Exam (elaborations)

Ecs1601 assignment 2 2022 Q&A

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Module
Ecs1601.

Institution
University Of South Africa

Ecs1601 assignment 2 2022 Q&AEcs1601 assignment 2 2022 Q&A 2.1 An appropriate government intervention in the economy … [1] is to encourage a monopolistic market that satisfies the aggregate demand for goods and services by the public. [2] is to get involved in the economic sectors where th...

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ecs1601 assignment 2 2022 qampa
ecs1601 assignment 2 2022 qampa 21 an appropriate government intervention in the economy … 1 is to encourage a monopolistic market that satisfies the aggregate

Institution
University of South Africa
Module
Ecs1601.

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Ecs1601 assignment 2 2022 Q&A

2.1An appropriate government intervention in the economy …

[1] is to encourage a monopolistic market that satisfies the
aggregate demand for goods and services by the public.
[2] is to get involved in the economic sectors where the private
sector is producing goods and services more efficiently.
[3] involves measures to correct market failure and provision
of public goods and services.
[4] has to do with taking income from those with low incomes
and providing income to those with higher incomes.

Cognisance should be taken of the fact that markets do not
always produce efficient outcomes. Markets fail and when they
do, a case for government intervention arises. In other words,
government intervention may be required in an attempt to correct
market failure.

2.2Which of the following statements is/are correct?

a) The failure of markets to produce efficient outcomes, is
called government failure.
b) Government may fail to have efficient outcomes due to corruption.
c) Government failure arises because bureaucrats put the
interest of society first.

[1] b and c
[2] a and b
[3] a and c
[4] b

Corruption is one of the main variables affecting the efficiency of
government, it reduces resources that could be used to enhance
efficiency.

2.3 Which one of the following statements on nationalisation and
privatisation is correct?

[1] Nationalisation is the transfer of ownership from the public
sector to the private sector.
[2] Privatisation is the transfer of ownership from private
enterprise to government.
[3] One of the arguments in favour of privatisation is that the
privatised firm may attract foreign direct investment.
[4] Privately owned enterprises are often a burden on the taxpayer.

, Because of the potential efficiency and profitability, privatised
firms are likely going to attract FDI (See Philip mohr on arguments
for privitasition).

2.4Fiscal policy …

[1] involves spending and/or changing of taxes by government.
[2] is said to be expansionary if the government increases taxes.
[3] does not influence the economy.
[4] can be used to attain price stability in the economy.

The two instruments of fiscal policy include government
expenditure and taxes which are used to to inflate or deflate the
economy.

2.5Which of the following statements regarding fiscal policy and the
budget is/are correct?

a) A country’s budget is the main instrument of fiscal policy
b) Budget outlines government spending plans and tax rates to
be levied on taxpayers.
c) Political decisions about government spending plans are
reflected in the budget.

[1] a
[2] b
[3] a and b
[4] a, b and c

All these are correct for reference purposes and further
understanding see Philip mohr Pg 289.

2.6 Expansionary fiscal policy refers to , while contractionary fiscal
policy refers to.

[1] an increase in government borrowing; decrease in
government spending.
[2] decrease in taxes; increase in government spending.
[3] an increase in government spending; an increase in taxes.
[4] demand management policy; monetary policy.

An increase in government spending increases aggregate demand
hence it is an expansionary fiscal policy whilst an increase in
taxes reduces the disposable income and hence reduces
aggregate demand.

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