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ECONOMICS

GRADE 10 PAPER 1

JUNE EXAMINATION

2015

MARKS: 100

TIME: 1 HOUR

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INSTRUCTIONS AND INFORMATION

1. Answer THREE questions as follows in the ANSWER BOOK:

SECTION A: COMPULSORY SECTION B: Answer ONE of the two questions. SECTION C: Answer ONE of the two questions.

2. Answer only the required number of questions. Answers in excess of the required number will NOT be marked.

3. Number the answers correctly according to the numbering system used in this

question paper.

4. Write the question number above each answer.

5. Start EACH question on a NEW page.

6. Read the questions carefully.

7. Leave 2–3 lines between subsections of questions.

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

9. Use only black or blue ink. 10. You may use a non-programmable pocket calculator.

11. Write neatly and legibly.

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SECTION A (COMPULSORY)

QUESTION 1 20 MARKS – 10 MINUTES

1.1 Various options are provided as possible answers to the following questions.

Choose the answer and write only the letter (A–C) next to the question

number (1.1.1–1.1.5) in the ANSWER BOOK.

1.1.1 ... implies producing the most wanted products in the least costly

way.

A choice

B efficiency

C production

1.1.2 Scarcity means that there are ... resources to produce all the goods that

we need.

A sufficient

B insufficient

C fixed

1.1.3 When South Africans import goods from foreign producers, the flow

of money in our economy will ...

A remain the same

B increase

C decrease

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1.1.4 Economists of the Keynesian school of thought believe that the ... should

intervene to bring the economy back to balance.

A private sector

B politicians

C government

1.1.5 Subjects that are within the field of Economics are ...

A Accounting; Geography; Commercial Law

B Business Studies; Accounting; Mathematics of Finance

C Mathematics of Finance; Commercial Law; Sociology

(5 x 2) (10)

1.2 Choose a description from COLUMN B that matches an item in COLUMN A.

Write only the letter (A–F) next to the question number (1.2.1–1.2.5) in the

ANSWER BOOK.

COLUMN A COLUMN B 1.2.1 Macro-economics 1.2.2 Green tax 1.2.3 Trend line 1.2.4 Formal sector 1.2.5 Economic model

A All the registered businesses in the country. B A simplified representation or picture of reality. C A measure to protect the environment. D Includes all the industries and enterprises that are owned and controlled by the state. E Indicates the general direction in which the indexes used in the business cycle move. F Unemployment; inflation; economic growth.

(5 x 1) (5)

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1.3 Give ONE term for each of the following descriptions. Write only the term next to the question number (1.3.1–1.3.5) in the ANSWER BOOK.

1.3.1 A condition whereby goods and services might be available but

poor people may not have access to them because of

affordability.

1.3.2 The study of the application of statistical methods in economics.

1.3.3 Goods that are available in unlimited quantities and their supply is

beyond human control.

1.3.4 Changes that cause economic resources to become redundant in

one sector but employable in another sector.

1.3.5 The study of how to use limited resources to satisfy our unlimited

wants and needs as fully as possible. (5 x 1) (5)

TOTAL SECTION A: 20

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SECTION B

Answer any ONE of the TWO questions in this section in the ANSWER BOOK.

QUESTION 2: MACROECONOMICS 40 MARKS – 25 MINUTES

2.1 Answer the following questions:

2.1.1 State any TWO characteristics of economic goods. (2 x 1)

2.1.2 Why is it impossible to conduct experiments in social sciences?

(1 x 2) (4)

2.2 Study the table below and answer the questions that follow.

2013 R million

2014 R million

Durable goods 23 362 93 785 A 31 403 97 000 Non-durable goods 130 617 460 134 Services 108 062 B Total

293 444

1 138 968

2.2.1 Describe non -durable goods. (2)

2.2.2 Provide the missing information in A and B. (2 x 1) (2) 2.2.3 In your opinion why is the spending on durable goods lower than the spending on other goods? (2) 2.2.4 Calculate the expenditure on non-durable goods as a percentage of the total expenditure for 2013. Show ALL calculations. (4) /10/

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2.3 Study the extract below and answer the questions that follow. Putting a value on nature could set the scene for true green economy

1. The living fabric of this planet - its ecosystems and biodiversity – are in rapid decline worldwide. This is visible and clear and is variously due to commercial over-exploitation, or population pressures, or a raft of unhelpful policies, or some combination. At a very fundamental human level, however, it is due to the lack of awareness that there is a problem with human society being disconnected from nature. Economics is blamed for much of our woes these days and credited with little, so two questions need to be asked: is economics part of the problem of ecosystem degradation and biodiversity loss? Or is it part of the solution?

