Macroeconomics Answers

Suppose production function is
Q=k²L²-0.12k²-3.2L²
Then find the level of output where
APL=MPL,if k=15
MPK=0,if L=10

2.1
The theory of the demand for money is based on John Keynes’ Liquidity Preference Theory.
Give your own detailed explanation of liquidity preference theory and how the demand for money curve is determined. Illustrate your answer graphically .
Note: You should include in your answer a detailed explanation of each component of the demand for money as well as the determinants of these components

5.1


Explain briefly what the national accounts are.

(2)



Q.5.2
Argue whether the real rate of growth in South Africa is acceptable.

(3)






Q.5.3
Briefly explain whether you consider real GDP a better measure of economic growth than nominal GDP.
(2)





Q.5.4
Research and provide suggestions for how economic growth can be improved in South Africa.

Q.2.1 The theory of the demand for money is based on John Keynes’ Liquidity
Preference Theory.
Give your own detailed explanation of liquidity preference theory and how the
demand for money curve is determined. Illustrate your answer graphically.
Note: You should include in your answer a detailed explanation of each
component of the demand for money as well as the determinants of these
components.
(25)

Q.2.2 Your prescribed text explains that the money stock (M) can be determined
endogenously or exogenously (i.e. there are two different approaches to
determining the value of M).
Explain which approach is used in the South African macroeconomy.

One of the major objectives of any macroeconomy is economic growth as measured by a
country’sGDP. In fact, GDP is one of the most important indicators of the performance of an
economy and is the central concept in the national accounts.

Investigate South Africa’s real economic growth rate in 2018 and answer the following questions

Q.5.1 Explain briefly what the national accounts are. (2)
Q.5.2 Argue whether the realrate of growth in South Africa is acceptable. (3)
Q.5.3 Briefly explain whether you considerreal GDP a better measure of economic
growth than nominal GDP.
(2)
Q.5.4 Research and provide suggestions for how economic growth can be improved in
South Africa.

Conduct your own research on the 2018/ 2019 budget and fiscal policy in South Africa. Provide
your own detailed analysis of the fiscal policy.

Structure your answer as follows:

• The balance between income received by government and the level of government
expenditure (2);
Changes made to the tax structure,reasons for the changes and whether the changes are
ideal in a South African context(5);
• Specific areas of focus for government spending and reasons for this (5);
• Forecast in terms of economic outlook (3).

.The information below relates to a closed economy without a government. Use the information to
answer the questions that follow:
• Autonomous consumption = R285 million;
• Autonomous investment = R300 million;
• Marginal propensity to consume = 0.4.
Q.4.1 Calculate the level of autonomous spending. (3)
Q.4.2 Calculate the size of the multiplier. (3)
Q.4.3 Calculate the equilibrium level of income. (2)
Q.4.4 Suppose that the equilibrium level of income is 1 000 and it is below the fullemployment level of income of 1200.
Calculate the change in investment spending required to reach full employment.
(3)
Q.4.5 Discussthe relationship between total income and total spending in the
macroeconomy according to Say’s law.
(4)

A successful government campaign aimed at advertising South Africa as an excellent holiday
destination for European travellers leads to an influx of tourists from Britain.
Graphically illustrate and explain the impact of this increase in tourists on the Rand/ British Pound
exchange rate.
Note: Five marks will be awarded for the graph and five marks for your explanation. The axes on
your graph should reflect the price and quantity of Pounds.

The information below relates to a closed economy without a government. Use the information to

answer the questions that follow:

• Autonomous consumption = R285 million;
• Autonomous investment = R300 million;
• Marginal propensity to consume = 0.4.

Q.4.1 Calculate the level of autonomous spending. (3)
Q.4.2 Calculate the size of the multiplier. (3)
Q.4.3 Calculate the equilibrium level of income. (2)
Q.4.4 Suppose that the equilibrium level of income is 1 000 and it is below the fullemployment level of income of 1200.
Calculate the change in investment spending required to reach full employment.
(3)
Q.4.5 Discussthe relationship between total income and total spending in the
macroeconomy according to Say’s law.