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KWAZULU-NATAL PROVINCE EDUCATION REPUBLIC OF SOUTH AFRICA GRADE 12 NATIONAL SENIOR CERTIFICATE ECONOMICS COMMON TEST MARCH 2023

Marks: 100
Time: 1½ hours
This question paper consists of 9 pages.

INSTRUCTIONS AND INFORMATION

  1. Answer THREE questions as follows:

    • SECTION A: COMPULSORY

    • SECTION B: Answer any ONE question from this section.

    • SECTION C: Answer any ONE of the two questions.

  2. Number the answers correctly according to the numbering system used in this question paper.

  3. Write the number of each question above each answer.

  4. Read the questions carefully and start EACH question on a new page.

  5. Leave at least ONE line between subsections of each question.

  6. Start each question on a new page.

  7. Answer questions in full sentences and ensure that the format, content and context of your responses comply with the cognitive requirements of the questions.

  8. Answer ONLY the required number of questions. Answers in excess of the required number will NOT be marked.

  9. Use ONLY blue or black ink.

  10. Non-programmable pocket calculators may be used.

  11. Write legibly and present your work neatly.

SECTION A: COMPULSORY

QUESTION 1

Common Test March 2023

1.1 Multiple Choice Questions

1.1 Various options are provided as possible answers to the following questions. Choose the correct answer and write only the letter (A-D) next to the question number (1.1.1 to 1.1.8) in the ANSWER BOOK, for example 1.1.9. D.
1.1.1 The market where long-term deposits and borrowing are made is called …

  • A) money

  • B) goods

  • C) capital (Correct Answer)

  • D) resources

1.1.2 Public goods on which fees are levied to exclude free riders are called … goods.

  • A) community

  • B) merit

  • C) demerit

  • D) collective (Correct Answer)

1.1.3 The economic model that shows the relationship between unemployment and inflation is called the … curve.

  • A) Laffer

  • B) Lorenz

  • C) Phillips (Correct Answer)

  • D) Keynesian

1.1.4 An increase in the price of a currency in terms of another currency due to market forces is referred to as…

  • A) overvalue

  • B) appreciation (Correct Answer)

  • C) undervalue

  • D) depreciation

1.1.5 Removal of unnecessary restrictions that may reduce international trade is called …

  • A) sanctions

  • B) deregulation (Correct Answer)

  • C) disinvestment

  • D) regulation

1.2 Matching Items

Choose a description from COLUMN B that matches the item in COLUMN A. Write only the letter (A-I) next to the question numbers (1.2.1. to 1.2.8) in the ANSWER BOOK.
COLUMN A
1.2.1 Residual items
1.2.2 Moving averages
1.2.3 Treasury bills
1.2.4 Trade balance
1.2.5 Absolute advantage
1.2.6 Social services

COLUMN B
A) The difference between the value of exports and imports
B) Benefits provided by the government to improve the quality of life for citizens
C) An international institution established to promote economic recovery and development
D) Used for balancing national income figures
E) Analyzing the series of data over a period of time
F) A short-term debt obligation of the central government
G) A situation where one country can produce goods or services cheaper than another
H) None of the above
I) All of the above

Correct matches:
1.2.1 D
1.2.2 E
1.2.3 F
1.2.4 A
1.2.5 G
1.2.6 B

1.3 Short-Answer Questions

Give ONE term for EACH of the following descriptions. Write only the term next to the question numbers (1.3.1 to 1.3.6) in the ANSWER BOOK. Abbreviations, acronyms and examples WILL NOT be accepted.
1.3.1 A small initial increase in spending which proceeds to produce a proportionately larger increase in aggregate national income. Multiplier effect
1.3.2 The highest turning-point of business cycles. Peak
1.3.3 The business that is wholly or partially owned by the state. Parastatals / State owned enterprise
1.3.4 The value of a country's currency in exchange for another currency. Exchange rate

TOTAL SECTION A: 20 MARKS

SECTION B

QUESTION 2: MACROECONOMICS

40 MARKS - 30 MINUTES

2.1 Answer the following questions.
2.1.1 Name any TWO examples of direct taxes.

  • Income tax

  • Property tax

  • Transfer tax

  • Capital gains tax

  • Corporate tax
    2.1.2 Why is gold shown as a separate item on the balance of payment?

  • Gold is a major contributor to the country's GDP; hence it is recorded separately to monitor the trend.

