Grade 11 Economics November 2012
Grade 11 Economics Exam
November 2012.
Time: 150 Minutes Marks: 200
INSTRUCTIONS
1 Answer FOUR questions as follows:
SECTION A: TWO QUESTIONS OUT OF FOUR (+/- 70 minutes)
SECTION C: BOTH ESSAY QUESTIONS (+/- 80 minutes)
2 Write the number of the question next to each answer.
3 Number the answers according to the system used in this question paper.
4 Start each question on a NEW SHEET OF PAPER. Leave one to two lines open between sub-sections of each question.
5 Read each question carefully.
6 Answer in full sentences.
7 A neat and systematic presentation of facts is required.
8 Do 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.
9 Use a black or blue pen only (graphs / diagrams may be done in pencil).
10 Non – programmable calculators may be used.
THIS QUESTION PAPER CONSISTS OF 14 PAGES
SECTION A: Answer any TWO questions from this section.
Start each question on a new sheet of paper.
QUESTION 1: Measuring the performance of the economy
1.1 For each of the following seven questions, there are four possible answers: A, B, C or D. Choose the one you consider correct and write your choice on your answer paper. Make sure you label your answers correctly.
1.1.1 The table shows inflation rates, unemployment rates and changes in nominal wage rates between 2008 and 2009 for a number of countries.
country / Inflation % / Unemployment % / nominal wages %France
Germany
UK
US / +0.2
+0.2
+1.8
–0.3 / 9.4
8.3
7.8
9.4 / +3.0
+2.7
+2.5
+2.5
What can be concluded from the table?
A. On average, those in employment in the UK had an increase in real incomes.
B. The same number of people were unemployed in the US and France.
C. The same product would have the same price in France and Germany.
D. Unemployment was highest where inflation was highest.
1.1.2 The table shows some indicators of macro-economic performance in the US economy for five decades.
economic target / 1950s / 1960s / 1970s / 1980s / 1990sreal GDP growth (average %) / 4.18 / 4.43 / 3.28 / 3.02 / 3.03
inflation (average %) / 2.07 / 2.33 / 7.09 / 5.66 / 3.00
unemployment (average %) / 4.51 / 4.78 / 6.22 / 7.27 / 5.76
Between which decades did the US government achieve an overall improvement in its performance with no trade-off between individual policy goals?
A. 1950s to 1960s
B. 1960s to 1970s
C. 1970s to 1980s
D. 1980s to 1990s
1.1.3 The table gives information about two countries in 1994 and 2004.
country / GNP(local currencies) / population
(thousands) / prices
(1994 = 100)
1994 / 2004 / 1994 / 2004 / 2004
1 / 5000 / 18000 / 5000 / 5500 / 300
2 / 10000 / 20000 / 3000 / 3 300 / 200
From the data in the table, what can be concluded about the real GNP per head?
A. It fell in country 2 only.
B. It fell in countries 1 and 2.
C. It rose in countries 1 and 2.
D. It rose in country 2 only.
1.1.4 The table shows the balance in $ million for four items in a country’s current account for two years.
visibles / invisibles / income / transfersYear 1 / –72 / 84 / –3 / –24
Year 2 / –87 / 96 / 12 / –44
What can be concluded about the changes between Year 1 and Year 2?
A. Income has moved from a net inflow to a net outflow.
B. The difference between the value of exported and imported services has increased.
C. The value of exported goods has fallen.
D. Transfers into the country have increased.
1.1.5 A South African multinational company receives profits from its factories based in Angola. It then buys an US-owned firm based in Angola.
How will these transactions appear in South Africa’s balance of payments?
the remittance of profit / the purchase of the US-owned firmA.
B.
C.
