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,8/7/24, 3:43 PM Assessment 3: Attempt review
ECS1601-24-Y Online assessments Assessment 3
QUIZ
Started on Tuesday, 6 August 2024, 6:30 PM
State Finished
Completed on Tuesday, 6 August 2024, 6:50 PM
Time taken 20 mins 38 secs
Marks 18.00/18.00
Grade 100.00 out of 100.00
Question 1
Correct
Mark 1.00 out of 1.00
The question is based on the information in the table below:
The growth rate in real GDP between 2018 and 2019 was _____.
a. 3,71%
b. 4,18%
c. 4,73%
d. 4,23%
The growth rate in real GDP between 2018 and 2019 can be calculated as
follows:
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,8/7/24, 3:43 PM Assessment 3: Attempt review
Question 2
Correct
Mark 1.00 out of 1.00
If GDP is greater than GDE,
a. the country has a deficit in the current account.
b. exports are greater than imports.
c. taxes are more than government expenditure.
d. the country is consuming more than it is producing.
See section 5.2 on the difference between GDP and GDE. In this case, the
difference lies in the fact that the contribution of the foreign sector is positive to
GDP (i.e X>Z).
Question 3
Correct
Mark 1.00 out of 1.00
Which of the following statements regarding rating agencies is correct?
a. Corruption is not considered when rating agencies assign an
investment rating to an economy.
b. The level of public debt is not considered when rating agencies assign
an investment rating to an economy.
c. Countries that fall under non-investment grade are also referred to
as “junk status” economies.
d. Credit ratings are only assigned at the macroeconomic level.
Corruption is considered when rating agencies assign an investment rating to
an economy. Corruption by government often leads to mismanagement of
public finances and resources, resulting in increased government debt and lack
of service delivery to citizens. Corruption occurs because resources are not
used for the purposes they are meant for. This negatively affects investor
confidence.
The level of public debt is considered when rating agencies decide on a credit
rating. If government is unable to repay its debt, this makes the country a higher
default risk. Default risk refers to the risk associated with a country’s ability to
repay its debts. Therefore, the higher the level of public debt, the higher the
default risk associated with the country. Countries that fall under non-
investment grade are also referred to as “junk status” economies. These are
usually countries with high levels of public debt, corruption, low economic
growth, and political interference in state institutions.
Credit ratings can also be assigned at a smaller scale to commercial banks,
such as Absa and First National Bank, state-owned enterprises such as Eskom
and even retail stores, such as Edgars. Their creditworthiness, management
and efficiency are also assessed before individuals and large pension funds
decide to invest.
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, 8/7/24, 3:43 PM Assessment 3: Attempt review
Question 4
Correct
Mark 1.00 out of 1.00
If a certain newspaper reports that “the construction sector was responsible for
1.8% of the GDP growth (for a specific period),this implies that the GDP has
been measured according to...method.
a. expenditure
b. production
c. income
d. nominal prices
Your answer is correct.
The three approaches to calculate the GDP, namely (i) the production
method(which measures the value added by all the participants in the economy.
(ii)the income approach(which measures the income received by different
factors of production) and (iii) the expenditure approach (which measures the
spending on final goods and services by the different participants in the
economy). With regards to the expenditure approach, the spending of the four
major sectors of the economy(namely households, firms, the government, and
the foreign sector) are added together to calculate the GDP. Thus, according to
the expenditure method, GDP is calculated as follows: Consumption spending
by households(C) plus expenditure on exports(X) minus expenditure on
imports(Z).The equation is: GDP=C+I+G+X-Z. Thus, when the newspaper
reports that the construction sector is responsible for 1,8% of the GDP for
specific period, this will be categorized as investment spending(gross capital
formation) by firms(I) , which is a component of aggregate spending on GDP
according to the expenditure method.See pages 84 to 94 in the prescribed
book.
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