is intertwined with an increase in the number of
people demanding goods and services therefore stimulating demand for goods
that are manufactured from other countries. 
(Accept any other correct relevant response) (1 x 2) (2)

2.2 DATA RESPONSE

2.2.1 What kind of economy is depicted in the diagram above?

 Closed economy  (1)

2.2.2 How many flows are indicated by the services/payments in the

diagram above?

 2 Flows  (1)

2.2.3 Briefly describe the term circular flow.

 It is the diagram indicating the flow of income, production and

expenditure in the economy 

(Accept any other correct relevant response) (2)

Economics/ Test 1 Task 2 Memo /Grade 12 4 Capricorn South District/2024
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2.2.4 Briefly explain the significance of the foreign sector in the

economy.

 The foreign sector is there to facilitate the exports and imports of goods
and services between different countries. 

(Accept any other correct relevant response) (2)

2.2.5 How can an increase in household spending influence the

economy?

 If households increase their spending it will lead to more money flowing

to businesses, who will use it to reinvest in their businesses and finally
result in growth in the economy. 
 More jobs will be created as businesses expand their operations and
the economy will be boosted. 
(Accept any other correct and relevant response) (2 x 2) (4)

2.3 DATA RESPONSE

2.3.1 What is the original equilibrium exchange rate in the above

graph?
 R17  (1)

2.3.2 What happens to the value of the Rand when prices change from
R17 to R18?
 Depreciation/decline/decrease  (1)

2.3.3 Describe the term depreciation of a currency.

 Depreciation of a currency is a decrease in the price of the currency
in terms of another country’s currency due to market forces (2)

2.3.4 Explain how managed exchange rates correct disequilibria in the

balance of payments.
 Central banks use their reserves to effect depreciations and
appreciations.
 Over the long-term currencies have to find their equilibrium levels.

(Accept any correct answer) (2)

Economics/ Test 1 Task 2 Memo /Grade 12 5 Capricorn South District/2024
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2.3.5 How will the depreciation in the value of a currency affect

businesses?
 Depreciation will increase the production costs for businesses as they will
require more money to buy from other currencies. 
 Exporting businesses can sell more to foreign countries as their products
will become cheaper.
(Accept any other correct relevant response) (2 x 2) (4)

2.4 Distinguish between real flow and money flow.

Real flow
 Flow of goods and services and factors of production between participants in
the circular flow. 
 Consumers render production factors to producers and government via the
factor market. 
 Goods and services are supplied by producers via the product market to
government and consumers. 
 Government provides public goods and services to consumers and producers.

 Producers receive goods and services (imports) form and deliver goods and
services (exports) to the foreign sector.  (2X2) (4)

Money Flow
 The flow of income and expenditure between the participants in the circular
flow. 
 The earning of money (income) and payments that is made. 
 Consumers earn an income for their production factors via factors market from
businesses. 
 Business sector earn an income for goods and services via the product market
from consumers and government. 
 Government earn an income consumers and businesses 
 Businesses earn an income for exports from the foreign sector and make
payments to the foreign sector for imports.  (2X2) (4)
(Accept any correct response)
Economics/ Test 1 Task 2 Memo /Grade 12 6 Capricorn South District/2024
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2.5 How does public sector failure negatively affect the South African
economy?

 Public sector failure results to a slow service delivery which retards the
development process of the country. 

 When the public sector fails, communities become disgruntled therefore

causing economic instability. 
 Unequal distribution of income and poverty may emanate from failure by
Public sector. 
 Public sector failure can be associated with the inefficient use of resources
and slow economic growth. 
 Failure by the state to provide public services can cause a violation of human
rights as people live in bad conditions. 
(Accept any relevant correct response) (4x2) (8)

[40]
Economics/ Test 1 Task 2 Memo /Grade 12 7 Capricorn South District/2024
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QUESTION 3
3.1.1 Name the TWO approaches to business cycles.
 Endogenous/Keynesian approach 
 Exogenous/Monetarist approach  (2x1) (2)

3.1.2 What is the effect of adding the value of intermediate goods when
calculating GDP?
 It will results in double counting which will cause national account to
reflect an incorrect higher total.  (1 x 2) (2)
(Accept any correct response)

3.2 DATA RESPONSE

3.2.1 Name ONE fiscal measure to increase economic activity during a

recession.
 Reduce taxes 
 Increase government spending  (1)

3.2.2 Which school of thought proposes external shocks as reasons for

business cycles?
 Exogenous/Monetarist view  (1)

