Multiple‐choice questions: Select one correct answer for each of the following. In your answer booklet, write down only the number of the question and next to it, the letter of the correct answer. Q.1.1 An increase in the budget deficit is the result of: (2) (a) Expansionary monetary policy; (b) Contractionary monetary policy; (c) Expansionary fiscal policy; (d) Contractionary fiscal policy. Q.1.2 Company tax is a: (2) (a) Progressive, direct tax; (b) Progressive, indirect tax; (c) Proportional direct tax; (d) Regressive indirect tax. Q.1.3 In the base year, a country produced 50 units of output at a price of R6,00 each for a nominal GDP of R300. This year it produces 60 units of output at a price of R8,00 each. What is the percentage change in real GDP since the base year? (2) (a) 5%; (b) 10%; (c) 20%; (d) 15%. Q.1.4 Which of the following statements about Fiscal Policy is INCORRECT? (2) (a) In order to combat inflation, the South African Reserve Bank must apply a contractionary fiscal policy; (b) A contractionary fiscal policy can result in higher levels of unemployment; (c) Expansionary fiscal policy will increase the budget deficit; (d) The application of fiscal policy will have no effect on aggregate supply in the AD‐AS model. 2020 © The Independent Institute of Education (Pty) Ltd 2020 Page 5 of 10 Q.1.5 If the inflation rate is 6% and Susan receives a 6% increase in income, then, over the year, Susan’s: (2) (a) Real and nominal income both remain unchanged; (b) Real and nominal income both rise; (c) Real income rises but nominal income remains unchanged; (d) Nominal income rises but real income remains unchanged. Q.1.6 Given the import function, Z = 300 + 2/3Y, which of the following statements is correct? (2) (a) The marginal propensity to save is 1/3; (b) The induced component is 300; (c) 2/3 is the proportion of any income spent on imports; (d) None of the statements is correct. Q.1.7 An increase of R5 billion in income in a macroeconomy leads to an increase in R3 billion in consumption spending. From this information, we can determine that the marginal propensity to save in this economy is: (2) (a) 0.6; (b) 0.5; (c) 0.3; (d) 0.4. Q.1.8 Mr Brown has recently been retrenched. The firm he worked for had to retrench a number of staff due to the downturn in the economy. Mr Brown has not managed to find alternative employment. We can say he is _________________ unemployed. (2) (a) Structurally; (b) Cyclically; (c) Seasonally; (d) Frictionally. Q.1.9 If the CPI was 106 in 2013 and 116 in 2014, the inflation rate in 2014 was: (2) (a) 106%; (b) 116%; (c) 9.4%; (d) 16% Q.1.10 Strikes across a wide range of industries in South Africa in the first half of 2020 can be illustrated in the AD‐AS model as a: (2) (a) Leftward shift of the AD curve; (b) Rightward shift of the AD curve; (c) Leftward shift of the AS curve; (d) Rightward shift of the AS curve.
