Question

Study the following table containing information on the South African labour force in the first quarter of 2019 (January to March) and answer the following question:

Table: Labour force by all sexes and all population group

Population	Millions
Total unemployed	?
Total employed	14690
Economically active	19663
Not economically active	?
Population of working age	34712

Source: Stats SA Quarterly labour force survey, Quarter 1, 2019

What is the current unemployment rate in SA?     

  

	A.	29.1%
	B.	23.3%
	C.	29.7%
	D.	30.1%
	E.	31%

If real gross domestic product is R500 billion and planned aggregate expenditure is R458 billion, then inventories will:

A.

pile up and output will decrease.

B.

pile up and output will increase.

C.

be depleted and output will decrease.

D.

be depleted and output will increase.

E.

stay constant, as will output.

The government of an open economy determines that the current equilibrium level of income in the economy is lower than the full-employment level of income and wishes to close this gap. The Minister of Economic Affairs hears that you have just studied the Keynesian model of the macro-economy and approaches you for advice. Which one of the following suggestions would be inappropriate in this context?

	A.	Create a more favourable environment for investment spending.
	B.	Spend more on infrastructural projects (for example, the construction of new roads).
	C.	Encourage households to save a larger proportion of their annual income.
	D.	Reduce the rate of taxation.
	E.	Try to reduce imports by encouraging households and firms to purchase locally-manufactured consumer and capital goods

Which one of the following statements about a simple Keynesian model without a government or foreign sector is incorrect?

A.	The greater the value of the marginal propensity to consume, the greater the value of the multiplier becomes.
	B.	The size of the multiplier depends on the size of the marginal propensity to consume.
	C.	If the marginal propensity to consume is 0,75, then a R10 million increase in investment spending will raise the equilibrium level of income by R7.5 million.
	D.	If the marginal propensity to consume is 0,6, then a R100 million increase in investment spending will raise the equilibrium level of income by R250 million.
	E.	The equilibrium level of income can be obtained by multiplying the level of autonomous spending by the multiplier.

In the Keynesian model, unemployment can be reduced by:

A.	increasing the level of saving, and hence investment.
	B.	decreasing the level of saving, ceteris paribus.
	C.	persuading households to reduce their consumption.
	D.	raising the interest rate.
	E.	none of the above, since it is not part of the model.

Study the table below and answer the following question.

YEAR	Output	Average price level	CPI	Nominal GDP	Real GDP (constant prices)	Inflation rate (%)	Economic growth
2014	700	R47.75	95.5	R33425	?	?	?
2015	840	R50	100	R42000	?	?	?
2016	900	R85	170	R76545	?	?	?
2017	980	R105	210	R102900	?	?	?
2018	980	R120	240	R117600	?	?	?
2019	1000	R150	300	R150000	?	?	?

What was the economic growth rate in 2010?    

	A.	2%
	B.	1.5%
	C.	2.04%
	D.	0.04%
	E.	3%

                                                              

Answer 1

SOLUTION:

1. What is the current unemployment rate in SA?

Answer: B. 23.3%

Explanation: As the table depicts the unemployment rate in South African labour force in the first quarter of 2019. Conider the currrent year 2020 to know the unemployment rate. It's rate has fell from 30.1% (JAN 2020) to 23.3% (JULY 2020). So, 23.3% is the current year.

2. If real gross domestic product is R500 billion and planned aggregate expenditure is R458 billion, then inventories will:

Answer: A.pile up and output will decrease.

Explanation: If aggregate planned expenditure(R458 billion) is less than real GDP(R500 billion), the firms inventories will be larger than the actual planned expenditure. People tend to buy less goods and services from them rather than the actual goods being produced. So, not all the goods and services will be sold by the firm, their inventories will pile up and real GDP falls. Thus, pile up and output will decrease.

3. The government of an open economy determines that the current equilibrium level of income in the economy is lower than the full-employment level of income and wishes to close this gap. The Minister of Economic Affairs hears that you have just studied the Keynesian model of the macro-economy and approaches you for advice. Which one of the following suggestions would be inappropriate in this context?

Answer: E.Try to reduce imports by encouraging households and firms to purchase locally-manufactured consumer and capital goods.

Explanation: This suggestion is inappropriate as it enables to reduce the imports by purchasing only the local manufacturing goods. To have a higher level of income than full employment, the government should implement other suggestions.

4. Which one of the following statements about a simple Keynesian model without a government or foreign sector is incorrect?

Answer: C. If the marginal propensity to consume is 0.75, then a R10 million increase in investment spending will raise the equilibrium level of income by R7.5 million.

Explanation: The R10 million increase in investment spending will not raise the equilibrium level of income by R7.5 million.

5. In the Keynesian model, unemployment can be reduced by:

Answer: E. None of the above, since it is not part of the model

Explanation: Keynes suggested that the government spend more money and cut taxes to turn a budget deficit, which would increase consumer demand in the economy. This would, in turn, lead to an increase in overall economic activity and a reduction in unemployment.

6. What was the economic growth rate in 2010?  

Answer: A.2%

Explanation: Consider the table, Divide the CPI and average price level of the recent year 2019.