Macroeconomics Answers

Briefly explain the concept “monetary policy transmission mechanism” and then illustrate how
changes in interest rates affects any business organisation of your choice. Substantiate your
answer fully.

Using the aggregate demand and supply analysis, explain with the aid of diagrams the
concept of (i) cost-push inflation and (ii) demand-pull inflation by assessing how the two
impact on the price level, real GDP and employment.

• Identify an article, which has a direct bearing on macroeconomics and write a brief
summary of the macroeconomic issues raised in the article. [5 Marks]
• Discuss in detail the market structure that best describes the sector being discussed
and support your selection.
• Discuss the relevant macroeconomic theory/ies, which can be applied to understand
the phenomenon being discussed in the article. Conclude by advising how to improve
the performance of the business discussed in the article taking into account the
macroeconomic issues raised

Possible reasons for an appreciation of the rand against the US Dollar

What is exchange rate?

5. Draw a demand and supply curve for British pounds (on the vertical axis plot rand per British pound). [10 marks]. What factors are likely to cause an increase in the demand for British pounds (in exchange for South African rands)? [5]. How can this be illustrated in the diagram you have drawn? [3] Does this represent an appreciation or depreciation of the South African rand relative to the British pound? [2] {20}

3. List four possible reasons for an appreciation of the rand against the US dollar. (Do not explain, just list)

4. Explain how changes in exchange rates can influence exports and imports

Use examples to explain the difference between absolute advantage and comparative (or relative) advantage in international trade. (you can draw a table or you can explain)

Who would benefit and who would lose if the South African government doubled the tariff on imported frozen chicken leg quarters from Brazil? Explain.

The following data relates to the market value of economic transactions for the three main sectors of your country’s economy.

SECTOR VALUE OF OUTPUT PURCHASES FROM OTHER FIRMS
Agriculture 300 160
Manufacturing 200 150
Services 150 120

Required:

(i) Compute the gross domestic product (GDP) and explain the method used and why. (2 Marks)

(ii) Given that: depreciation = 90, indirect taxes = 70, subsidies = 30, payments to factors of production from abroad = 20, payments to foreign factors = 40.

Compute:

1) Gross national product (GNP) at market prices. (1 Mark)

2) Net national product (NNP) at market prices. (1 Mark)

3) Net national product (NNP) at factor cost. (1 Mark)

4) Net domestic product (NDP) at factor cost (1 Mark)