Question

Question 2 [10] TRUE/FALSE QUESTIONS Consider the following list of statements. Each statement is either true or false. You must read each statement carefully and then select the option that you believe is correct as your answer. Write down only the question number and next to the number either “True” or “False”. 2.1. The level or rate of unemployment is a stock concept, that is, it is measured at a particular date. 2.2. The consumer price index (CPI) is an index of the prices of a representative “basket” of consumer goods and services. The CPI thus represents the cost of the “shopping basket” of goods and services of a typical or average South African household. 2.3. A policy in respect of the level and composition of government spending, taxation and borrowing is called fiscal policy. 2.4. When the dollar appreciates (i.e. when the rand depreciates), imports from the United States become more expensive (in rand) in South Africa and South African exports to the United States become cheaper (in dollars) in that country, ceteris paribus. This will tend to dampen imports and stimulate exports (i.e. to improve the balance on the South African current account). 2.5. The way in which changes in the monetary sector are transmitted to the rest of the economy is called the financial transmission mechanism. 2.6. Monetary and fiscal policy (sometimes collectively called supply management) can be expansionary or contractionary. 2.7. Demand-pull inflation occurs when the aggregate supply of goods and services increases while aggregate demand remains unchanged. 2.8. Frictional unemployment (sometimes also called search unemployment) arises because it takes time to find a job or to move from one job to another. 2.9. The Phillips curve was originally regarded as a clear indication that unemployment and inflation could be traded off against each other. In other words, a lower inflation rate could be achieved by trading it off against, or exchanging it, for greater unemployment. 2.10. One complete cycle has four elements: a trough, an upswing or expansion (often called a boom), a peak and a downswing or contraction (often called a recession).

Answer 1

2.1 TRUE. Level of unemployment is a stock concept. It is measured over a particular period of time. It is basically defined as the total number of people or what porportion of the total population are not employed into their jobs. It may also ramine the same over years, some people may drop out of unemployment, some people may draw in, and hence same rate is maintained.

2.2 TRUE. The CPI tells us the respective prices of basket of goods and services for every household. Thus, the CPI would also tell us cost of the shopping basket of goods and services of every household in South Africa. That is, it tells us how much is the index of price of every good or serivce that every household is consuming or purchasing in South Africa.

2.3 TRUE. There are mainly two types of policies used by economies to maintain the money supply in the economy. One is the monetary policy that is used by federal banks to maintain the money suppply, like the CLR, SLR, bank rate, repo rate, etc,. Another one is the fiscal policy, which asks as to tool used by the government to maintain the money supply in the economy.

2.4 TRUE. A dollar appreciation would mean that the the products that need to purchased from the US would cost more now since the value of dollar is more than the rand and similarly if US purchases products from our country, it'll cost less hence making rand cheaper. Hence the statement hold true that it wil lead to less of imports and more of exports happening.