Economics P1 Nov 2015 Memo Eng
Economics P1 Nov 2015 Memo Eng
SENIOR CERTIFICATE
GRADE 12
ECONOMICS P1
NOVEMBER 2015
MEMORANDUM
MARKS: 150
SECTION A (COMPULSORY)
QUESTION 1
1.1.1 B (investment)
1.1.2 A (amplitudes)
1.1.3 C (collective)
1.1.4 B (assets and liabilities)
1.1.5 C (dumping)
1.1.6 B (medium)
1.1.7 A (subsidies)
1.1.8 A (mortality rate) (8 x 2) (16)
1.3.1 Multiplier
1.3.2 Money / financial
1.3.3 Merit / public
1.3.4 Foreign / international
1.3.5 Gini
1.3.6 Life expectancy (6 x 1) (6)
TOTAL SECTION A: 30
SECTION B
QUESTION 2: MACROECONOMICS
• Export income / X
• Investments / I
• Government expenditure/spending / G Any (2 x 1) (2)
• VAT
• Sins tax / excise duty
• Fuel levy (1)
GDP plus primary income from the rest of the world minus
primary income to the rest of the world / GDP plus/minus net
primary income (2)
2.3.4 How does South Africa benefit from trade relations with
China?
2.5 How can the household as an important participant in the circular flow
model contribute to building the economy?
• The owners of the four factors of production can try to increase the quality
thereof to make a better contribution to the economy
• Households can sell their factors of production at lower rates to help to
lower the inflation rate and build the economy
• Households (labourers) can limit labour unrest and strikes where they
usually claim unreal increases in payment (much more than the current
inflation rate)
• Households can increase their savings and contribute indirectly to
increased production in the manufacturing sector
• Households can limit their spending on luxury goods that will limit the
aggregate demand and stabilise prices
• Households can concentrate on buying South African goods to stimulate
local production, future exports and increased penetration of markets
internationally
• Households can pay their relevant taxes and claim better service delivery
and infrastructure development
(Accept any other relevant answer) Any (4 x 2) (8)
[40]
3.1 3.1.1 Name any TWO redress measures currently used in South
Africa.
• BBBEE Act
• Employment Equity Act
• Land Restitution Act
• Land Redistribution Act
• Policy Promoting Equality
• Poverty reduction policy
• Affirmative Action
(Accept any relevant answer) Any (2 x 1) (2)
• South has low per capita income / which constitute 15% of the
world’s income
• North has high per capita income / which constitutes 85% of the
world’s income
(Accept any other relevant answer) (2 x 1) (2)
• Progressive personal income tax implicates higher tax rates levied on high
income earners and lower rates of taxes applying to lower income earners
- it leads to a desirable redistribution of income
• A too progressive personal income tax system has led to tax evasion and
avoidance – this might cripple the system. The number of people
responsible for most of the income of the state is decreasing
• Taxes on assets owned as well as wealth taxes (CGT) are both categories
where those who can afford it; must pay the taxes concerned
• Cash benefits include grants to the poor – old age pensions; disability
grant; UIF are amounts paid to those who form part of the lower income
groups of people without any income
• Benefits in kind comprises lower fees or no fee for certain income
categories, e.g. health care, education, protection, municipal services tries
to redistribute income successfully although major problems of nepotism,
apathy, lack of motivation and inefficiency occurs in these sectors where
money allocated for these groups are not spent accordingly
• Land reform programme involves returning of land to people that were
previously dis-owned without compensation as well as people excluded
from owning land in the past. Implementation of this policy remains
problematic due to certain decisions being taken that might reduce mass
production dramatically and we might not be able to feed the nation –
disadvantaging the poor even more
• Cash and financial benefits to SMMEs where Government provides
training, employment subsidies and financing of SMMEs - previously
disadvantaged groups will enjoy preference and income would be
successfully redistributed
• Public works programmes provide employment but usually on a
temporarily basis e.g. where unemployed are appointed to build stadiums
for a World Cup
• Property subsidies are paid to persons earning less than R3 500 per month
(Accept any other relevant facts) Any (4 x 2) (8)
(40)
• Recession
• Depression
• Prosperity
• Recovery
(Accept any other relevant fact) Any (2 x 1) (2)
4.1.2 How does a high level of education influence the ability of an
individual to get employed?
