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SENIOR CERTIFICATE EXAMINATION

MARKS: 150

TIME: 1½ hours

This question paper consists of 12 pages.

ECONOMICS P1

2015

Economics/P1 2 DBE/2015 SCE


INSTRUCTIONS AND INFORMATION 1. Answer FOUR questions as follows in the ANSWER BOOK:

SECTION A: COMPULSORY SECTION B: Answer TWO of the three 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. 6.

Read the questions carefully. Start EACH question on a NEW page.

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.



SECTION A (COMPULSORY) QUESTION 1 30 MARKS – 15 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 (1.1.1–1.1.8) in the ANSWER BOOK, for example 1.1.9 C.

1.1.1 In calculating the gross domestic product (GDP), only the value of

… goods and services is taken into account.

A

B C

final raw intermediate

1.1.2 An example of a fiscal policy instrument is ... A

B C

money supply. government spending. interest rates.

1.1.3 State-owned enterprises are also called … A

B C

parastatals. the private sector. the corporate sector.

1.1.4 An increase in the value of a currency due to supply and demand is

known as …

A

B C

appreciation. revaluation. depreciation.

1.1.5 Newly established industries are often called … industries. A

B C

mature infant developed

1.1.6 Labour as a factor of production is referred to as … A

B C

human development. human rights. human capital.



1.1.7 IPAP was designed to increase industrialisation in the … sector. A

B C

service agricultural manufacturing

1.1.8 The ratio between goods and services produced and the resources

used to produce them is called …

A

B C

productivity. production. efficiency. (8 x 2)

(16) 1.2 Choose a description from COLUMN B that matches the item in COLUMN A.

Write only the letter (A–I) next to the question number (1.2.1–1.2.8) in the ANSWER BOOK.

COLUMN A COLUMN B

1.2.1 1.2.2 1.2.3 1.2.4 1.2.5 1.2.6 1.2.7 1.2.8

Factor market Kuznets cycle Full employment Foreign reserves Demand-side approach Free trade Strategic Investment Programme Consumer price index

A B C D E F G H I

human resources used to maximum capacity no restrictions or limitations to global trade where labour, entrepreneurship, land and capital are traded caused by changes in the building and construction industry cash incentives for businesses in information technology headline inflation all currencies of other countries in the possession of the South African Reserve Bank inflation indicator at producer level the use of fiscal policy to stimulate spending in the economy

(8 x 1) (8)



1.3 Give ONE term for each of the following descriptions. Write only the term next

to the question number (1.3.1–1.3.6) in the ANSWER BOOK.

1.3.1 The ratio between the imports and exports indices 1.3.2 Expansion and contraction in the level of economic activities 1.3.3 A place or mechanism through which buyers and sellers meet to do

business

1.3.4 The plan containing government estimates of revenue and

expenditure for a specific year

1.3.5 The government's intervention programme aimed at creating

employment by using labour-intensive methods

1.3.6 A trade policy whereby government uses incentives and subsidies

to encourage South African businesses to sell to other countries (6 x 1)

(6)

TOTAL SECTION A: 30



SECTION B Answer any TWO of the three questions in this section in the ANSWER BOOK. QUESTION 2: MACROECONOMICS 40 MARKS – 20 MINUTES 2.1 Answer the following questions. 2.1.1 Name TWO methods to calculate national account aggregates.

(2 x 1)

(2) 2.1.2 Why are the GNP figures generally lower than the GDP figures in

South Africa? (1 x 2)

(2) 2.2 Study the table below and answer the questions that follow. SOUTH AFRICA'S CURRENT ACCOUNT ITEM 2011 2012 2013 Merchandise exports (free on board) 714 466 743 811 853 715 Net gold exports 75 298 71 050 63 887 Services receipts 107 825 124 332 136 751 Income receipts 38 118 48 501 64 441 Less: Merchandise imports (free on board) 742 679 854 439 991 186 Less: Payment for services 142 230 145 006 158 356 Less: Income payments 104 689 121 428 135 652 Current transfers -14 199 -31 369 -30 666 Balance on current account -68 090 -164 548 -197 179 [Source: SARB Quarterly Bulletin, September 2014] 2.2.1 What has happened to the contribution of gold since 2011? (1) 2.2.2 Define the term current transfers. (2) 2.2.3 Calculate the trade balance for 2013. Show ALL calculations. (3) 2.2.4 What impact will the deficit on the current account have on the

economy? (2 x 2)

(4)



2.3 Study the pie chart below and answer the questions that follow.

2.3.1 Which government department received the highest allocation of

the budget?

