Grade 12 Economics Exam
June 2013.
Time: 180 Minutes Marks: 300
INSTRUCTIONS
1Answer SIX questions as follows:
SECTION A: COMPULSORY QUESTION(+/- 20 minutes)
SECTION B: THREE COMPULSORY QUESTIONS(+/- 90 minutes)
Question 2 – LO1 (Macroeconomics)
Question 3 – LO2 (Microeconomics)
Question 4 – LO4(Contemporary Issues)
SECTION C: TWO QUESTIONS OUT OF THREE OPTIONS.(+/- 70 minutes)
2Write the number of the question next to each answer.
3Number the answers according to the system used in this question paper.
4Start each question on a NEW SHEET OF PAPER. Leave one to two lines open between sub-sections of each question.
5Read each question carefully.
6A neat and systematic presentation of facts is required.
7Answer in full sentences.
8Do not answer more than the required number of questions. Only the required number of questions, in the order in which they have been handed in, will be marked.
9Use only a black or blue pen (graphs / diagrams may be done in pencil).
10Non – programmable pocket calculators may be used.
THIS QUESTION PAPER CONSISTS OF 13 PAGES AND ONE ANSWER SHEET
SECTION A (COMPULSORY)
For this section, use the ANSWER SHEET attached to the question paper.
QUESTION 1
1.1Three options are provided as possible answers to the following questions. Indicate with an X the correct answer (A – C) next to the question number (1.1.1 – 1.1.12).
1.1.1Deregulation means that the state
- adopts certain acts, measures and regulations to ensure the smooth running of production
- adopts certain acts, measures or regulations to prevent monopolistic power forming
- removes certain acts, measures or regulation to promote informal economic activities without unnecessary regulations
1.1.2The volume of ... is an example of a leading indicator.
- goods imported
- mining production
- manufacturing production
1.1.3Money spent by a South African tourist staying in a London hotel is part of ...
- invisible imports
- invisible exports
- trade balance
1.1.4Lowering the interest rate can be classified as a … approach to economic growth.
- supply-side
- fiscal
- demand-side
1.1.5The diagram shows the cost and revenue curves of a monopolistically competitive firm in long-run equilibrium.
Which statements correctly describe the performance of this firm?
The firm is making a normal profit / The firm is fully exploiting all economies of scaleA / no / no
B / no / yes
C / yes / no
1.1.6A government gives its approval for the building of a private airport because the airport would be socially beneficial.
In making its decision it calculates private costs at $700 m, private benefits at $800m and external costs at $200m.
What does this suggest must be true about the external benefits of the scheme?
- External benefits equal private benefits
- External benefits exceed $100m
- External benefits exceed external costs
1.1.7 An advertising agency estimates than an advertising campaign would shift the demand curve for a profit maximising firm’s product from D1 to D2 in the diagram.
What does the shaded area measure?
- The additional sales revenue the campaign would be expected to generate
- The maximum sum it would be worth the firm spending on the campaign
- The opportunity cost to the agency of undertaking the campaign
1.1.8The diagram shows a firm’s short-run marginal cost curve (SRMC).
What explains why the curve is upward sloping at output levels above OQ?
- Barriers to entry
- Diseconomies of scale
- The law of diminishing returns
1.1.9The graph shows a country’s average annual inflation rate over a five year period.
What can be concluded about the general price level during the five years?
- It fell in only one year
- It fell in only two years
- It rose in only two years
1.1.10Over a period of a year, the annual rate of inflation falls from 10% to 6%.
Which statement is correct?
- The cost of living has increased
- There has been a reduction in the Consumer Price Index
- The standard of living has increased
1.1.11Tourism could lead to socio-economic problems such as …
- pollution.
- unemployment.
- poverty
1.1.12One of the main reasons for the recent increase in international tourism to South Africa is …
- the appreciation of the rand.
- low tax rates.
- peaceful political transformation.
(12 x 2 = 24)
1.2Complete the following sentences by using the words provided in the list below. Write only the word(s) next to the question number (1.2.1 – 1.2.5).
cost-push; demand-pull; homogeneous; heterogeneous; AR curve; MR curve; merit goods; public goods; social security grants; taxes.
1.2.1Goods that are essential for the general welfare of a country’s residents, but are not provided by the market.
1.2.2The most important source of income for the poor.
1.2.3The demand curve for a monopolist is also its ...
1.2.4All products sold in perfectly competitive markets are ...
1.2.5This type of inflation is also known as “stagflation”.
(5 x 2 = 10)
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1.3Choose a description from COLUMN B that matches an item in COLUMN A. Write only the letter (A – M) next to the question number (1.3.1 – 1.3.8).