Source: South Africa Department of Environmental Affairs and Tourism

2.3.1 Which branch of economics studies ecosystem and biodiversity? (2) 2.3.2 In your opinion, why is economics blamed for ecosystem degradation? (2)

2.3.3 How can economics be part of the solution? (2)

2.3.4 Give TWO measures that the government can use to address the problem in the article. (4)

2.4 Tabulate the differences between positive and normative statements. (8) 2.5 Discuss changes in the exchange rate as an effect of business cycle. (8) [40]

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QUESTION 3: MACROECONOMICS 40 MARKS – 25 MINUTES

3.1 Answer the following questions:

3.1.1 Name TWO turning points in a business cycle. (2 x 1)

3.1.2 Why are economic indicators important to the government? (1 x 2) (4)

3.2 Study the diagram below and answer the questions that follow.

Supply of goods and services=R100 (A) Payment of income=R100 Consumption spending =(R?)

Source: Adapted from the Internet 2014 3.2.1 What diagram is depicted above? (2) 3.2.2 Fill in the missing information in A. (2) 3.2.3 Calculate the value of R. (2) 3.2.4 Identify ONE example of real flow from the diagram above. (2) 3.2.5 Explain the effect of the R20 (savings) in the economy. (2) /10/

Businesses Households

Savings =R20 Investment =R80

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3.3 Study the graph below and answer the questions that follow.

CHANGES IN AD and AS AD1 Price AS AS1 level AD 30 E1 20 E2 10 E AD1 AS AS1 AD 100 200 300 Aggregate quantity

3.3.1 Identify the average price level and equilibrium quantity at point E? (2 x 1) (2) 3.3.2 Explain why we use the term aggregate demand (AD) and not demand (DD). (2)

3.3.3. What do you think can happen to consumption expenditure during the expansionary phase? (2)

3.3.4 Mention any TWO factors that could cause AD to shift to the right . (2 x 2) (4) 3.4 Discuss the exogenous reasons for business cycle. (8)

3.5 With the use of formulae explain income and expenditure methods of calculating GDP. (8) [40] TOTAL SECTION B: 40

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SECTION C Answer only ONE of the two questions in this section in the ANSWER BOOK.

STRUCTURE OF THE ESSAY: MARK ALLOCATION:

Introduction Max. 2 Body: Main part: Discuss in detail/In-depth discussion/Examine/ Critically discuss/Analyse/Compare/Evaluate/Distinguish/ Explain/Assess/Debate Additional part: Give own opinion/Critically discuss/Evaluate/ 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

Max. 26 Max. 10

Conclusion Max. 2 TOTAL

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QUESTION 5: MACROECONOMICS 40 MARKS – 25 MINUTES The economy consists of millions of people who are engaged in many activities. They work, buy, sell, hire, manufacture, learn, teach, import and export.

x Analyse the role of participants in a closed economy. (26)

x Explain why South Africa is regarded as an open economy (10) [40]

QUESTION 6: MACROECONOMICS 40 MARKS – 25 MINUTES

Statistics South Africa and the South African Reserve Bank compile our national income accounts that measure economic activity.

x With the use of a diagram explain prosperity and depression as phases of a business cycle. (26)

x How can interest rates be used to smoothen economic fluctuations. (10) [40] TOTAL SECTION C: 40 GRAND TOTAL: 100

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ECONOMICS

PAPER 1 GRADE 10

JUNE EXAMINATION

2015

MEMORANDUM MARKS: 100

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SECTION A (COMPULSORY)

QUESTION 1

1.1 MULTIPLE-CHOICE QUESTIONS 1.1.1 B (efficiency) 99 1.1.2 B (insufficient) 99 1.1.3 C (decrease) 99 1.1.4 C (government) 99 1.1.5 B (Business Studies; Accounting; Mathematics of Finance) 99

(5 x 2) (10) 1.2 MATCHING ITEMS

1.2.1 F (unemployment; inflation; economic growth) 9 1.2.2 C ( a measure to protect the environment) 9 1.2.3 E (indicates the general direction in which the indexes used in the business cycle moves) 9 1.2.4 A (all the registered businesses in the country) 9 1.2.5 B (a simplified representation or picture of reality) 9 (5 x 1) (5) 1.3 GIVE ONE WORD 1.3.1 Relative scarcity9 1.3.2 Econometrics9 1.3.3 Free goods 9 1.3.4 Structural changes9 1.3.5 Economics9 (5 x 1) (5)

