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2021 past paper
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Economics 244 2021 past paper
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STELLENBOSCH UNIVERSITYDEPARTMENT OF ECONOMICS
ECONOMICS 244
MAIN ASSESSMENT A1 : 1 OCTOBER 2021
Marks: 100 Time: 3 hours
NO POCKET CALCULATORS ARE ALLOWED
Lecturers: Prof GA Schoombee
Prof RCC Jafta
Internal moderator: Dr DJ van Lill
SECTION A
MONETARY POLICY
[40 Marks]
QUESTION 1
Over the years the focus of monetary policy has shifted between the four macroeconomic
stability objectives. Discuss these shifts in the international context since the implementation
of the Bretton Woods fixed exchange rate system in 1944. [10]
QUESTION 2
Briefly describe the distinction between goal independence and operational independence of
a central bank. Then provide a motivated explanation of the situation with regards to the
South African Reserve Bank. [5]
QUESTION 3
"When implementing monetary policy, the South African Reserve Bank focuses on the
initiating factors (the first-round effects) of inflation." Discuss this statement. [5]
QUESTION 4
Is the South African Reserve Bank credible? Fully motivate your view. [10]
Page 1 of 5
, QUESTION 5
An increase in the repo rate leads to an upward adjustment in all other short-term interest
rates in South Africa. Fully explain how the latter will curtail inflation via the two channels
of the monetary transmission mechanism that have an impact on the (input) cost of
production.
[10]
SECTION B
INTERNATIONAL TRADE
[60 marks]
PENALISATION
-1 FOR TRUE/FALSE
-0.30 FOR MULTIPLE CHOICE QUESTIONS
QUESTION 6
True/False [10
marks]
6.1 Adam Smith was a mercantilist.
6.2 In contrast to Adam Smith, David Ricardo’s theory of trade emphasises the absolute
advantage of trade.
6.3 The mercantile system sought to enrich the country by restraining imports and
encouraging exports.
6.4 Assume countries A and B produce two products, X and Y. If country A has an
absolute advantage in the production of both X and Y, trade which benefits both
countries, will be impossible.
6.5 An import tariff increases producer surplus.
6.6 One of the objectives of the WTO is to make sure that no trade takes place between
members and non-members.
6.7 Paul Krugman argued that trade between countries that have identical tastes,
technologies and factors endowments, will still be beneficial.
6.8 Dumping in international trade means buying goods at low prices abroad and selling
at higher prices locally.
6.9 The demand lag in the technology gap theory refers to the time taken for foreign
consumers to acquire a taste for a new product.
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