(1) 2.3.2 When does the financial year of the government begin? (1) 2.3.3 Name any TWO items in the pie chart above that are related to

social spending. (2 x 1)

(2) 2.3.4 Why do you think the government should spend more on

infrastructure development?

(2) 2.3.5 Why does the government allocate 60% of the entire budget to

social spending? (2 x 2)

(4) 2.4 Explain the endogenous reasons (Keynesian theory) for business cycles.

(4 x 2)

(8) 2.5 Argue in favour of import substitution. (4 x 2) (8)

[40]

INFRA- STRUCTURE

R93 bn

PUBLIC SECTOR BUDGET BIG SPENDING – 2013/2014 FINANCIAL YEAR

EDUCATION R254 bn

HOUSING R143 bn

HEALTH R146 bn



QUESTION 3: ECONOMIC PURSUITS 40 MARKS – 20 MINUTES 3.1 Answer the following questions. 3.1.1 Name any TWO economic indicators that are related to

employment. (2 x 1)

(2) 3.1.2 What is the main aim of South Africa's National Development Plan

(NDP)? (1 x 2)

(2) 3.2 Study the map below and answer the questions that follow.

[Source: SA Yearbook, 2013/2014] 3.2.1 Name the SDI indicated by A. (2) 3.2.2 Define spatial development initiatives. (2) 3.2.3 What is the main focus of SDIs? (1 x 2) (2) 3.2.4 What is the difference between industrial development zones and

special economic zones? (2 x 2)

(4)

Spatial Development Initiatives in SA

Platinum SDI

Phalaborwa SDI Maputo Development

Corridor

Coast 2 Coast Corridor

Lubombo SDI

Richards Bay SDI

Fish River SDI

A

West Coast Investment Initiatives



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

BLACK ECONOMIC EMPOWERMENT

Towards broad-based growth

Black economic empowerment – or broad-based black economic empowerment, as it is technically known – is not affirmative action, although employment equity forms part of it. Nor does it aim to take wealth from one group and give it to another. It is essentially a growth strategy, targeting the South African economy's weakest point: inequality. 'No economy can grow by excluding any part of its people, and an economy that is not growing cannot integrate all of its citizens in a meaningful way. As such, this strategy stresses a BEE process that is associated with growth, development and enterprise development, and not merely the redistribution of existing wealth,' the department of trade and industry says. Black economic empowerment is an important policy instrument aimed at broadening the economic base of the country – and through this, at stimulating further economic growth and creating employment.

[Adapted from www.wikipedia.com]

3.3.1 According to the extract, what is the misconception regarding the

BEE policy?

(1) 3.3.2 What is the focus of the BEE policy instrument? (1) 3.3.3 How can broad-based growth be achieved? (2 x 2) (4) 3.3.4 Do you think that BEE is successful as a measure to redress

inequalities of the past? Motivate your answer. (2 x 2)

(4) 3.4 Differentiate between economic growth and economic development. (2 x 4) (8) 3.5 How can the South African government ensure that its industrial policies

comply with international benchmarks? (4 x 2)

(8) [40]



QUESTION 4: MACROECONOMICS AND ECONOMIC PURSUITS

40 MARKS – 20 MINUTES

4.1 Answer the following questions. 4.1.1 Name TWO growth sectors of South Africa's Integrated

Manufacturing Systems (IMS). (2 x 1)

(2) 4.1.2 How can extrapolation be used in predicting business cycles?

(1 x 2)

(2) 4.2 Study the graph below and answer the questions that follow.

4.2.1 What do dotted lines a and b represent? (2 x 1) (2) 4.2.2 Define the term real (actual) business cycles. (2) 4.2.3 What is the importance of the length (T2–T3) of a business cycle? (2) 4.2.4 What can the government do to ensure that high inflation does not

occur during peaks of business cycles?

(4)

e

d

c

b

a

B A

T3

P1

P2

T1

T2

105

104

103

102

101

100

99

98

97

0 1 2 3 4 5 6 7 8 9 10 11 GDP

Years

Inde

x of

eco

nom

ic a

ctiv

ities

REAL BUSINESS CYCLE



4.3 Study the cartoon below and answer the questions that follow.

[Source: www.economicscartoons.com] 4.3.1 What message is depicted in the cartoon above? (2) 4.3.2 Name TWO countries that belong to the G8 group of countries.