• It provides skills to do a specific job
• It provides knowledge to do a specific job
(Accept any other relevant answer) Any (1 x 2) (2)
4.2 Data Response
4.2.1 Identify the institution responsible for publishing the data
above.
South African Reserve Bank / SARB (1)
4.3.3 What is the correlation between a tax rate of zero and a tax
rate of 100 % for the government?
In both scenarios government will receive no income (2)
4.3.4 Explain the implication of a tax rate of 60% on the taxpayer.
• Tax evasion or tax avoidance will occur because too much tax
is levied on the taxpayer
• Taxpayer's burden will increase (by 20%)
• Some of the tax payers will stop working due to the increased
tax load (2 x 2) (4)
• Goods and services should be provided in the desired quantity and quality
• Public goods can be efficiently provided if pareto efficiency is achieved
• Minimising red tape / avoid bureaucracy rules and procedures should
be streamlined to minimize the negative impact on the delivery of services
• Increase training effective training must be provided for government
officials e.g. in-service training, reskilling
• Improve motivation by providing awards to productive workers,
financially or payment in kind
• Eliminate corruption put effective monitoring measures in place (8)
(Accept any other relevant answer) Any (4 x 2) [40]
TOTAL SECTION B: 80
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Economics/P1 12 DBE/November 2015
NSC – Memorandum
SECTION C
Answer ONE of the two questions in this section in the ANSWER BOOK.
QUESTION 5 MACROECONOMICS
INTRODUCTION
• Theories by the Monetarists (Friedman) and Keynesians (Keynes) are extreme
and only true under specific circumstances /
• Under real circumstances, government pursues economic growth irrespective of
being inherently stable or unstable market conditions prevalent /
• According to the New Economic paradigm, it is possible for output rise over
extended periods of time without being hampered by supply constraints and
inflationary pressures/-does not render ideal policies /
• Smoothing of the business cycle is when policy is used to prevent dramatic peaks
and troughs /
• Consecutive periods of increasing and decreasing economic activities
(Accept any other relevant introduction) (Max 2)
BODY
MAIN PART
• Governments’ aim with business cycle policies is to achieve the best possible
growth rates
• They need to apply policies to smooth out cyclical movements, so that peaks do not
end up in high inflation and troughs do not result in high unemployment
• Governments use monetary and fiscal policies to do this
• Fiscal policy - more successful in stimulating a depressed economy
• Monetary policy is more effective when ‘dampening’ an overheated economy that
has inflation rising
Monetary policies
When the level of economic activity changes the SARB can use expansionary
and contractionary measures reduce fluctuation of such economic activities.
Demand-side policies:
Traditional monetary and fiscal policies focus on aggregate demand
A demand-side approach only – does not render ideal results, often growth has to be
cut due to problems in inflation, balance of payments and shortages of skilled labour
• Aggregate supply needs to be managed as well - focus on increased flexibility of
supply components
• If the costs of increasing production is completely flexible, a greater output can be
supplied at any given price level
Supply-side policies governments can arrange things in the economy in a way that is
cooperative to changes in demand.
• Reduction of costs Greater output supplied at any given price level. AS shifts
to AS 1 and AD to AD 1 output expands from Q to Q 1 with prices stable
Price level %
AD AS
AD1 AS1
F
C
P E
AS
AD1
AS1 AD
0 Q Q1
Output level
• Supply often sticky and fixed in short term with increase in demand to AD 1 ,
supply stays constant - intersects at point F - real production and prices increase
(inflation) - creates conditions where supply is more flexible - through the use
of supply-side measures
ADDITIONAL PART
How has the Keynesian (endogenous) school of thought influenced business
cycles?