3.2.3 Briefly describe the term monetary policy.

 The approach taken by a country’s central bank to influence spending
in an economy by controlling the interest rates and the money supply.
(Accept any other correct relevant response.)  (2)

3.2.4 What is the relationship between unemployment and inflation in

the Phillips curve?
 A reduction in unemployment will cause an increase in inflation
because of the increased amount of spending by people that were
previously unemployed. 
 Inverse relationship occurs when unemployment decreases, and
inflation will increase. 
(Accept any other correct relevant response.) (2)
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3.2.5 How can raising interest rates slow down economic growth?
 When central banks increase interest rates, it reduces demand for
goods and services. 
 This could result in companies hiring fewer or laying off their workers
and potentially lead to a recession. 
 Borrowing money becomes more expensive and the cost of doing
business rises. 
 Over time, higher costs and less business could mean lower revenue
and earnings for firms, possibly impacting their growth 
(Accept any other correct relevant response) (2 x 2) (4)

3.3 DATA RESPONSE

3.3.1 Identify the original consumption function on the graph.

 E0=10+0.5y  (1)

3.3.2 Give the marginal propensity to consume (mpc) from the above
graph.
 0.5  (1)

3.3.3 Briefly describe the term induced consumption.

 Induced consumption is consumption that depends on the level of income.

(Accept any other correct response) (2)

3.3.4 How does an increase in marginal rate of taxation (mrt) influence

the value of the multiplier?
 It will decrease the value of the multiplier due to a decrease in the
marginal propensity to consume. 
(Accept any other correct response) (2)
Economics/ Test 1 Task 2 Memo /Grade 12 9 Capricorn South District/2024
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3.3.5 Using the formula ΔY/ΔJ, calculate the value of multiplier for the
above diagram. Show all calculations.

 K=ΔY/ΔJ
 (60-20) / (30-10) 
K=40/20 
K=2  (4)

3.4 Briefly discuss leading indicators and coincident indicators as features

of forecasting in business cycles.

Leading economic indicators

 Leading indicators are a subset of economic indicators that provide early

signals about the future direction of an economy. 
 Their primary purpose is to help businesses, policymakers, and investors
make informed decisions by anticipating economic changes before they
happen. 
 Common leading indicators include stock market performance, business
sentiment surveys, consumer confidence indices, and housing permits. 
 Consumer confidence surveys assess the sentiment and spending intentions
of the public. High consumer confidence often leads to increased consumer
spending, which drives economic growth. 
 The number of building permits issued for new construction can signal future
economic activity. An increase in permits suggests a growing construction
sector and potential economic expansion. 
 While leading indicators are valuable for forecasting, they are not full proof,
and false signals can occur. Additionally, they may not always predict the
severity or duration of economic changes.  (Max.4)
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Coincident indicators

 They move at the same time as the economy. If the turning point of a specific
time series variable coincide with the reference turning point. 
 It indicates the current state of the economy. 
 If the business cycle reaches a peak and then begins to decline, the value of
retail sales will reach a peak and then begin to decline at the same time. 
 E.g. retail sales/ real GDP. 

(Accept any other relevant and correct response) (Max.4)

(2 x 4) (8)

3.5 Explain how government can correct a deficit on the Balance of Payment
account?

 Using methods, which will reduce imports and promote exports, can reduce
deficits. 
The following ways can be considered:
 Borrowing money from the IMF 
 Policies of export promotion an import substitution 
 Increase in aggregate supply will reduce prices. Exports are
promoted through cheaper prices. 
 Higher interest rates help to decrease spending on imports. 
 Increase in import tariffs and controls, although SA complies with policies
of the WTO to reduce its import controls. (Trade liberalisation) 
 Exchange control that allows central banks to ration foreign exchange. 
 Currency depreciation/devaluation makes imports expensive (reduction)
exports cheaper for foreign countries.(increase exports) 
 Increase in tax which reduces disposable income which decreases demand
in imports. 
 Reduction of reserves by SARB to correct deficits if we adopted a
managed floating exchange rate.  (4x2) (8)
(Accept any correct response)
(40)
TOTAL SECTION B: 40
Economics/Test 1 Task 2 Memo/Grade 12 11 Capricorn South District/2024
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SECTION C
Answer any ONE of the two questions from this section.

Answer will be assessed as follows.