(2 x 1)

(2) 4.3.3 Give a reason why African countries feel that the G8 countries

neglect Africa.

(2) 4.3.4 Why will the Gini-coefficient of G8 countries in the North differ from

that of countries in the South? (2 x 2)

(4) 4.4 Explain the methods to promote exports. (4 x 2) (8) 4.5 Evaluate the success of economic growth and price stability as a part of

government's macroeconomic objectives. (2 x 4)

(8) [40]

TOTAL SECTION B: 80

Pollution

Africa

Face it ... there's always something on the

agenda more pressing than Africa.

http://www.economicscartoons.com/


Copyright reserved

SECTION C Answer any ONE of the two questions in this section in the ANSWER BOOK. Your answer will be assessed as follows:

STRUCTURE OF ESSAY MARK ALLOCATION

Introduction Max. 2 Body: Main part: Discuss in detail/In-depth discussion/Examine/ Critically discuss/Analyse/Compare/Evaluate/Distinguish/ Differentiate/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: Any higher-order conclusion should include: • A brief summary of what has been discussed without

repeating facts already mentioned in the body • Any opinion or valued judgement on the facts discussed • Additional support information to strengthen the

discussion/analysis • A contradictory viewpoint with motivation, if required • Recommendations

Max. 2

TOTAL 40 QUESTION 5: MACROECONOMICS 40 MARKS – 35 MINUTES Economists present the economy as a simplified economic circular-flow model to show how the different participants interact with each other.

• Discuss, in detail, without the use of a diagram, the interaction of all the participants in the open economic circular-flow model.

• Explain the multiplier process by using a fully labelled graph.

(26) (10) [40]

QUESTION 6: ECONOMIC PURSUITS 40 MARKS – 35 MINUTES The wellbeing and development of society is very important; therefore the government prioritises the provision of goods and services to enhance social development.

• Analyse, in detail, the following social indicators: - Demographics - Nutrition and health - Services

• In your opinion, how can economic development be promoted through the use of these social indicators?

(26) (10) [40]

TOTAL SECTION C:

GRAND TOTAL: 40

150


SENIOR CERTIFICATE EXAMINATION

MARKS: 150

This memorandum consists of 19 pages.

ECONOMICS P1

2015

MEMORANDUM

Economics/P1 2 DBE/2015 SCE – Memorandum


SECTION A (COMPULSORY) QUESTION 1 1.1 MULTIPLE-CHOICE QUESTIONS 1.1.1

1.1.2

1.1.3

1.1.4

1.1.5

1.1.6

1.1.7

1.1.8

A (final)

B (government spending)

A (parastatals)

A (appreciation)

B (infant)

C (human capital)

C (manufacturing)

A (productivity) (8 x 2)

(16) 1.2 MATCHING ITEMS 1.2.1

1.2.2 1.2.3 1.2.4 1.2.5 1.2.6 1.2.7 1.2.8

C – where labour, entrepreneurship, land and capital are traded D – caused by changes in the building and construction industry A – human resources used to maximum capacity G – all currencies of other countries in the possession of the South African Reserve Bank I – the use of fiscal policy to stimulate spending in the economy B – no restrictions or limitations to global trade E – cash incentives for businesses in information technology F – headline inflation (8 x 1)

(8)

1.3 GIVE ONE TERM 1.3.1

1.3.2

1.3.3

1.3.4

1.3.5

1.3.6

Terms of trade

Business cycles / Cyclical trends

Market

State budget/Budget/National budget

Expanded Public Works programme/EPWP/EPW/PWP

Export promotion (6 x 1)

(6)

TOTAL SECTION A: 30



SECTION B Answer any TWO of the three questions in this section in the ANSWER BOOK. QUESTION 2: MACROECONOMICS 2.1 Answer the following questions. 2.1.1 Name TWO methods to calculate national account aggregates.