TOTAL SECTION A: 20

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SECTION B

QUESTION 2: MACROECONOMICS

2.1 Answer the following questions:

2.1.1 State any TWO characteristics of economic goods.

x Available in large quantities, often not enough to meet demand 9 x Command a price-consumers must pay for them9 x Have utility and exchange value9 x We can control supply9 x The prosperity of people is measured in term of the quantity of economic goods

in their possession9 (2 x 1) (2)

2.1.2 Why is it impossible to conduct experiments in social sciences?

x People think, reason and behave differently from each other therefore laboratory experiments cannot be done to check how people will react to certain changes99

(Accept any other relevant response) (1 x 2) (2)

2.2 Data response 2.2.1 Describe non - durable goods? Non - durable goods refers to goods that can be used once only. 99 (2) 2.2.2 Provide the missing information in A and B. A Semi-durable goods9 B 488 0499 (2 x 1) (2) 2.2.3 In your opinion why is the spending on durable goods lower than the spending on other goods? They produce a steady stream of satisfaction and their value diminishes relatively slowly through age and use99 (2) (Accept any other relevant response) 2.2.4 Calculate the expenditure on non-durable goods as a percentage of the total expenditure for 2013. Show ALL calculations. 130 617 x 10099 293 444 1 = 44.5% / 45% 99 (4)

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2.3 Data response 2.3.1 Which branch of economics studies ecosystem and biodiversity?

Environmental economics99 (2)

2.3.2 In your opinion why is economics blamed for ecosystem degradation Much of environmental damage has been caused by the way we conduct business99 (2) (Accept any other relevant response) 2.3.3 How can economics be part of the solution?

By putting value on nature / by teaching people to make choices that are not detrimental to nature.99. (2) (Accept any other relevant response)

2.3.4 Give TWO measures that the government can use to address the problem in the article.

x Regulating the usage of nature’s services99 x Engaging businesses and communities in a vision for a new economy99 x Imposing tax on the production of goods that degrade the ecosystem and

biodiversity99 x Changing incentive structures99 2 X 2 (4)

(Accept any other relevant response) 2.4 Tabulate the differences between positive and normative statements

Positive statement Normative statement x Deals with facts, and not

opinions99 x Deals with what was, what is, what

will be99 x Can be proven right or wrong by

evidence that can be observed99 x It is more concerned with how the

world really works99 x Religion, culture or class has no

influence99 x Example: An increase in petrol price

will increase the price of goods and services99 Any 2x2=4

x Deals with opinions99

x Deals with what should be or should have been99

x It is more of abstract without evidence to prove99

x It is more concerned with policies99

x Religion, culture or class has influence99

x Example: Tertiary education should be offered free of charge like basic education99 Any 2x2 = 4

(8)

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2.5 Discuss changes in the exchange rate as an effect of business cycle.

x Aggregate demand increases during expansion and decreases during contraction. 99

x When demand increases in countries that use goods imported from South Africa, exports from South Africa increase. 99

x The countries that buy South African products will need more rand to pay for these goods. 99

x When the demand for our rand increases, its value increases, or we say the rand becomes stronger. 99

x Therefore when exports increase, the exchange rate appreciates. 99 x The decrease in demand for our goods means that there is also a reduced

demand for the rand, as fewer payments need to be made in rand. 99 x As a result, the rand exchange value depreciates. 99 (8)

(Accept any other relevant response) [40]

QUESTION 3: MACROECONOMICS

3.1 Answer the following questions:

3.1.1 Name TWO turning points in a business cycle.

x peak9 / trough9 / (2 x 1) (2)

3.1.2 Why are economic indicators important to the government?

They show how the economy is doing at a specific time compared to how it

did in the past / predict direction in which economy will move in the future99.

(Accept any other relevant response) (1 x 2) (2)

3.2 Data response 3.2.1 What diagram is depicted above? Circular flow99 (2) 3.2.2 Fill in the missing information in A. Supply of production factors99 (2) 3.2.3 Calculate the value of R 8099 (2)

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3.2.4 Identify ONE example of real flow from the diagram above. Supply of goods and services99 (2) 3.2.5 Explain the effect of the R20 (savings) in the economy. There will be a leakage of R2099 / less consumer spending99 / availability of loanable funds in the financial institutions99 (2) (Accept any other relevant response) 3.3 Data response

3.3.1 Identify the average price level and equilibrium quantity at point E? Average price = 109 Equilibrium quantity = 1009 (2 x 1) (2)