CONCLUSION
It remains critical that business cycles must be clearly monitored through the indicators
available, policy makers must act quickly by using monetary and fiscal instruments in
order to prevent instability in the economy
(Accept any other relevant conclusion) (Max. 2) (40)
INTRODUCTION
Governments use different statistical data to predict economic trends and formulate
suitable developmental strategies toward influencing the direction that the economy
should take
(Accept any other suitable introduction) (Max. 2)
BODY
MAIN PART
- This is the weighted average of the prices of a general basket of goods and
services likely to be bought by consumers
- The weights are obtained from expenditure of different income categories of
households
- Decides on a base year for calculating the CPI which is similar for all SNA items
- Decides on a formula for calculating the CPI
- Decides on the collection of prices – in SA it is obtained by means of surveys
- It shows changes in the general purchases of a currency (e.g. rand)
- It is also used for inflation targeting
- Pertains to cost of living
- Capital and intermediate goods are excluded
- Prices include VAT
- Interest rates are taken into account
- Prices of imported goods are not shown explicitly
- PPI measured prices of locally produced goods when they leave the factory
gate and imported goods when they enter the country
- It consist of a basket of local, exported and imported goods
- It includes capital and intermediate goods, but not services
- Prices exclude VAT
- Interest rates are excluded
- It measures the cost of production and not the cost of living
- It also serves as an indicator to predict consumer inflation (CPI)
• GDP deflator
- The GDP deflator is ratio that indicates the relationship of the GDP at nominal
prices to the GDP at real prices (formula)
- The GDP deflator is calculated for all goods produced in a country for a certain
year and is not based on a certain basket of goods
- GDP at constant prices is used to measure economic growth and inflation
EMPLOYMENT
• Employment
- The number of employed persons expressed as percentage of the EAP gives the
employment rate
- The South African employment rate was 75% during 2014 and is not
accompanied by a similar growth in employment numbers
- Employment indicators are important and used to calculate trends in employment
in different sectors or industries that indicates structural changes in the
economy to calculate productivity or to show the success of the
economy in utilising its full potential
- Full employment or high levels of employment is an indicator of a strong
economy with high levels of growth and development
- High levels of unemployment are normally a sign of deep-seated problems in an
economy lack of domestic and foreign direct investment, low levels of labour
productivity and rigid labour laws or high levels of poverty
- Employment indicators are used to calculate: (1) trends in different sectors or
industries (2) productivity and (3) successes of the economy in utilising
its full potential
There are various employment indicators that are used to monitor employment
progress:
• Unemployment
- Strict definition - the unemployed are those people within the economically
active population who; did not work during the seven days prior to the interview,
want to work are available to start work within two weeks of the interview and
have taken active steps to look for work or start some form of self-employment
in the four weeks prior to the interview
- Expanded definition includes everyone who desires employment, irrespective of
whether or not they actively tried to obtain one
- The unemployment rate is expressed as the percentage of unemployed persons
out of the total number of people willing and able to work, in other words the
labour force
- StatsSA obtains labour data from the Quarterly Labour Force Surveys to
calculate unemployment
- In South Africa the official unemployment rate was 25% in 2014 and is the most
important cause of poverty
ADDITIONAL PART
- The CPI breached the upper range of the inflation target during 2014. SARB has
increased interest rates to bring the inflation rate back into lower ranges, thus
stabilising prices.
- Setting the inflation target of 3 – 6% was a major initiative by the state that helped
SARB to stabilize prices
- A decline in international crude oil prices in recent months suppressed global
inflationary pressures. This contributed largely to lower domestic inflation -
favourably affecting Producer price inflation. Due to this the Reserve Bank were
able to keep the repo rate unchanged PPI for intermediate manufactured goods
has a positive impact on the stabilising of prices
- Although the Reserve Bank has been very successful in stabilizing prices, certain
external factors which influenced the global economy like the World recession has
impacted negatively on the SARB efforts in stabilizing prices
- Other factors like disinvestment due to poor governance led to a sharp decline in
stability which hampered the stabilizing effects of SARB
- The poor value of the Rand on international markets is a major negative contributing
factor on the inflation rate due to a major dependency on imports
(Accept any other relevant fact) (Max. 10)
CONCLUSION
Economic indicators are some of the most important and powerful tools that the
government can use to influence the direction that the economy should take as
against other countries (Max. 2) [40]
TOTAL SECTION C: 40
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