• Income method/GDP(I) • Expenditure method/GDP (E) • Production method/Value Added/GDP (P) (Any 2 x 1)

(2)

2.1.2 Why are GNP figures generally lower than GDP figures in

South Africa? • Compared to our own factors of production in foreign

countries, there are more foreign factors of production involved in our country

• Foreigners contribute more than what we contribute to their countries (1 x 2)

(2)

2.2 Data Response 2.2.1 What has happened to the contribution of gold since 2011?

It has declined/decreased

(1)

2.2.2 Define the term current transfers.

Receive money without any counter performance / These are the transfers e.g. donation and gifts from residents to non-residents and vice versa

(2)

2.2.3 Calculate the trade balance for 2013. Show ALL calculations.

Merchandise exports 853 715 Plus Net gold exports 63 887 Less Merchandise imports 991 186 Trade balance -73 584

(3)

2.2.4 What impact will the deficit on the current account have on the

economy? • It will have a negative effect on the economy • Foreign exchange reserves will be reduced to settle

international debts • Domestic prices of goods and services will increase/lead to

inflation/imported inflation • It will have a negative effect on economic growth

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

(4)



2.3 Data Response 2.3.1 Which government department received the highest allocation

of the budget? Education

(1)

2.3.2 When does the financial year of the government begin?

1st April

(1)

2.3.3 Name any TWO items in the above pie chart that are related to

social spending.

• Housing • Health • Education (Any 2 x 1)

(2)

2.3.4 Why do you think the government should spend more on

infrastructure development?

• To promote industrial development • To promote economic growth • To reduce unemployment and improve the standard of living

• To reduce poverty (Accept any other relevant response) (Any 1 x 2)

(2)

2.3.5 Why does the government allocate 60% of the entire budget to

social spending? • To improve the quality of life of all the citizens • To promote the literacy and numeracy • To provide shelter to the indigent (Accept any other relevant response) (Any 2 x 2)

(4)

2.4 Explain the endogenous reasons (Keynesian theory) for business

cycles.

• The Keynesians view is that markets are inherently unstable • The level of economic activities constant and erratically overshoots and

undershoots the economy's potential • The price mechanism fails to coordinate demand and supply of goods

and services • Prices are simply not flexible enough to be adjusted downwards • These mismatches cause business cycles • The government should intervene to smooth peaks and troughs as they

occur (Allocate 2 marks for appropriate graph. Accept any other relevant response) (4 x 2)

(8)



2.5 Argue in favour of import substitution.

• More local businesses can be established/diversification Its often

argued that the industrial base of the economy need to be strengthened and expanded and this will make them less dependent on foreign countries and give them more control over their own economies

• A natural starting point therefore is to substitute imports because there are certainties that the domestic market exists for those products

• A greater variety of businesses can exist or continue to exist • Trade developing countries rely on their natural resources as a base

for their economic growth and development • Increased employment the establishment of new industries demands

more employment and thus improve the standard of living of the people

(Accept any other relevant argument) (4 x 2)

(8)

[40]



QUESTION 3: ECONOMIC PURSUITS 3.1 Answer the following questions. 3.1.1 Name any TWO economic indicators that are related to

employment. • Economically Active Population (EAP) • Employment rate • Unemployment rate (Any 2 x 1)

(2)

3.1.2 What is the main aim of South Africa's National Development

Plan (NDP)? • Eliminate poverty and reduce inequality by 2030 • Reduce unemployment 14% by 2020 and 6% in 2030 • Grow an inclusive economy

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

(2)

3.2 Data Response 3.2.1 Name the SDI indicated by A.

Wild Coast SDI

(2)

3.2.2 Define spatial development initiatives.

Regional development initiative in South Africa to attract infrastructure and business investments to neglected and under developed areas

(2)

3.2.3 What is the main focus of SDIs?

• Stimulate growth • Create employment


(2)

3.2.4 What is the difference between industrial development zones

and special economic zones? IDZ - Purpose-built industrial estate that are physically enclosed and linked to an international port or airport SEZ - Sets the basis for a broader range of industrial parks and economic infrastructure provision for effective clustering of value-adding employment, enhancing manufacturers

OR The key difference between SEZ and IDZ is that the latter focuses solely on exports and hence located near port and airports SEZ have a wider industrial development objective and can be located in any area and investment are complimented by incentive packages and cluster development Tax incentives expanded in SEZ (2 x 2)

(4)



3.3 Data Response 3.3.1 According to the extract, what is the misconception regarding

the BEE policy? • That BEE is affirmative action • That the meaning of existing wealth should be redistributed 9

(1)

3.3.2 What is the focus of the BEE policy instrument?

• To eradicate inequality 9 • Stimulate further economic growth • Create employment • Broaden the economic base