D. / a credit (+) item in the current account
a credit (+) item in the financial account
a debit (-) item in the current account
a debit (-) item in the financial account / a debit (-) item in the financial account
a debit (-) item in the current account
a credit (+) item in the financial account
a credit (+) item in the current account
1.1.6 Assume that, in the population, 95 million people worked for pay last week, 5 million people did not work for pay but had been seeking a job, 5 million people did not work for pay and had not been seeking a job for the past several months, and 45 million were under age 16. The unemployment rate, given these numbers, is:
A. 5% B. 8% C. 10% D. 20%
1.1.7 The diagram shows the Lorenz curve for a country. What is the value of its Gini coefficient?
A. 0 B. 1 C. ½ D. -1 7 x 2 = (14)
1.2 Study the table below and answer the questions that follow:
National income and production accounts of South Africa (2008) at current prices
Method 1 / R million / Method 2 / R million / Method 3 / R millionCompensation of employees / 956 562 / Consumption expenditure / 1 384 979 / Primary sector / 264 474
Net operating surplus / 759 767 / Government expenditure / 464 791 / Secondary sector / 496 016
Consumption of fixed capital / 306 946 / Gross capital formation / 520 305 / Tertiary sector / 1 292 997
Exports of goods and services / 807 704
Imports of goods and services / 878 482
Source: SARB Quarterly Bulletin March 2009
1.2.1 Identify Methods 1, 2 and 3 in the table above. (3)
1.2.2 Calculate GDP at basic prices and factor cost (show all your working). (6)
1.2.3 Explain the difference between the two figures you calculated in 1.2.2 above. (3)
1.2.4 Calculate GDE (show all your working). (3)
1.2.5 Calculate NDP at basic prices (show all your working). (3)
1.2.6 The figures in the table are measured at current prices. 2008 is also a base year. What does this imply about GDP at constant prices? Explain your answer. (2)
1.3 Discuss and describe how the Lorenz Curve and the Gini co-efficient are derived / calculated and how they are used as measures of income inequality. (16)
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QUESTION 2: Inflation
2.1 For each of the following seven questions, there are four possible answers: A, B, C or D. Choose the one you consider correct and write your choice on your answer paper. Make sure you label your answers correctly.
2.1.1 The diagram compares the inflation rates of Paraguay and Argentina between 1950 and 2005.
What can be concluded about inflation rates in the two countries in the period 1950 to 2005?
A. Argentina’s prices fell rapidly between 1992 and 1995.
B. Argentina stabilised its price level between 1973 and 1992.
C. Paraguay was always more successful than Argentina at controlling its inflation rate.
D. Paraguay was most successful at controlling its inflation rate between 1962 and 1970.
2.1.2 Over a period of a year, the annual rate of inflation falls from 10 % to 6 %.
Which statement is correct?
A. The cost of living has increased.
B. The purchasing power of money has increased.
C. There has been a reduction in the Consumer Price Index.
D. The standard of living has increased.
2.1.3 Which statement about inflation is correct?
A. Cost-push inflation is likely to occur when the government increases its expenditure.
B. Demand-pull inflation is likely to occur when the country’s exchange rate appreciates.
C. The Quantity Theory of Money predicts that changes in money supply can cause inflation.
D. When inflation is unanticipated real values remain unchanged.
2.1.4 The table shows the annual percentage change in an index of prices.
country / 2008 / 2009China
Pakistan
Saudi Arabia
United States / 6.3
24.3
10.9
5.6 / –1.2
11.2
10.7
–1.4
What can be concluded from the table?
A. Prices were lowest in the United States in both 2008 and 2009.
B. Prices were most stable in Saudi Arabia.
C. The fall in inflation between 2008 and 2009 was greater in China than Saudi Arabia.
D. The price of all products sold by Chinese firms fell in 2009.
2.1.5 In an economy, the volume of output rises by 2 % in a year, while the quantity of money rises by 5 %.
If the velocity of circulation of money remains the same, what will be the approximate increases in the price level and the money value of national income?
increase in price level / increase in money value of national incomeA / 2.5% / 5%
B / 2.5% / 7%
C / 3% / 5%
D / 3% / 7%
2.1.6 Between 2008 and 2009 a country’s national income at current prices increased by 15%. At the same time the country experienced 5% inflation.
