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ecs1601 assignment 5 2023
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ecs1601 assignment 5 2023
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By: ttakhopsy • 10 months ago
By: BMZAcademy • 5 months ago
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BMZ ACADEMYBMZ ACADEMY
@061 262 1185/068 053 8213/0717 513 144
BMZ ACADEMY 061 262 1185/068 053 8213/0717 513 144
, BMZ ACADEMY
Table of Contents
Question 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) ................ 3
Question 2.1Owing to increasing, food and transport prices, the Consumer Price Index (CPI) in South
Africa accelerated from 6,5% to 7,4% in June 2022. As a result, the Monetary Policy Committee (MPC)
decided to increase the repurchase rate by 75 basis points to 5.50% per year, with effect from 22 July
2022. With the aid of a diagram, explain how the money market in South Africa will be affected by the
MPC’s decision to increase the interest rate. The direction of any changes should be clearly indicated
by using arrows. (4 marks) ...................................................................................................................... 3
Question 2.2: What effect will a change in the price of oil, as described in Extract 2A, have on the foreign
exchange market of a developing country like South Africa where oil is imported? Include a diagram in
your answer. (6 marks)............................................................................................................................ 4
3.1 You're an economic adviser to the Central Bank and National Treasury and you're asked to advise
both on: ................................................................................................................................................... 5
(ii) the appropriate steps to address the inflation. ................................................................................... 6
4.1 (i) With reference to the above diagram, calculate the equilibrium level of income after the
introduction of government spending and proportional income tax. Show all calculation steps. (5) ...... 6
4.1 (ii) With reference to the above diagram, if national income (Y) is R500 million, calculate the induced
consumption after the introduction of government spending and proportional income tax. Show all
calculation steps. (3) ............................................................................................................................... 7
4.2 Given the consumption function in the Keynesian Model with the Public sector taken into
consideration: If South Africa is experiencing a recession and the government is required to bring the
economy to its equilibrium level of R 6 600 billion. Suppose the aggregate expenditure is currently at R
4 500 billion. In addition to this, the tax rate is 0.3; marginal propensity to consume is 0.68, and the
marginal propensity to import is 0.15. How much should the government spend to bring the economy
to equilibrium? (7 marks)......................................................................................................................... 8
BMZ ACADEMY 061 262 1185/068 053 8213/0717 513 144
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