(Accept any other relevant response)

(1)

3.3.3 How can broad-based growth be achieved?

• BEE should focus on ALL the sectors and levels of the

economy • The government should establish more charters/agreements

between the Department of Trade and Industry (DTI) and industries in private sector


(4)

3.3.4 Do you think that BEE is successful as a measure to redress

inequalities of the past? Motivate your answer. • Yes 9 • There are many previously disadvantaged people participating

in the economy of the country than before 99 • There is more participation and competition in the market

/business environment OR

• No 9 • There are still many previously disadvantaged people who are

excluded from economic participation 9 • In some industries there is still a shortage of previously

disadvantaged role players (Accept any other relevant response) (2 x 2)

(4)



3.4 Differentiate between economic growth and economic development.

Economic growth • It is the increase in the real GDP over a period of time • It focus on the production of goods and services • Increase the production capacity of the economy (2 x 2) Economic development • It is the increase in the real per capita GDP • It focus on the increase in living standards

(Accept any other relevant fact) (2 x 2)

(8)

3.5 How can the South African government ensure that its industrial

policies comply with international benchmarks? • Ensure macroeconomic stability • Achieve high rates of savings and investment • Allow markets to allocate resources • Have committed, credible and capable government


(8)

[40]



QUESTION 4: MACROECONOMICS AND ECONOMIC PURSUITS 4.1 Answer the following questions. 4.1.1 Name TWO growth sectors of South Africa's Integrated

Manufacturing Systems (IMS). • Exports • Tourism • Agriculture • Information Technology and Communication • Cultural (Any 2 x 1)

(2)

4.1.2 How can extrapolation be used in predicting business cycles?

By extending the current trend line/To base forecasting on information already known (1 x 2)

(2)

4.2 Data Response 4.2.1 What do dotted lines a and b represent?

Amplitude

(2)

4.2.2 Define the term real (actual) business cycles.

Real changes in economic activities over a period of time

(2)

4.2.3 What is the importance of the length (T2–T3) of a business

cycle? • The length of the business cycle is the amount of time it takes

to move through one complete cycle • Longer cycles show strength – shorter cycles show

weakness • The length in this instance is approximately 3 years and we

can predict that the following one will also take approximately 3 years or shorter (Accept any other relevant response)

(2)

4.2.4 What can the government do to ensure that high inflation does

not occur during peaks of the business cycles? • Government can increase taxes • Government expenditure can be reduced • Monetary policy instruments e.g. increased interest rates,

inflation targeting (Accept any other relevant responses related to fiscal and monetary policy) (2 x 2)

(4)



4.3 Data Response 4.3.1 What message is depicted in the cartoon above?

Africa is being destroyed while the North are watching/North South divide/ North responsible for damaging the environment at the expense of Africa (Accept any other relevant response)

(2)

4.3.2 Name TWO countries that belong to the G8 group of countries.

• USA • Russia • Canada • England • Italy • France • Japan • Germany (Any 2 x 1)

(2)

4.3.3 Give a reason why African countries feel that the G8 countries

neglect Africa. • The G8 countries are industrialised and seem to care very little

for the development of African countries, except the need for their natural resources

• These countries are the major polluters in the world and it seems that they do not care what impact their production levels have on world pollution

• Trade agreements seem to favour the G8 countries more than the major African countries


(2)

4.3.4 Why will the Gini-coefficient of G8 countries in the North differ

from that of countries in the South? • The G8 countries have a higher per capita income due to high

GDP and low unemployment • The Gini coefficient in the North will be closer to 0 due to more

equitable distribution of income compared to countries in the South where the Gini coefficient was closer to 1 because of an inequitable distribution of income

• Reasons could be: experiencing high unemployment, low industrialisation, past political policies in the South


(4)



4.4 Explain the methods to promote exports.

• Tax concessions these are reductions in taxes on profits and volumes exported and also refunds of the taxes exporters have to pay on their goods in foreign countries • Tax-free grants (tax exemptions) these grants compensate exporters

for the extra costs they incur in exporting • E.g. set up operations in an IDZ/SEZ • Rebates refunds on import tariffs • Export credit and export credit guarantees • Identifying markets information on export markets, research with

regard to new markets • Subsidies are money (cash) paid to businesses to decrease their cost of

operation • Export subsidies these are amounts that the government pays to the

producers of exported goods to compensate them for some of their expenses, which enable them to sell their goods at a reduced price in foreign countries e.g. reduction in the freight cost

• Incentives information on export markets, research on new markets, concessions on transport tariffs (4 x 2)

(8)

4.5 Evaluate the success of economic growth and price stability as a part of

government's macroeconomic objectives.

