Economics Answers

Assume that two shocks happen simultaneously:a positive expenditure shock and a positive supply shock (let’s say prices on imported inputs decreased dramatically due to a substantial reduction in tariffs). Use AE/PC Model (carefully labeled!!) without time lags (use the AE and PC graphs similarly to the textbook, place PC graph below AE graph).For your analysis, choose as a starting point (marked A) an economy operating at potential GDP (Y=Y*) and at its inflation target (π = π^T).show point B where the economy is situated after the shocks but prior to any central bank policy response. There should be A and B on BOTH the upper (AE graph) and lower (PC graph) graphs. If points A and B are the same point, then just mark that point with both A and B. Mark initial curves with the superscript 1, like AE1 and PC1, and every subsequent shift with a higher number, like the second shift would be AE2 and PC2, and the third shift would be AE3 and PC3 and so on. Describe that situation.

Explain the economic decision making that a consumer undertakes to maximize their satisfaction when buying goods or services. Be sure to use the MU/P model that was introduced in class. Explain the model used and be sure to describe the substitution and income effects connected to a change in the price of one of these goods. I think that this is easier to do with a specific, relevant example.

4. The circular flow of income and spending reveals that an increase in South African exports will…
[1] increase spending on South African imports by more than the spending on exports.
[2] increase income to South African economy and increase income to South African producers
of goods and services.
[3] increase income to foreign firms and increase income to foreign factors of production.
[4] decrease output and income in the rest of the world.

5. Which of the following statements about stock and flow variables is/are true?
a) Interest earned is a flow variable.
b) The number of people who enter the unemployment pool is a stock variable.
[1] both a and b are correct
[2] only b is correct
[3] a is correct and b is incorrect
[4] both a and b are incorrect

7. We can expect that the amount of money that a bank create will decrease when…
[1] more bank clients choose to deposit their funds at the bank.
[2] the bank's clients choose to hold a smaller part of their money in the form of cash.
[3] the bank borrows from the South African Reserve Bank.
[4] the South African Reserve Bank increases the repo rate.

8. Suppose there is an increase in the total remuneration earned by the factors of production. How
this will influence the demand for money?
[1] The demand for active balances will increase and shift L2 to the right.
[2] The demand for transaction purposes will increase and shift L1 to the right.
[3] The demand for passive balances will decrease and shift L1 to the left.
[4] Speculative demand for money will decrease and shift L2 to the left.

12. Which one of the following statements regarding taxation is correct?
[1] Neutrality of tax means that compliance and administration costs are kept as low as possible.
[2] Taxes which induce taxpayers to change their behaviour are not neutral.
[3] The aim of taxes is to distort relative prices and change the behaviour of taxpayers.
[4] The tax burden is spread equally amongst taxpayers.

Questions 52 and 53 are based on the following table showing the key labour market indicators in
South Africa:
Number of persons (‘000)
Population 15-64 yrs 38 134
Labour force 22 668
Employed 16 529
Unemployed 6 139
Discouraged work-
seekers
2 841
52. The unemployment rate (using the strict definition) in South Africa is… (rounded to two decimals
after the comma).
[1] 54,33%
[2] 35,20%
[3] 37,14%
[4] 27,08%
53. The unemployment rate (using expanded definition) in South Africa is… (rounded to two
decimals after the comma).
[1] 54,33%
[2] 35,20%
[3] 37,14%
[4] 27,08%

Suppose that the quantity of corn supplied depend on the price of corn (P) and the amount of rainfall (R). The demand for corn depends on the price of corn and the level of disposable income (I). The equations describing the supply and demand relationships are Qs=20R +100P and Qd=4000-100P+10I.
a) sketch a graph of demand and supply curves that shows the effect of an increase in rainfall on the equilibrium price and quantity of corn.

The principal of employment at will is opposed to the doctrine that employees have a right