COLUMN A / COLUMN B1.3.1 / Endogenous explanation / A / the distance of the peaks and troughs from the trend line in a business cycle
1.3.2 / Implicit GDP deflator / B / also known as spill-over effects
1.3.3 / Externalities / C / the government increases government expenditure and reduces taxation
1.3.4 / CBA / D / business cycles are inherently stable
1.3.5 / Amplitude / E / price index of all goods and services
1.3.6 / Contractionary fiscal policy / F / measures the cost of production
1.3.7 / Explicit cost / G / comparison made between the expected social costs and benefits
1.3.8 / Moving average / H / the rent an entrepreneur pays
J / comparison made between the expected private costs and benefits
K / the government reduces government expenditure and increases taxes
L / reduces the impact of random events to highlight long-term trends
M / the profit earned by an entrepreneur
N / business cycles are inherently unstable
(8 x 2 = 16)
TOTAL SECTION A: [50]
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SECTION B: Answer ALLTHREE questions from this section.
START EACH QUESTION ON A NEW PAGE.
QUESTION 2: (LO1 Macroeconomics)
2.1Choose the correct word(s) from those given in brackets. Write only the word(s) next to the question number (2.1.1 – 2.1.4)
2.1.1Real flows and money flows move in the (same / opposite) direction.
2.1.2Economic equity is ensured by (proportionate / progressive) tax rates.
2.1.3Excessive demand for credit is linked to the (recovery / prosperity) phase of the business cycle.
2.1.4Devaluation and revaluation occur with (floating / fixed)exchange rates.
(4x2 = 8)
2.2GDP at factor cost, GDP at basic prices and GDP at market prices are associated with which methods of National Income accounting respectively? (3x2 = (6)
2.3Study the graph below that depicts a simplified 2-sector economy (where E = C + I) and answer the questions that follow:
2.3.1 Name the two sectors involved in deriving the multiplier. (2)
2.3.2What is represented by the line E=Y? (2)
2.3.3Use the formula, k=Y/J, to calculate the value of the multiplier. Show your calculations. (4)
2.3.4Explain the relationship between the mpc and the multiplier. (2)
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2.4Study the extract below and answer the questions that follow.
UNEMPLOYMENT RATE RISES TO 25.2%Johannesburg – The number of unemployed increased by 100 000 people to 4.6 million between the 4th of 2012 and the 1st quarter of 2013, Statistics SA (StatsSA) said on Monday. This took the country’s official unemployment to 25.2% from 24.9% in the 4th quarter of 2012, StatsSA said in its Quarterly Labour Force Survey.
StatsSA ‘s official definition of unemployment is someone aged between 15 and 64 who is without work in the week preceding the interview, but who looks for work and is available to take up employment or open a business.
In the expanded definition of unemployment, which includes people who have stopped looking for work, the rate was 36,7% in the 1st quarter of 2013, the highest since 2008.
The South African economy lost approximately one million jobs during the recession. It had gained 646000 jobs since the lowest level of employment in the 3rd quarter of 2010 (12.9 million). However, at 13.6 million, employment in the 1st quarter of 2013 was still lower than the 14 million before the recession.
Source: fin24 (2013/05/24)
2.4.1Differentiate between “official definition of unemployment” and the “expanded definition of unemployment”. (2)
2.4.2In terms of the business cycle. At what stage of the cycle would one experience “the lowest level of employment in the 3rd quarter of 2010”? (2)
2.4.3Calculate the Economic Active Population (EAP) by making use of the following formula: [EAP = # of unemployed / unemployment rate (%)] (2)
2.4.4 Briefly explain the relationship between unemployment and the inflation by making use of a graph. (4)
2.5Discuss how the Balance on the Current Account is calculated. (8)
2.6Discuss the Monetarist approach as a cause of Business cycles. (8)
[50]
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QUESTION 3 (LO2: Microeconomics)
Start this question on a NEW and SEPARATE SHEET OF PAPER.
3.1.Determine which of the following statements are true or false. Write only True or False next to the number (3.1.1 – 3.1.4).
3.1.1.Allocative inefficiency means that a business does not produce goods at the lowest possible cost.
3.1.2A monopolistically competitive firm will make an economic profit in the long run.
3.1.3If a producer has a patent right, it is an example of an artificial monopoly.
3.1.4An ideal price is an imputed price or value of a good or service. (4 x 2 = 8)
3.2Identify THREE forms of non-price competition. (3 x 2 = 6)
3.3Study the graph below and answer the questions that follow.
3.3.1 What type of market structure is illustrated above? (2)
3.3.2 Is the firm making a profit or loss? Calculate it and show your working. (4)
3.3.3Will this firm continue to produce in the SHORT RUN? Explain your answer.
