Economics Answers

The cost of production in South African economy accelerated, due to rising prices of electricity and petrol in the country, which led to an increase in the prices of domestic goods and services relative to foreign goods and services. This will likely to a (n).........

1. Increase in the net export and aggregate spending in the SA economy
2. Increase in the demand of South African goods by foreign countries
3. Increase in the quantity of goods and services demanded in the SA economy
4. Decrease in the quantity of goods and services demanded in the SA economy

B. If the government decides to increase personal income tax to raise its tax revenue, what will be the impact on the economy?

1. Both the price level and the equilibrium level of real output will decrease
2. Both aggregate demand and aggregate supply will increase
3. Price level will increase, and total production will decrease
4. Price level will decrease, total production will increase

On 1 August 2016 Sipho started a garden services business. The following is an extract of certain
accounts from his trial balance on 31 August 2016:
Prepaid expenses (insurance) R1500
Equipment R8000
Loan (credit) R10000
Fees earned R2000
Income received in advance (fees) R1500
The following relates to the above accounts:
a. The insurance premium was paid for the month of September 2016.
b. Depreciation on equipment for August 2016 amounts to R300.
c. The loan was negotiated on 1 August 2016 at an interest rate of 15% per annum.
d. A client paid R1500 on 1 August 2016, for the next four months (September, October,
November and December).
e. A client, who received services valued at R250 during August, has not yet paid for them.
Sipho would like to prepare statements on a monthly basis.
REQUIRED:
Prepare the adjusting general journal entries as at 31 August 2016. Show all calculations.

In the classical model of the labour market, involuntary unemployment will increase if:

Given Qsx=20Px where Qsx is the quantity supplied of good x and Px is the price per unit of good x find the minimum price that will induce the supplier to start selling good x at the market

The market for widgets has demand P = 60 − 2QD and supply P = 2QS . The consumption of widgets produces a positive marginal benefit to society so that the social marginal benefit curve is given by SMB = 60 − Q. The government considers two policies to correct the inefficiency created by the externality in the market: (1) give producers a Pigouvian subsidy, or (2) give producers a subsidy equal to the quantity they produce. Check all of the following statements (if any) that are correct and explain why:
A. The market produces the efficient quantity under each policy
B. The deadweight loss from policy (2) is greater than from policy (1) C. The government spends more on policy (1) than on policy (2)

Explain the process of multipler in a two sector economy using suitable diagram.

How far ahead do people typically look in making market decisions?
Provide examples of different forms of market behaviour in this regard.

Explain income method of measuring GDP. What is the role of statistical diserepancy.

On October 17, 1973, the Organization of Arab Petroleum Exporting Countries (OPEC) declared an embargo on the
shipment of oil to those countries that had supported Israel in its conflict with Egypt. With one stroke, the total
dependence of the industrialized world on oil, especially the US, became painfully clear. The effects of the embargo
were immediate. The retail price of a gallon of gasoline rose from a national average of 40 cents in May 1973 to 60
cents in June 1974. President Nixon (a controlling man that he was) decided to set a price ceiling at 50 cents.
Illustrate using supply and demand graph the effect on equilibrium quantity and quantity sold of gasoline as the
embargo came into effect. And then after the embargo, (on the same graph) show what happens to the quantity of
gasoline sold as Nixon imposes the price ceiling. Is there any dead weight loss from the above two events?

Assume that the aggregate production of an economy is Yt= √Kt Lt , where Kt+1 =( 1-d) Kt+ It, St= sYt and Lt= L( i.e., the notation and meanings is to correspond the setting for the allow model with constant population. Then the savings rate s that maximizes the steady rate of consumption equals ?