Macroeconomics Answers

3.1. Government spending (as a percentage of gross domestic expenditure) has
increased significantly over the past decades. Explain any two reasons for this
trend. (6)

3.2. The increased government spending noted in Q.3.1. above has to be financed in
one way or another.
Describe three ways in which government spending can be financed (9)

Explain in detail, with the aid of a graph, the two components of the demand for money. Identify the main determinant of each component. In your graph, illustrate each component as well as the total demand for money.

The increased government spending noted in Q.3.1. above has to be financed in
one way or another.
Describe three ways in which government spending can be financed.

During this COVID‐19 pandemic, the South African Reserve Bank (SARB) plays a
crucial role in maintaining financial stability.
Describe the roles that the SARB can play to ensure the objective of financial
stability is met.
Marks will be awarded for the quality of your paraphrasing, i.e. you must write
in your own words.
(Note: 1 mark to identify the area and 2 marks to describe each of the areas)

Describe four ways in which government spending can be financed.

The increased government spending noted in above has to be financed in
one way or another.
Describe three ways in which government spending can be financed.

Many economists argue that the South African government should implement a policy of
privatisation.
Argue in favour of a policy of privatisation.

Explain, with the aid of a graph, the impact of a cut in the interest rate on the
demand for money.

Explain, using the AD‐AS model, how the South African Reserve Bank (SARB)
can use accommodation policy as a tool to recover from the negative effects of
this COVID‐19 pandemic.