(4)
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3.4Study the following diagram of a market failure and answer the questions that follow:
3.4.1What market failure is represented by the diagram above? (2)
3.4.2What is the equilibrium level of output and prices in this market (without government intervention)? (2)
3.4.3What is the socially optimum level of output and price? (2)
3.4.4Explain how government could correct the market failure shown. (4)
3.5Explain why a firm’s short-run average cost curve is usually drawn as a U shape and explain the link between the short-run average cost curve and the long-run average cost curve of a firm. (8)
3.6Discuss whether an economy would benefit from its government intervening to regulate an industry. (8)
[50]
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QUESTION 4 (LO4: Contemporary Issues)
Start this question on a NEW and SEPARATE SHEET OF PAPER.
4.1Choose the correct word from those given in brackets. Write only the word next to the question number (4.1.1 – 4.1.4).
4.1.1 Tax payers (nominal / real) income usually rises in an inflationary environment.
4.1.2 The SARB has (limited / complete) control over the money supply.
4.1.3 Most employment in the tourism industry is in the (transport / hospitality) sectors.
4.1.4Spending by international tourists can be regarded as(income/service) receipts.
(4 x 2 = 8)
4.2List THREE monetary policy tools used to control inflation. (3 x 2 = 6)
4.3Study the graph below and answer the questions that follow:
4.3.1What macroeconomic model is represented in the diagram above? (2)
4.3.2What might cause the AD curve to shift from AD1 – AD2? (2)
4.3.3Explain why the AS curve is vertical at Yf. (4)
4.3.4What type of inflation is illustrated in the diagram? (2)
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4.4Study the extract below and answer the questions that follow.
Tourist arrivals showed exceptional growth in the first quarter of 2012, with overall arrivals growing by 10.5%.A total of 2 267 807 tourists arrived in South Africa in January. February and March. Overseas tourist arrivals grew by 17.8% but growth in tourist arrivals had come from all regions. Emerging markets had continued their robust growth while traditional markets had bounced back.
Arrivals from Europe grew by 11.9% (394 716 tourists). Robust sales, marketing partnerships, South Africa's accessibility, and its value for money for European travellers contributed to the growth from Europe.Tourist arrivals from regional African tourist markets achieved positive growth rates of 7.9%.
This overall growth in tourism could be ascribed to significant investments in the local tourism industry, in time, energy and resources.
Source: Fin24.com, June 2012
4.4.1 Define the concept “tourism”. (2)
4.4.2 Which regionis the source of most tourists to South Africa? (2)
4.4.3 Which regionis the source of most tourist spending in South Africa? (2)
4.4.4 Identify TWO reasons highlighted in the article that explain why tourism has recently grown in South Africa (4)
4.5Briefly discuss the monetarist explanation of inflation (MV = PQ) (8)
4.6Briefly discuss FOUR reasons/purposes why tourists visit South Africa. (8)
TOTAL SECTION B: [150]
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SECTION C
Answer TWO questions from this section.
INSTRUCTIONS
Essay responses should include an introduction, body and conclusion. Five marks will be awarded for the introduction and conclusion. In addition, 5 marks will be allocated for the interpretation of the topic and language usage. A maximum of 40 marks will be awarded for the body.
QUESTION 5 (LO1: Macroeconomics)
Start this question on a NEW and SEPARATE SHEET OF PAPER.
Failure by the public sector to produce public goods and services causes higher prices in the market.
Discuss the characteristics, reasons and effects of the public sector failures when providing goods and services. [50]
QUESTION 6: (LO2: Microeconomics)
Start this question on a NEW and SEPARATE SHEET OF PAPER.
Explain, with the aid of graphs, how short and long-term equilibrium for the individual producer is achieved under conditions of perfect competition. In your explanation, ensure that you make reference to: market supply and demand; normal profit; economic profit and economic loss. [50]
QUESTION 7: (LO3: Contemporary Issues)
Start this question on a NEW and SEPARATE SHEET OF PAPER.
Tourism can be an engine of growth, capable of dynamiting and rejuvenating other sectors of the economy. We must see tourism as a means for a better life for all. Tourism is the world's largest industry and every year it pumps millions of dollars into some of the poorest countries.
Discuss the effects of tourism on the South African economy, highlighting its impact on GDP, employment, poverty, externalities, the environment and infrastructure. [50]
TOTAL SECTION C: [100]
GRAND TOTAL: [300]
BLANK PAGE
Grade 12 Economics Exam
June 2013
ANSWER SHEET.
Name: ______Teacher: OFH / SH / WHS
A / B / C / 1.3.11.1.1 / 1.3.2
1.1.2 / 1.3.3
1.1.3 / 1.3.4
1.1.4 / 1.3.5
1.1.5 / 1.3.6
1.1.6 / 1.3.7
1.1.7 / 1.3.8
1.1.8
1.1.9
1.1.10
1.1.11
1.1.12
1.2.1
1.2.2
1.2.3
1.2.4
1.2.5
1
Grade 12 Economics: June 2013