ECS1601 Assignment 7 (DETAILED ANSWERS) Semester 2 2024 - DISTINCTION GUARANTEED

ECS1601 Assignment 7 (DETAILED ANSWERS) Semester 2 2024 - DISTINCTION GUARANTEED - DISTINCTION GUARANTEED - DISTINCTION GUARANTEED Answers, guidelines, workings and references ,... Question 1 (5 marks) Maximum word count: 100 words 1.1 Suppose you live in South Africa and have the option to buy proudly South African products or international brands. With reference to the circular flow of goods and services and the circular flow of income and spending between households, firms, government and the foreign sector, provide an explanation as to why it is better to purchase the proudly South African products and also explain the opportunity costs of buying international items instead of those produced locally. (5 marks) Question 2 (10 marks) Maximum word count: 150 words 2.1 The following question is based on the passage below: NEWS Extract 2A After 2.0% economic growth for 2022 as a whole, South Africa's economy is now 0.3% bigger than it was in 2019 before the COVID-19 pandemic, Stats SA said, adding that the expansion was smaller than a 3.5% rise in the country's population over the same period. Gross domestic product grew 0.9% year on year in the fourth quarter, worse than forecasts for a 2.2% expansion. Source: Reuters (2023) < With the aid of a diagram, explain how the money market in South Africa will be affected by the abovementioned changes in economic activity. The direction of any changes should be clearly indicated by using arrows. (4 marks) Page 4 of 7 ECS1601 | Assessment 07 | Year 2024 2.2 • What effect will a change in economic growth prospects of China, as described in Extract 2B, have on the foreign exchange market of developing countries like South Africa where China is a significant trading partner? Include a diagram in your answer. (6 marks) Question 3 (10 marks) Maximum word count: 200 words 3.1 Read the following news clip and answer the question. News extract 3A Ghana inflation edges up to 42.5% in annual terms in June Ghana’s inflation rate surged more than expected in December, driven by steep increases in food, transport and housing costs in the West African country. Annual inflation quickened to 54.1% in the world’s second-largest cocoa producer, from 50.3% a month prior, Government Statistician Samuel Kobina Annim told reporters Wednesday in the capital, Accra. That’s the seventh-highest inflation rate in the world among 120 nations, including the eurozone … News extract 2B Unlike consumers in the West, Chinese people were left largely to fend for themselves during the COVID-19 pandemic and the revenge spending spree that some economists expected after China re-opened never took place. Moreover, demand for Chinese exports has been softening as key trading partners have been grappling with rising living costs. Source: Reuters (2023) < Page 5 of 7 ECS1601 | Assessment 07 | Year 2024 Source: Reuters (2023) You're an economic adviser to the Central Bank of Ghana and you're asked to advise both on: (i) With reference to news reported in Extract 3A, explain what type of inflation is likely to be triggered and why. Also, explain the influence of this inflation on the distribution of income and wealth among economic participants. (ii) the appropriate steps to address the inflation mentioned above. (8 marks) 3.2 Refer to the following table to answer the question Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2019 288,57 2020 303,13 2021 309,08 309,54 311,46 314,27 316,51 317,07 319,88 319,88 323,53 328,58 328,86 328,58 2022 331,38 336,72 344,29 355,52 359,16 358,60 363,37 366,46 372,35 381,89 390,59 398,73 • Calculate the annual inflation rate in Egypt for September 2022. Show all calculation steps. (2 marks) Question 4 (15 marks) 4.1. Have a look at the following diagram and answer questions 4.1 (i) and 4.1 (ii) that follow: Page 6 of 7 ECS1601 | Assessment 07 | Year 2024 Have a look at the following diagram and answer questions 4.1 (i) and 4.1 (ii) that follow: 4.1 (i) With reference to the above diagram, calculate the equilibrium level of income after the introduction of government spending, proportional income tax and the foreign sector. Show all calculation steps. (5) 4.1 (ii) With reference to the above diagram, if national income (Y) is R652 million, calculate the induced consumption after the introduction of government spending and proportional income tax. Show all calculation steps. (3) Y = AE