Economics Answers

XYZ LTD is considering replacing a machine with the following cash flows and salvage values
year cash flow(000) Salvage value (000)
1 5,000 6,000
2 3,800 3,000
3 2,500 1,000
the company project requires an initial cash investment of 7.5 million and cost of capital is 12 %
advice management when to replace asset with
a) identical asset
b) Non- identical asset

John was discussing the market for cocoa beans with his friend Kim. John said, "Ever since Venezuela announced that its cocoa harvest was its lowest ever in fifteen years, the price of cocoa beans has been rising and rising and people are buying more and more. I think the demand for cocoa beans must be upward sloping." Is John right? Briefly explain why or why not.

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?

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.