Which index number most closely represents the country’s national income in 2009 at 2008 prices (2008 = 100)?
A. 103 B. 110 C. 115 D. 120
2.1.7 What is likely to be the effect of a fall in oil prices on the global economy?
A. a decrease in the rate of economic growth
B. a decrease in unemployment
- a strengthening of cost-push inflation
- a weakening of demand-pull inflation 7 x 2 = (14)
PTO
2.2 Study the article below and answer the questions that follow:
Housing to get heavier weighting in inflation basket
HOUSING costs will carry a significantly larger weighting in a revamped measure for consumer inflation that takes effect at the start of next year, Statistics South Africa said on Tuesday.
The existing consumer price index (CPI) is monitored by the Reserve Bank when it makes decisions on interest rates. It rose 5.5% in September, up from 5% in the previous month and nearing the top of its official 3%-6% target range.
The contribution of housing costs to the CPI will rise to 22.8% from 21%, largely due to double-digit increases in electricity prices, Stats SA said. The weighting of food and non-alcoholic beverages will fall to 17.5% from 18.3% at present. Transport costs will carry a weight of 15.4%, down from 17.8%, reflecting a reduction in the importance given to purchases of motor vehicles.
The calculations are based primarily on the outcome of the Income and Expenditure Survey for 2010-11, released by Stats SA at the same time, but are supplemented by data from retailers.
They showed there had been a substantial shift in spending away from goods to services. This means that goods will account for just 49% of the weight of the overall CPI, compared with 54% now, while services will make up 51% of the weight, compared with 46% at present.
The last time Stats SA made changes to the index was in 2009, when the measure was overhauled to reflect international best practice.
Source: Business Day, November 2012
2.2.1 Define “CPI”. (3)
2.2.2 What do you understand the term “weighting” to mean in the context of the CPI? (3)
2.2.3 Explain why there might have been:
i. “a reduction in the importance given to purchases of motor vehicles” and
ii. “a substantial shift in spending away from goods to services” (6)
2.2.4 There has been some criticism of the new weightings – especially in regard to the data used to calculate them. What do you think is the main reason for this criticism? (4)
2.2.5 The new CPI calculations will be “rebased” to 2012. Explain. (4)
2.3 Using diagrams to assist you, explain “demand-pull and cost-push inflation.
(16)
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QUESTION 3: Theory of the firm
3.1 For each of the following seven questions, there are four possible answers: A, B, C or D. Choose the one you consider correct and write your choice on your answer paper. Make sure you label your answers correctly.
3.1.1 Which diagram correctly shows the relationship between the average product (AP) and the marginal product (MP) of labour given that the quantities of other factor inputs remain constant?
3.1.2 In the diagram, a firm is operating at point X on its long-run average cost curve.
Which statement is not correct?
A. The firm is employing the least-cost combination of factor inputs to produce OQ.
B. The firm is operating below its minimum efficient scale.
C. The firm is producing at its cost-minimising level of output.
D. The firm is producing output OQ at minimum cost.
3.1.3 The schedule shows the short-run marginal cost of producing good X.
units of X / 1 / 2 / 3 / 4 / 5marginal cost ($) / 40 / 30 / 30 / 60 / 120
Given that the total fixed cost is $20, what level of output minimises average total cost?
A. 2 units B. 3 units C. 4 units D. 5 units
3.1.4 The diagram shows a firm’s demand curve and its marginal revenue curve.
What is the approximate price elasticity of demand at price OP?
A. 0.25 B. 0.5 C. 1 D. 2
3.1.5 The table shows information about a profit-maximising firm.
output / 17 000 unitsprice per unit / $1.75
fixed costs / $10 000
variable costs per unit / $1.70
What should the firm do?
A. close down immediately because it is not covering its fixed costs
B. close down immediately because it is not covering its average costs
C. close down immediately because it is not covering its total costs