Macroeconomics Answers

Which of the following statements is correct? (2)
(1) When a British firm invests in a bicycle manufacturing facility in South Africa,
the amount concerned is entered as an inflow on the current account of the
South African balance of payments.
(2) When someone purchases a second‐hand car, the transaction is included in
the calculation of GDP in the year the sale took place.
(3) A deficit on the current account of the balance of payments indicates that
the country exported more than it imported during the period in question.
(4) In the base year, the value of nominal GDP is equal to the value of real GDP.

If a household’s income falls from R12 000 to R10 000, and its consumption falls
from R9 500 to R8 000, then:
(2)
(1) The marginal propensity to consume is ‐0.8.
(2) The marginal propensity to consume is 0.75.
(3) The marginal propensity to consume is 0.2.
(4) The marginal propensity to save is 0.15.

In the national income accounts: (2)
(1) Total spending is always equal to total production and income.
(2) Total spending is always greater than total production and income.
(3) Total spending is always less than total production and income.
(4) Total spending may be greater than, equal to or less than total production
and income.

If the marginal propensity to consume increases: (2)
(1) The slope of the consumption function will be steeper.
(2) There will be a movement from left to right along the consumption function.
(3) The consumption function will shift parallel upwards.
(4) The consumption function will shift parallel downwards.

Out of 20 million people in the population, 9 million people are in the labour force
and 3 million are unemployed, therefore the unemployment rate is:
(2)
(1) 3 percent.
(2) 15 percent.
(3) 30 percent.
(4) 33,3 percent.

Which of the following will NOT cause a depreciation of the rand against the
dollar?
(2)
(1) A decrease in imports from the United States.
(2) A decrease in exports to the United States.
(3) A decrease in the number of tourists visiting South Africa from the United
States.
(4) An increase in the number of American investors selling their shares in South
African companies and converting the proceeds to dollars.

An appreciation of the rand against the dollar: (2)
(1) Will worsen the current account balance but improve domestic prices.
(2) Improve the current account balance but worsen domestic prices.
(3) Improve the current account balance as well as reduce domestic prices.
(4) Worsen both the balance on the current account as well as domestic prices.

Kenya has a comparative advantage over Uganda in the production of sugar if it: (2)
(1) Is able to produce sugar at a faster rate than Uganda.
(2) Produces sugar at a lower opportunity cost than Uganda.
(3) Has the absolute advantage in sugar production.
(4) Specialises in sugar production.

An increase in criminal activity in South Africa acts as a deterrent to foreign tourists
considering visiting South Africa, and as a result, there is a decline in the number of
American tourists to South Africa.
Explain, with the aid of a graph, the effect of this on the rand/dollar exchange rate
and the equilibrium quantity of dollars.

Choose the correct answer
The multiplier is useful in determining the
1. The level of business inventories
2. A change in inflation resulting from a change in interest rates.
3. A change in equilibrium production or income resulting from a change in spending.
4. A change in unemployment resulting from a change in spending.