Started on Wednesday, 8 November 2023, 1:01 PM
State Finished
Completed on Wednesday, 8 November 2023, 2:01 PM
Time taken 59 mins 35 secs
Marks 25.00/25.00
Grade 100.00 out of 100.00
Question 1
Correct
Mark 1.00 out of 1.00
The opportunity cost of holding money is
a. The interest that is forgone had the money been used to purchase
bonds.
b. The rent that could have been earned had the money been used to
purchase bonds.
c. The pro t that could have been earned had the money been used to
purchase bonds.
d. The interest that is forgone had the money been used to purchase
consumer goods.
Interest can only be earned if money is used to purchase bonds, not consumer
goods. Consumer goods are used by households to satisfy their wants, and
include food and wine. Rent is earned on land and pro t on entrepreneurship.
Which of the following statements regarding the nancial account in the
balance of payments is correct?
a. Direct investment includes short-term credit used to nance imports
and exports.
b. When out ows of foreign capital exceed in ows of foreign capital,
there is a nancial account surplus.
c. Portfolio investment refers to the purchase of assets such as
shares or bonds, where investors are only interested in the
expected nancial returns.
d. The balance on the nancial account is calculated by only adding net
direct investment and change in reserve assets.
Direct investment refers to transactions where the investor gains control or has
a meaningful say in the management of the business in which investment is
made. An example of a direct investment would be a multinational company
opening a production plant in South Africa. Short-term trade credit used to
nance imports and exports is found under other investment in the nancial
account.
When out ows of foreign capital exceed in ows of foreign capital, this is a
nancial account de cit. When in ows exceed out ows, then we have a
nancial account surplus. Portfolio investment refers to the purchase of shares
on bonds in nancial markets, where investors are only interested in the
nancial return on investment. A foreign investor buying shares in a company
listed on the Johannesburg Stock Exchange (JSE) to gain a return on equity
(investment) is an example of portfolio investment. The balance on the nancial
account is obtained by adding net direct investment, net portfolio investment,
net derivatives, net other investment, and the change in reserve assets.
Out ows are deducted from in ows in each of these sub-accounts of the
nancial account.
The following question is based on the table below, which shows the GDP at
current prices of country A for the years 1 and 2.
Which of the following statements are correct?
a. The increase in GDP from year 1 to year 2 can be the result of an increase in
the general price level.
b. The increase in GDP from year 1 to year 2 can be the result of an
increase in production.
c. From the given information, it is impossible to tell whether the 10% increase
in GDP from year 1 to year 2 represents economic growth.
a. All the statements are correct.
b. a and b
c. b and c
d. a and c
e. a
Your answer is correct.
Only nominal GDP for years 1 and 2 are provided in the table. This means we
can’t determine whether the increase in nominal GDP is due to an increase in
prices or due to an increase in production. There is not enough information to
determine if there is economic growth or not.
Which of the following statements de ne an import quota?
a. It is a tax or duty imposed on the quantity of goods imported into the
country.
b. It restricts imports by limiting the amount of foreign currency available
to buy them.
c. It is the price of one currency in terms of another.
d. It seeks to control the physical level of goods imported into the
country.
An import quota seeks to control the physical level (quantity) of goods
imported into the country.
Question 5
Correct
Mark 1.00 out of 1.00
Country A can produce 20 units of maize or 10 units of bananas. Country B can
produce 30 units of maize or 20 units of bananas. Assuming constant
opportunity costs, which of the following statements are correct?
a. Country B has an absolute advantage in the production of maize.
b. Country B has an absolute advantage in the production of bananas.
c. Country A has a relative advantage in the production of bananas.
a.
All the statements are correct.
b.
a and b
c. a and c
d. b and c
e. c
Your answer is correct.
Country B can produce more units of maize and more units of bananas in
absolute terms and therefore has absolute advantage in the production of both
these products. Country A has a higher opportunity cost than Country B with
respect to bananas
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