3.3.1 Explain why we use the term aggregate demand (AD) and not demand (DD). Business cycle is a macroeconomic issue which affects the economy and all its role players99 (2) (Accept any other relevant response) 3.3.3 What do you think can happen to consumption expenditure during the expansionary phase? It will increase99 / AD will shift to the right and form a new AD curve, AD199 (2) 3.3.4 Mention any TWO factors that could cause AD to shift to the Right . Consumption expenditure99 / investment expenditure99 / net government expenditure99/ net foreign expenditure99 (2 x 2) (4) 3.4 Discuss the exogenous reasons for business cycle.

x Weather conditions99 – Changes in the weather conditions affect agricultural production, and therefore the level of economic performance. 99

x Money supply99 – An oversupply or undersupply of money circulating in the economy due to inappropriate government policies may results in inflation economic disequilibrium. 99

x Structural changes99 – This cause economic resources to become redundant in one sector and move to another sector. 99

x Shocks99 – Events such as the sharp increase in the price of oil in the 1970s, 11/09/2011 tragedy in USA and the collapse of emerging Economies cause distortions which create business cycles99.

x Political reasons99 – The decisions and actions of politicians can cause the economy to go into a particular phase of the business cycle. 99 For example, a prolonged depression which is still continuing today in Zimbabwe followed

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after the 2008 elections. 99 x Foreign trade99 – A country that trades a lot with other countries is likely

to be affected by the business cycles of its trading partners. If a major trading nation is in recession, its trading partners will also experience the slump in their economies. 99

x Psychological reasons99 – Sometimes business cycles are caused by what people believe about the economy. If most people are positive about the future of the country, the economy may enter the expansion phase. 99

x Natural disasters99 – The occurrences such as floods, prolonged drought, earthquakes or tsunamis may destroy or damage crops, factories, machinery, transport links and storage facilities which may cause a reduction in output and sends the economy into a downswing. 99 (Any 4 x 2) (8)

3.5 With the use of formulae explain income and expenditure as methods for calculating GDP.

x Income method – GDP is determined by adding up the income earned by the factors of production within the borders of the country. 99 GDP = wages + rent + profit + interest99

x Expenditure method – GDP is determined calculating the total expenditure on all final goods and services produced within the borders of the country. 99 GDP = C +G + I + (X - M) 99 (8)

[40] TOTAL SECTION B: 40

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SECTION C

Answer only ONE of the two questions in this section in the ANSWER BOOK.

STRUCTURE OF THE ESSAY: MARK ALLOCATION:

Introduction

Max.2

Body: Main part: Discuss in detail/In-depth discussion/Examine/ Critically discuss/Analyse/Compare/Evaluate/Distinguish/ Explain/Assess/Debate Additional part: Give own opinion/Critically discuss/Evaluate/ 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

Max.26

Max.10 Conclusion Max.2 TOTAL 40 QUESTION 5: MACROECONOMICS 40 MARKS – The economy consists of millions of people who are engaged in many activities. they work, buy, sell, hire, manufacture, learn, teach, import and export. x Analyse the role of participants in a closed economy. (26)

x Explain why South Africa is regarded as an open economy. (10)

INTRODUCTION

The circular-flow model of the economy is a simplification showing how the economy works and the relationship between income, production and spending in the economy as a whole. 99 The circular-flow model of a closed economy shows the workings of an economy that excludes foreign trade. 99 (Accept any other relevant introduction) (Max. 2) BODY: MAIN PART Consumers / Households

x A household may be described as an individual or a group of people who live together and who make joint economic decisions99

x They are the primary economic participants, for they own the factors of production99

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x Households offer the factors of production for sale in the factor market and receive wages, interest, rent and profit in return99

x They use the income to buy goods and services from businesses in the goods market99

x They use the goods and services to satisfy their needs and wants99 x Consumers do not always spend all their money on goods and services, they

also keep some of their money for use at a later date at financial institutions99 x They also pay tax to the government in various forms and get public goods and

services99 (Max. 10) Business enterprises / firms

x Firms are responsible for the creation of goods and services that will be bought by consumers in order to satisfy their needs and wants99

x They use production factors purchased from households in the production process99

x The goods and services are sold in the goods market to households, the government and also buyers in foreign countries99

x The income received from households is used to pay for more factors of production or to buy capital goods99

x Savings by households enable financial institutions to lend money to businesses who want money to start a business or improve an existing one99

x They also make payments to the government mainly in the form of taxes99 x A business can also receive a subsidy from the government for it to sell their

product at lower prices to households99 x They may also export goods and services to buyers in foreign countries99

(Max. 8)