STRUCTURE OF ESSAY MARK

ALLOCATIO
N

Introduction
 A good starting point would be to define a concept or key
word that appears in the question.
 Include other sentences to support the topic. Max. 2
 Do not include in your introduction any part of the question.
 Do not repeat any part of the introduction in the body.
 Avoid saying in the introduction what you are going to
discuss in the body.

Body:
Main part: Discuss in detail/In-depth discussion/Examine/Critically Max. 26
discuss/Analyse/Compare/Evaluate/Distinguish/Differentiate/Explai
n/ Assess/Debate

Additional part: Give own opinion/Critically discuss/Evaluate/ Max. 10

Critically evaluate/Draw a graph and explain/Use the graph given
and explain/Complete the given graph/Calculate/Deduce/Compare/
Explain/Distinguish/Interpret/Briefly debate

Conclusion
 The conclusion is a wrap-up of the discussion of the topic in
the body and should be treated as a higher-order response.
 The conclusion can take the form of an own opinion, Max. 2
examples to support your discussion or a contradictory
viewpoint from what has been discussed.
 No aspect from either the introduction or body should be
included in the conclusion.

TOTAL 40
Economics/Test 1 Task 2 Memo/Grade 12 12 Capricorn South District/2024
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QUESTION 4 FOREIGN EXCHANGE MARKET 40 MARKS

 Discuss in detail the demand reasons for international trade. (26 Marks)

 What impact can international trade have on countries of the world?

(10 Marks)

INTRODUCTION
 Countries of the world are interdependent and trade outside the border of a
country must be an important element. 
(Accept any other relevant introduction) (Max. 2)

MAIN PART

DEMAND REASONS:

1. Changes in the size of the population 

 A bigger population means that there are more consumer’s needs and wants
that must be fulfilled. 
 More goods and services will therefore have to be produced locally, but the
local supply might not be met by its corresponding demand. 
 This demand can therefore be satisfied by imports from other countries. 

2. Changes in the level of income 

 When aggregate income levels increase, so too will the aggregate demand for
goods and services within the country. 
 Increase in income increases the disposable income for spending on
additional goods and services. 
 If local supply is insufficient to meet the local the demand, then the platform
for international trade will emerge whereby imports will be necessitated. 
Economics/Test 1 Task 2 Memo/Grade 12 13 Capricorn South District/2024
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3. Changes in the wealth of the population 

 An increase in the wealth of the population will result in consumers demanding,
for example, luxurious goods. 
 If luxury goods demand cannot be satisfied locally, such goods will have to be
imported from abroad. 
 Most luxury goods are obtainable from developed countries since they
specialise with such goods. 

4. Tastes and preferences 

 Japanese are well-known for their small cars, while the Americans are well-
known for their big cars. 
 Americans are likely to exports to those with taste for big cars, while Japanese
will get imports from those who prefer small cars. 
 Tastes and preferences will push South Africans who are not the producers of
iphones to import them from United States of America. 

5. Differences in consumption patterns 

 Consumption patterns are to a large extent determined by the level of
economic development within the country. 
 In countries where the level of disposable income is high, the demand for
luxury goods especially from other countries will be high. 
 In countries where the level of disposable income is low, the demand for basic
goods especially from other countries will be high. 
(Max. 26)

ADDITIONAL PART
What impact can international trade have on countries of the world? (10 Marks)

Positive impact
 International trade is an important stimulant for the economic growth of a
country. 
Economics/Test 1 Task 2 Memo/Grade 12 14 Capricorn South District/2024
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 Demand for certain products by citizens of countries will increase as trade

increases, leading to increased production, job opportunities, increased
income and increased expenditure. 
 This will lead to a higher economic growth rate for countries of the world. 
 Being able to import also gives citizens access to a variety of goods
 Infrastructure, such as harbour and transport networks, will be developed in
order to move the high volumes of goods. 
 Unrestricted international trade increases competition. 
 Competition on the other hand increases efficiency because it demands the
elimination of unnecessary costs and all wastage. 
 Increases in efficiency result in lower prices. 

Negative impact
 When one nation knows that it is the source of all or a significant portion of
materials or services for another nation, the supplying nation can impose
embargoes or other difficult trade restrictions if differences arise or simply for
financial gain. 
 Some countries are so desperate for revenue or so profit-driven that they will
allow their natural resources to be over-exploited, which can create serious
problems in the future. 
 The welfare of the people in nations that produce goods and services is
sometimes ignored for the sake of profits. 
 Dumping can also have adverse effects on local businesses. 
 Countries with traditional economies could lose their local farming base as
developed economies subsidize their agribusiness. 
 International trade may adversely affect the consumption pattern of a country
due to the import of cheaply manufactured and at times harmful commodities.

