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ECS1601: Assignment 6 Semester 1 of 2023
Macroeconomic policy consists of ………
a.
contractionary monetary policy only.
b.
expansionary fiscal policy only.
c.
monetary, fiscal, and other policies.
d.
monetary and fiscal policies only.
Feedback
Macroeconomic policy consists of fiscal, monetary, and other policies.
Question 2
Which of the following statements is/are incorrect with regard to the main purpose of
economic theory?
a) Economic theory aims to capture every detail of a phenomenon under study.
b) Economic theory explains how the real economy functions.
c) Economic theory aims to predict changes in economic conditions and its impact on
the whole economy.
d) Economic theory serves as an underpinning for the formulation and analysis of
economic policies.
a.
a and b
b.
a only
c.
a and c
d.
a, b, c and d
Feedback
The purpose of the economic theory is not to capture every detail of a phenomenon
under study.
,Question 3
The quantity of money in an economy is …
a.
decided jointly by the Reserve Bank and the government, as it has important implications
for inflation targeting.
b.
determined by the interaction between the cost of credit and the demand for
money.
c.
dependent on the money supplied.
d.
determined by the Minister of Finance.
e.
fixed by the South African Reserve Bank.
Feedback
The quantity of money demanded is determined by the cost of credit. The cheaper it is
to take out the credit, the more money will be demanded. The quantity if money is
determined by the interaction of the interest rate (cost of credit) and the demand for
money.
Question 4
Which one of the following statements regarding taxes is correct?
a.
In a good tax system, compliance costs are equal to administration costs.
b.
Taxes which distort relative prices are not neutral.
c.
Equity in the tax system ensures simplicity and neutrality.
, d.
The aim of taxes is to always change the behaviour of people.
Feedback
Your answer is correct.
When taxes distort relative prices, they affect decisions of consumers and investors in the
economy and therefore such taxes are then not neutral. Review the section on taxation
in section 3.6.
Question 5
The process whereby the world’s economies have become more integrated through
trade, capital markets and technology are called______
a.
economic growth.
b.
economic development.
c.
colonisation
d.
globalisation
e.
economic integration
Feedback
Your answer is correct.
The world has become a global village in which individuals, businesses, and governments
have to think, plan and act globally. Factors of production have become extremely
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