• Economic growth Economic growth has been on a decreasing trend for the past five years

The average growth rate has been lower than 5% This has been having a negative impact on the capacity of the economy to create employment

• Price stability Inflation has generally been within the target range of 3 to 6% However, in 2014 it edged out of the range due to high cost of production like wages and oil price

(Accept any other relevant response with reference to current data) (Any 2 x 4)

(8)

[40] TOTAL SECTION B: 80



SECTION C Answer any ONE of the two questions in this section in the ANSWER BOOK. STRUCTURE OF ESSAY MARK ALLOCATION Introduction Max. 2 Body: Main part: Discuss in detail/In-depth discussion/Examine/ Critically discuss/Analyse/Compare/Evaluate/Distinguish/ Differentiate/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: Any higher-order conclusion should include: • A brief summary of what has been discussed without

repeating facts already mentioned in the body • Any opinion or valued judgement on the facts discussed • Additional support information to strengthen the

discussion/analysis • A contradictory viewpoint with motivation, if required • Recommendations

Max. 2

TOTAL 40 QUESTION 5: MACROECONOMICS Economists present the economy as a simplified circular-flow model to show how the different participants interact with each other.

• Discuss, in detail, without the use of a diagram, the interaction of all the

participants in the open economy circular flow model. (26 marks) • Explain the multiplier process by using a fully labelled graph. (10 marks)

[40] INTRODUCTION The circular flow model of the economy is a simplification showing how the economy works and the relationship between income and spending in the economy as a whole. The circular flow model of an open economy shows the workings of an economy that is open to foreign trade. It is different to a closed economy because it includes the foreign sector 99 (Accept any other relevant introduction) (Max. 2)



BODY MAIN PART There is a flow of money and goods and services between the household sector and business sector 99 • Households earn income in the form of wages by selling their factors of production

to business 99 • Business use factors of production to produce goods and services on which the

household sector spends money 99 • Thus the business will receive an income in return from the households for goods

and services 99 There is a flow of money and goods and services between the household sector and state 99 • Household sector provides the state with labour and receive income 99 • The state provide the households with public goods and services and receives tax

as income in return • (e.g.) parks, hospitals for which they pay taxes which is an income to the state

99 There is a flow of money and goods and services between the business sector and state 99 • The business sector provides the state with goods and services for which the state

pays 99 • The state provides the business sector with public goods and services for which

they pay taxes 99 There is a flow of goods (imports) to the business from the foreign sector which the business pays for 99 • This will be regarded as expenditure for the business 99 • There is also a flow of goods from the business to the foreign sector 99 • This will be income for the business 99 The financial markets consist of banks, insurance companies and pension funds 99 • They act as a link between households and firms who have surplus money and

others in the economy who require funds 99 • The money which households and firms provide to the financial sector is known as

savings 99 • The spending on capital equipment by firms is regarded as investment 99

(Accept any other relevant response) (Max. 26)



ADDITIONAL PART Explain the multiplier process by using a fully labelled graph.

GRAPH: EXPENDITURE AND INCOME (R million) ∆E (I)

∆Y (R million) EXPLANATION

• A change in investment of R10 m. will result in a change in income of R20 m. 99 • The income increase by more than a proportionate change in investment 99

OR • An increase in investment causes the expenditure function to shift upwards from C1

to C2 so that C1 is parallel to C2 99 • The effect of the increase in investment is that the total expenditure will increase

from R20 m to R30 m. • In other words the increase in investment results in an increase in expenditure and

an equilibrium level of income and output • The increase in the value of the output (Y) is greater than the increase in the

expenditure (E) (Explanation must comply with the figures supplied in the graphical presentation) (Max. 6) CONCLUSION The circular flow ensures continued interdependence and coordination of the economic activities in the economy 99 (Accept any other relevant response) (Max. 2)

E2

E1

Income (Y)

40

30

40

60

0 80 100

20

AE=Y

45

AE1=30+0.

AE=20+0.