The public sector / government x The term government refers to all levels of public sector – local, provincial and

national government, as well as public corporations such as Eskom and Transnet99

x The aim of the state enterprises is to provide goods and services that private individuals or firms cannot or will not provide99

x It also provides public goods that can be used by communities in general – such as public schools, roads, street lights and refuse removal99

x The government pays for the goods and services it buys from businesses or individual producers in the goods market99

x It also pays subsidies to producers to enable them to sell a product to consumers at a lower price than what would have been possible99

x It also makes transfer payments to people who are not able to take part in the economic activities99 (Max. 8)

BODY : ADDITIONAL PART

x South Africa being an open economy means that it does a lot of business with the rest of the world99

x Many goods and service produced by businesses in South Africa are sold to other countries99

x These goods that we sell to the rest of the world are called exports99 - they include minerals, cars, food and chemicals99

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x Households, businesses and government also buy many goods and services from other countries99

x These goods that are produced in the rest of the world are called imports99 x South Africa’s imports consist mainly of capital and intermediate goods, which are

used to produce goods and services99 (Max. 10)

CONCLUSION

Any relevant higher order conclusion that should include: x A summary of what has been discussed without repeating facts already

mentioned in the body. x An opinion or valued judgement on the facts discussed. x Additional support information to strengthen the discussion. x A contradictory viewpoint with motivation. x Recommendation.

E.g. The circular flow model shows how various participants in the economy interact with one another, and how their behaviour determines the flows of income, spending and production in the economy99 (Max. 2) [40] (Accept any other relevant conclusion)

QUESTION 6: MACROECONOMICS 40 MARKS –35 MINUTES Statistics South Africa and the South African Reserve Bank compiles our national income accounts that measure economic activity.

x With the use of a diagram explain prosperity and depression as phases of business cycle. (26)

x How can interest rates be used to smoothen economic fluctuations. (10) [40] INTRODUCTION

Business cycle can be defined as the consecutive periods of increasing and decreasing economic activities of a country over a number of years. 99 Many factors contribute to the upswing and downswing of economic activities like supply of power, investment in the country, productivity of the labour force etc 99

(Accept any other relevant introduction) (Max 2)

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MAIN PART Diagram

Phases of business cycle

The prosperity phase x Optimism encourages entrepreneurs to borrow money and buy new machinery

and equipment99 x More people are employed and production increases99 x Factories work overtime and skilled workers become extremely scares99 x Prices, wages, interest rates and profit increases99 x Boom starts99 x Everything seems go to the extreme99 x Interest rates, salaries and wages increases to even higher levels and together

with a much greater demand for raw materials, costs of business increase almost beyond control99

x Inflation accelerates beyond previous high levels99 x Some businesses start to realize that the prosperity phase cannot last

forever99 x But there are no disturbances yet99 (Max 10)

The depression phase

x Characterised by general pessimism by households and businesses99 x Spending of all sectors in the economy decrease drastically and consists

mainly of expenditure99 x Businesses shows poor profit, many makes losses and some get bankrupt99 x Households cannot pay their debt99

Econ

omic

Act

ivity

Time

pros

perit

y

depr

essio

n

Trend line

Mark Allocation

Correct naming of phases: 2 marks Correct labelling of axis: 2 marks Labelling of the trend line: 1 Correct shape of the cycle: 1

Total marks: 6

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x Have their furniture, motorcars and even the houses repossessed99 x Many people loses their jobs and households income are low99 x Many people find their work in the informal sector99 x Inflation decrease and inflation falls99 x At some stage, businesses start to realize that conditions are going to improve

at some time and they first actions that will eventually lead to recovery99 (Max 10)

ADDITIONAL PART

x Monetary policy is a policy used by the government to influence the supply of

money in circulation at a certain stage during the business cycle99 x A change in interest rates is the main way in which a government implements

the policy99 x Consumers often want to borrow money to buy consumer goods and services

that they cannot afford such as expensive cars, fancy clothing, houses even jewellery during the prosperity phase of the business cycle99

x When consumers borrow money from financial institutions, they have to pay interest99

x Businesses also tend to borrow more money for investment purposes during a prosperity phase99

x If there is too much money in circulation in the economy, it makes the inflation problem worse99

A government then tries to slow down consumer demand and other spending by increasing the basic interest rate that banks have to pay if they need to borrow money from the South African Reserve Bank99

x If the bank acceptance rate increases, all other interest rates also increase – this tends to discourage people from spending money they have to borrow, and this then decreases the demand for goods and services99

x Entrepreneurs also borrow less money when interest rates are high99 x Continuous increases in interest rates could lead to an economic recession99

(Max. 10) CONCLUSION E.g. Although we know the effects of business cycles, we prefer growth and dislike recession but business cycles will be part of our lives. 99 (Accept any other relevant conclusion) (Max. 2)

TOTAL SECTION C: 40

GRAND TOTAL: 100