(Accept any correct relevant answer) (Max 10)
Economics/Test 1 Task 2 Memo/Grade 12 15 Capricorn South District/2024
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CONCLUSION
As countries tend to specialise more, they become more dependent on one another
and are increasingly affected by the economic successes and failures of each other.

(Accept any other relevant conclusion) (Max 2)

(40)

QUESTION 5 PUBLIC SECTOR 40 MARKS

 Discuss in detail the main objectives of the public sector in the economy.
(26 Marks)
 Analyse the challenges that the South African economy is experiencing in
achieving the macro-economic objectives. (10 Marks)

INTRODUCTION
The government provides goods and services that are under supplied by the market
and therefore plays a major role in regulating economic activity and guiding and
shaping the economy. 
(Accept any other relevant introduction) (Max 2)

MAIN PART

Objectives:

1. Economic growth 
 Refer to an increase in the production of goods and services 
 Measured in terms of Real GDP 
 For economic growth to occur, the economic growth rate must be higher than
Population growth 
 Growth and development in a country benefit its citizens because it often
leads to a higher standard of living 
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2. Full employment 
 It is when all the people who want to work, who are looking for a job must be
able to get a job 
 High levels of employment is the most important economic objective of the
government 
 The unemployment rate increased over the past few years 
 Informal sector activities must be promoted because it is an area where
employment increase 

3. Exchange rate stability 

 The economy must be manage effectively and effective Fiscal and monetary
policy must be used to keep the exchange rate relatively stable 
 Depreciation and Appreciation of the currency create uncertainties for
producers and traders and should be limited. These uncertainties must be
limited 
 SARB changed the Exchange rate from a Managed floating to a free floating
exchange rate 

4. Price stability 
 Stable price causes better results in terms of job creation and economic
growth 
 The SARB inflation target is 3% - 6% and they are successful in keeping
inflation within this target 
 Interest Rates, based on the Repo Rate are the main instruments used in the
stabilisation policy 
 The table budget deficit also has a stabilizing effect on the inflation rate 

5. Economic equity 
 Redistribution of income and wealth is essential 
 South Africa uses a progressive income tax system – taxation on profits,
taxation on wealth, capital gains tax and taxation on spending, are used to
finance free services 
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 Free social services are basic education; primary health and to finance basic
economic services 
 E.g. Cash Grant to the poor, e.g. child grants and cash grants to vulnerable
people, e.g. disability grants 
 Progressive taxation means that the higher income earners pay higher/more
taxation  (Max.26)

ADDITIONAL PART

Analyse the challenges that the South African economy is experiencing in

achieving the macro-economic objectives. (10 Marks)

 The economy faces a number of socio-economic challenges such as high

unemployment rate; social inequality; limited access to health-care services; low
levels of educated people that decreases the country’s productivity levels. 
 South Africa's unemployment rate is one of the highest in the world;
unemployment in SA is due to sluggish economic growth, strict labour laws and
bureaucratic hurdles that have weighed on the ability of local companies to hire
additional workers. 
 The rand is perceived to be riskier than currencies of developed countries due to
domestic, political and economic instability – this can often lead to greater
fluctuations in the rand's value against the dollar and other major currencies. 
 The SARB is unable to keep inflation within the target range of 3–6% due to
continuous increase in the price of fuel and other factors.  For example,
South Africa's annual inflation rate was 7,2% in December of 2022, down from
7,4% in the prior month, as expected, but still above the upper limit of the South
African Reserve Bank.  The fluctuations such as the depreciation and
appreciation of a currency create uncertainties for investors; producers and
retailers. 
 South Africa faces persistent challenges of inequality, unemployment and
poverty. 
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 These challenges have overtime been worsened by sustained low levels of

investment and growth. 
 South Africa is the most unequal country in the world, with race playing a
determining factor in a society, where 10 percent of the population owns more
than 80 percent of the wealth according to the World Bank report. 
(Accept any other correct relevant response) (Max 10)

CONCLUSION
While some successes have been achieved by government, the fulfilling of some of
the objectives are compromised by factors like lack of accountability, corruption,
budgeting, nepotism and incompetence. 
(Accept any other relevant conclusion) (Max 2)

(40)

TOTAL SECTION C: 40

GRAND TOTAL: 100