ECS1601 Macroeconomics Test Bank 2022
ECS1601 TEST BANK
Question 1
In the goods market of the circular flow model, ….
1) firms buy factors of production from consumers
2) firms buy finished products from households
3) consumers buy factors of production from firms
4) firms sell facto...
ecs1601 test bank question 1 in the goods market of the circular flow model
… 1 firms buy factors of production from consumers 2 firms buy fin
Written for
University of South Africa (Unisa)
ECS1601 TEST BANK
All documents for this subject (3)
Seller
Follow
UNISA2022
Reviews received
Content preview
lOMoAR cPSD| 11450120
ECS1601
TEST BANK
Macroeconomics (University of South Africa)
Downloaded by DJ poppy paps (blackstonepoppymusic@gmail.com)
, lOMoAR cPSD| 11450120
ECS1601 TEST BANK
Question 1
In the goods market of the circular flow model, ….
1) firms buy factors of production from consumers
2) firms buy finished products from households
3) consumers buy factors of production from firms
4) firms sell factors of production to the government
5) consumers buy finished products from firms The correct alternative is [5].
Explanation
In the goods market of the circular flow model, consumers receive income in the
form of salaries and wages, interest, rent and profit and use this income to purchase
finished consumer goods and services.
Question 2
In the factor market, … .
1) a student buys lunch at a local university cafeteria.
2) the South African Defence Force buys machine guns from a weapons
manufacturer
3) a retirement fund buys shares in a major company
4) a farmer buys farmland from a retiring farmer The correct alternative is [4].
5) a welder buys a personal computer from an electronics store
Explanation
A factor market is a market where factors of production such as labour, land and
capital are traded. Therefore, in this case only the sale of land (i.e. farmland) will
occur in a factor market.
Question 3
In the circular flow of income and spending, … .
1) investment results in a decrease in the volume of the income flow
2) taxes result in an increase in the volume of the income flow
3) imports result in an increase in the volume of the income flow
4) savings result in a decrease in the volume of the income flow The correct
alternative is [4].
Explanation
In the circular flow of income and spending, savings, taxes and imports are called
leakages or withdrawals since they result in a decrease in the volume of the income
flow, whereas investment spending and government expenditure and exports are all
injections into the circular flow since they result to an increase in the volume of the
income flow.
1
Downloaded by DJ poppy paps (blackstonepoppymusic@gmail.com)
, lOMoAR cPSD| 11450120
Question 4
Which one of the following statements is correct?
1) Flows (2) and (3) represent income.
2) Flows (2) and (4) represent spending.
3) Flows (1) and (2) represent spending.
4) Flows (1) and (3) represent spending. The correct alternative is [4].
Explanation
In the circular flow of income and spending, households supply factors of production
to firms and in turn receive income which they spend on goods and services offered
by firms (Flow 3). Their spending represents the income to firms. Firms spend some
of their income to pay wages to households for their services, interest for the use of
capital and rent for the use of their land (Flow 1).
Question 5
1) capital, wealth and income are stock variables, whereas investment and profit
are flow variables
2) capital, wealth and gold reserves are stock variables, whereas investment,
profit and loss are flow variables The correct alternative is [2].
3) investment, income and profit are stock variables, whereas capital, wealth and
natural resources are flow variables
4) capital, wealth and population size are stock variables, as are investment,
profit and savings
Explanation
Capital, wealth and gold reserves are stock variables since they have no time
dimension and can only be measured at a specific moment. Whereas investment,
profit and loss are flows since they have a time dimension and can only be
measured over a period.
2
Downloaded by DJ poppy paps (blackstonepoppymusic@gmail.com)
, lOMoAR cPSD| 11450120
Question 6
In the circular flow of income and spending, the main leakages are:
a) the foreign sector, the financial sector and taxes
b) imports, investments, bank withdrawals, off-shore shares and securities
c) imports, savings and taxes
1) a
2) c The correct alternative is [2].
3) a and b
4) b and c
5) None of the above.
Explanation
Savings, taxes and imports are leakages in the circular flow of income.
Question 7
In a mixed economy, the economic decisions of what to produce, how to produce it,
and who will receive it are made by … .
1) the government
2) consumers and firms
3) banks and stock markets
4) household, firms, government and the foreign sector The correct alternative
is [4].
5) banks and the government
Explanation
In a mixed economy the households, firms, government and the foreign sector all
participate in the production process. They all partake in production, income and
spending since they contribute towards production, earn an income and spend their
income.
Question 8
An example of a double coincidence of wants is … .
1) a car dealer who wants a TV finding an electronics store owner who wants
money
2) a car mechanic who wants a TV finding an electronics store owner who wants
a car repaired The correct alternative is [2].
3) an electronics store owner who wants car repairs finding a car mechanic who
wants money
4) All of the above.
Explanation
A double coincidence of wants is present where two individuals have exactly the
same products available for exchange that the other person wants. In this case a car
mechanic who needs a TV finds an electronic store owner who needs a car repaired.
Question 9
Money overcomes the problem of a double coincidence of wants through its function
as a …
1) medium of exchange The correct alternative is [1].
3
Downloaded by DJ poppy paps (blackstonepoppymusic@gmail.com)
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller UNISA2022. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $2.76. You're not tied to anything after your purchase.