Agg

rega

te e

xpen

ditu

re (A

E)

1. Labelling of the axis = 1 Mark 2. Labelling on axis = 1 Mark 3. Labelling of the 45 ° line = 1 Mark 4. Labelling of the autonomous

spending line = 1 Mark 5. Labelling of the change in

Income and investment = 1 Mark each Max = 6 Marks

E = Y

C2

C1



BODY MAIN PART There is a flow of money and goods and services between the household sector and business sector 99 • Households earn income in the form of wages by selling their factors of production

to business 99 • Business use factors of production to produce goods and services on which the

household sector spends money 99 • Thus the business will receive an income in return from the households for goods

and services 99 There is a flow of money and goods and services between the household sector and state 99 • Household sector provides the state with labour and receive income 99 • The state provide the households with public goods and services and receives tax

as income in return • (e.g.) parks, hospitals for which they pay taxes which is an income to the state

99 There is a flow of money and goods and services between the business sector and state 99 • The business sector provides the state with goods and services for which the state

pays 99 • The state provides the business sector with public goods and services for which

they pay taxes 99 There is a flow of goods (imports) to the business from the foreign sector which the business pays for 99 • This will be regarded as expenditure for the business 99 • There is also a flow of goods from the business to the foreign sector 99 • This will be income for the business 99 The financial markets consist of banks, insurance companies and pension funds 99 • They act as a link between households and firms who have surplus money and

others in the economy who require funds 99 • The money which households and firms provide to the financial sector is known as

savings 99 • The spending on capital equipment by firms is regarded as investment 99

(Accept any other relevant response) (Max. 26)



ADDITIONAL PART Explain the multiplier process by using a fully labelled graph.

GRAPH: EXPENDITURE AND INCOME (R million) ∆E (I)

∆Y (R million) EXPLANATION

• A change in investment of R10 m. will result in a change in income of R20 m. 99 • The income increase by more than a proportionate change in investment 99

OR • An increase in investment causes the expenditure function to shift upwards from C1

to C2 so that C1 is parallel to C2 99 • The effect of the increase in investment is that the total expenditure will increase

from R20 m to R30 m. • In other words the increase in investment results in an increase in expenditure and

an equilibrium level of income and output • The increase in the value of the output (Y) is greater than the increase in the

expenditure (E) (Explanation must comply with the figures supplied in the graphical presentation) (Max. 6) CONCLUSION The circular flow ensures continued interdependence and coordination of the economic activities in the economy 99 (Accept any other relevant response) (Max. 2)

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E2

E1

Income (Y)

40

30

40

60

0 80 100

20

AE=Y

45

AE1=30+0.

AE=20+0.

Agg

rega

te e

xpen

ditu

re (A

E)

6. Labelling of the axis = 1 Mark 7. Labelling on axis = 1 Mark 8. Labelling of the 45 ° line = 1 Mark 9. Labelling of the autonomous

spending line = 1 Mark 10. Labelling of the change in

Income and investment = 1 Mark each Max = 6 Marks

E = Y

C2

C1



QUESTION 6: ECONOMIC PURSUITS The wellbeing and development of society is very important; therefore the government prioritises the provision of goods and services to enhance social development. • Analyse in detail the following social indicators:

- Demographics - Nutrition and health - Services (26 marks)

• In your opinion, how can economic development be promoted through the use of these indicators? (10 marks)

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INTRODUCTION Social indicators are a measure that economists or government use to evaluate the performance of a country in terms of the social well-being of its citizens. 99 (Accept any other relevant response) (Max. 2) BODY • DEMOGRAPHICS:

This deals with the characteristics of the population, e.g. population size/race/age/sex/ income/geographic distribution/language/education/occupation/religion/birth rate/ fertility rate/life expectancy at birth/infant mortality rate/death rate This information can be used by government to plan for e.g. infrastructure development 99 and implementation of social programmes 99 it is also important to business as it indicates the size and characteristics of business' targets markets 99

- The population growth 9 In 2006 the South African population was estimated at

47.4 million 99 and with recent 2011 census the population stood at 50,5 million 99 South Africa has a relatively high population growth compared to other developed countries 99 the population growth rate is an important indicator to the government 99 in terms of the number of social services that are needed 99

- Life expectancy 9 This expresses the number of years a new-born infant will live if the prevailing patterns of mortality remained the same throughout his or her life 99 in South Africa, life expectancy went down from 62,8 years in 1991 to 47 years in 2005 99 and started increasing again in 2011 to 52 years 99 it is important for the government to know the average life expectancy of the population since working human beings require a range of social services 99 and also the tax base of the country 99 assurance companies in particular are interested in the life expectancy 99 unexpected reductions in life expectancy reduce the number of years policy holders can pay their premiums 99 and can have detrimental effect on the services of such businesses 99



• Nutrition and health: These are two related social indicators.