2.2 Data Response

2.2.1 Identify the method of calculating national accounts shown above. Income method
2.2.2 Give another term used for gross value added. Gross domestic product / GDP
2.2.3 Briefly describe the term gross national product. Gross national product is the market value of all final goods and services that are produced by permanent residents of a country in a year.
2.2.4 Explain the benefit of investing in small business for the economy. Small business investment can create employment thus improving the standard of living. The emergence of small businesses can improve economic growth in the country.
2.2.5 Calculate the value of A. (Show all calculations)

  • R5,453,539+R131,563−R12,494=R5,572,608R 5,453,539 + R 131,563 - R 12,494 = R 5,572,608

2.3 Economic Analysis

2.3.1 Identify the sub-account of the balance of payment discussed above. Current account
2.3.2 Give the change in the surplus between quarter 4 of 2021 and quarter 1 of 2022. R 11 Billion
2.3.3 Briefly describe the term portfolio investment. Portfolio investments refer to the buying of assets such as shares in companies on the stock exchange of another country.
2.3.4 What is the importance of foreign direct investment in the economy? FDI is an inflow of capital to the country which increases the GDP. Having FDI creates job opportunities hence improving the standard of living.
2.3.5 How can the shortage of skilled labour force affect South Africa's trading position?

  • Lack of skilled labour force will reduce the quality of goods produced by the country.

  • A shortage of skilled labour resources means that those cannot be put to optimum use.

  • A lack of skills can result in increased dependence on imports, thus causing balance of payment problems.

2.4 Distinguish between the money market and capital market in circular flow.

Money Market:

  • The money market consists of short-term loans and investments made by consumers and business enterprises.

  • Instruments include bank debentures, treasury bills, and government bonds.

  • The South African Reserve Bank is the main institution in this market.

  • Banks and insurance companies are typical examples of players in the money market.

Capital Market:

  • The capital market consists of long-term loans and investments made by consumers and enterprises.

  • Shares and mortgage bonds are traded in this market.

  • The Johannesburg Stock Exchange is a key institution in the capital market.

2.5 How can a positive balance of payment benefit the country?

  • A positive BOP allows the government to provide for citizens, thus improving livelihood.

  • It allows the country to earn foreign income thereby accelerating economic growth.

  • Countries with a positive BOP can attract investors, increasing the real GDP.

  • Increased exports lead to a rise in per capita income, helping improve the standard of living.

  • Promotes globalization and trade, introducing new goods to the market.

TOTAL: 40 MARKS

SECTION C

QUESTION 4: MACRO-ECONOMICS

40 MARKS - 40 MINUTES

Discuss in detail the new economic paradigm in the smoothing of cycles.

INTRODUCTION

The new economic paradigm discourages policymakers from using monetary and fiscal policies to fine-tune the economy; however, they are encouraged to resort to policies related to demand and supply.

BODY: MAIN PART

Demand-side policies:

  • Determine actions by the government to influence aggregate demand for goods and services.

  • Aims to stimulate consumer spending and aggregate demand, which can lead to economic growth but might introduce bottlenecks like inflation, unemployment, and balance of payments deficits.

Inflation:

  • Occurs when aggregate demand increases faster than aggregate supply, resulting in rising general price levels.

  • If supply doesn't react adequately, inflation follows.

Unemployment:

  • Demand-side policies can stimulate economic growth, increasing employment opportunities.

  • Job creation reduces unemployment but may provoke inflation, as captured in the Phillips curve.

Supply-side policies:

  • Undertaken to influence the level of aggregate supply to meet fluctuation in demand.

  • Methods include cost reductions for increased output, improving infrastructure, and enhancing worker conditions, among others.

  • Deregulation helps enhance market efficiency, inviting foreign direct investment.

ADDITIONAL PART

How can exogenous (external) factors influence the economy?

  • Natural disasters can damage infrastructure and slow trade/investments, lowering living standards.

  • Competition from countries with similar products might create balance of payment issues.

  • Political instability can disrupt policy consistency, affecting investor confidence.

CONCLUSION

In real-world scenarios, governments often avoid monetary and fiscal policies as they can trigger inflationary effects and cause unemployment.

QUESTION 5: MACRO-ECONOMICS

40 MARKS - 40 MINUTES

Discuss in detail the macro-economic objectives of the state.

INTRODUCTION

The central objective of the state is to serve the people and facilitate systematic development for all citizens.

BODY: MAIN PART

  1. Economic growth: Refers to an increase in production of goods and services in the economy. States should aim for sustainable growth to improve living standards.

  2. Full employment: Indicates everyone who wants to work can find employment or create self-employment opportunities. Attaining high employment levels is a key objective for governments.

  3. Exchange rate stability: Protecting currency from excessive depreciation or appreciation fosters business certainty and investment.

  4. Price stability: Stabilizing prices leads to improved market performance. South Africa aims to maintain an inflation rate between 3% and 6%.

  5. Economic equity: Emphasizing redistribution of income and wealth to ensure social justice. South Africa utilizes a progressive tax system to fund social services.

ADDITIONAL PART

How can public sector failure negatively affect the economy of South Africa?

  • Public sector failures can lead to service delivery protests, damaging critical infrastructure.

  • Inept service delivery can curtail economic growth and development and will negatively impact the production sectors relying on state services.

  • Poor government performance discourages investment, leading to pessimism in business markets and worker layoffs.

CONCLUSION

The government plays a vital role in shaping the economy and making key governance decisions.

TOTAL SECTION C: 40 MARKS GRAND TOTAL: 100 MARKS