- Nutrition: This is an important indicator for the well-being of infants and young children 99 two important conditions of nutrition in child malnutrition and overweight 99 which are both particularly important for children under the age of five years of age:

- Child malnutrition Malnutrition is expressed in two ways, namely weight for age (underweight) 99 and height for weight (stunted or dwarfism) 99 the proportion of children who are underweight is the most important indicator of malnutrition 99 it is important to monitor malnutrition 99 and weight because being overweight increases the risk of death 99 and inhibits cognitive development in children 99

- Overweight children the prevalence of overweight children is growing concern in South Africa 99 there is an association between obesity in children and the high prevalence of diabetes, respiratory diseases, high blood pressure, and psychological and orthopaedic disorders 9 being overweight can lead to numerous adverse health conditions which affect people's ability to work and take care of themselves 99 obesity is a killer 99 governments often legislate that health supplements such as vitamin A be added to basic food stuffs such as bread 99 while the health department also encourage breast feeding 99 malnutrition and obesity in children are indicators taken into account when deciding on feeding schemes and their extent 99

• HEALTH: A number of indicators are used both nationally and internationally to

monitor the health of a population - Infant mortality This is measured in terms of the number of infants who die

before reaching one year of age per thousand live births in a given year 99 in South Africa in 2010, it was at 34% per thousand 99

- Under five mortality This is measured in terms of the probability that a new born baby will die before reaching the age of five years, if subject to present age-specific mortality rates 99 the probability is expressed is a number per thousand 99 and in South Africa it was at 50 per thousand in 2010 99 - Health expenditure This is measured in terms of the amount of public and private expenditure on healthcare as a percentage of GDP 99 IN 2009 South Africa's expenditure was 8,4% 99 compared to the 6,6% in the Sub-Saharan Africa 99 and 5,3% in the North Africa 99 - Access to safe and drinking water This is measure in terms of the percentage of the population that a reasonable access to safe and drinking water 99 (treated or uncontaminated) - in 2009 91% of the South African population had access compared to 60% in Sub Saharan Africa and 92% of North Africa 99

- Access to sanitation facilities This is measured in terms of the percentage of a population with at least adequate sanitation facilities that can effectively prevent human/animal/and insect contact 99 in 2009, 77% of the South African population had access to improved sanitation 99, compared to 31% in sub-Saharan Africa 99 and 89% in North Africa 99 a healthy population saves on medical and other costs, produces income and contributes to a stronger economy 99


Copyright reserved

• SERVICES: Services are vital to enhance people's lifestyles and level of economic and social development 99

In South Africa, in terms of the Constitution's requirements of human dignity and

social justice the following are identified: - Electricity The national Electricity Regulator reports that 83,1% of

households has access to electricity in 2010 compared to 50% in 1995 99 - Refuse removal Some 61% of households in South Africa had access to refuse removal by the local authorities once a week 99 - Water supply Some 89% of households had access to clean water in 2010 99 this is the average of urban and rural access to improved water Schemes 99 improved water resources refers to an adequate amount of water from sources. e.g. households' connections/taps inside the yard/ public taps/boreholes/protected springs/and rainwater collection 99 - Sanitation Just over 71% of households in South Africa had access to functioning basic sanitation in 2010 99 e.g. flush toilets/pit toilets with ventilation pipes/and chemical toilets 99 (Accept any relevant current statistics) (Max. 26)

ADDITIONAL PART In your opinion, how can economic development be promoted through the use of these indicators. • Assist the government to look into other areas of need through the budget 99 • Improve social cohesion and interdependence 99 • Focus on the areas of dire need in communities and spend on them 99 • Improve health and educational facilities 99 • Invest more in the future quality labour force for the progression of the

economy 99 • Spend more on the improvement of the quality of life of the general population and

reduce social tensions 99 (Accept any other relevant response) (Max. 10) CONCLUSION Social indicator can serve as a focal point in directing government expenditure on issues that will guarantee social development and quality lifestyle 99 (Accept any other relevant response) (Max. 2)

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TOTAL SECTION C: 40 GRAND TOTAL: 150

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