Economics Grade 12 Paper 1 FS Prelim 2022 Memo

Downloaded from hlayiso.com Downloaded f rom St anmorephysics. com education p rtm nt f Edu ti n FREE STATE PROVINCE PREPARATORY EXAMINATION GRADE 12 ECONOMICS P1 SEPTEMBER 2022 MARKING GUIDELINE MARKS: 150 This marking guideline consists of 19 pages. Copyright reserved Please turn over

Downloaded from hlayiso.com Downloaded Economics P1 f rom St anmorephysics. 2 com FS/September 2022 Grade 12 Prep. Exam. Marking Guidelines SECTION A (COMPULSORY) QUESTION 1 1.1 MULTIPLE CHOICE 1.1.1 C (income method GDP(I).)  1.1.2 C (lead to a larger change in the national income)  1.1.3 A (money)  1.1.4 D (improving the efficiency of markets)  1.1.5 B (free floating)  1.1.6 A (land restitution)  1.1.7 B (obesity)  1.1.8 D (investing in social capital)  (8 x 2) (16) 1.2 MATCHING COLUMNS 1.2.1 C (difference in the value of total output between a peak and a trough)  1.2.2 E (measures undertaken by the government to stimulate growth in the economy)  1.2.3 B (drives countries to specialize in the production of goods where they enjoy the lowest opportunity cost)  1.2.4 F (purchase of assets, such as shares or bonds, where the investor is interested only in the expected financial return on the investment)  1.2.5 A (levied according to the amount earned)  1.2.6 H (a track of land that forms passageway allowing access from one area to another and is developed as part of regional development)  1.2.7 D (financial incentives in the form of a cash grant of up to 50% of the costs training new staff)  1.2.8 I (measured in terms of the rate of output per unit of input)  (8 x 1) (8) Copyright reserved Please turn over

Downloaded from hlayiso.com Downloaded Economics P1 f rom St anmorephysics. 3 com FS/September 2022 Grade 12 Prep. Exam. Marking Guidelines 1.3 CONCEPT/TERM: 1.3.1 Coincident indicators  1.3.2 Trend  1.3.3 Opportunity cost  1.3.4 International Monetary Fund  1.3.5 Expanded Public Works Programme  1.3.6 Dependency rate  (6 x 1) (6) TOTAL SECTION A: 30 Copyright reserved Please turn over

Downloaded from hlayiso.com Downloaded Economics P1 f rom St anmorephysics. 4 com FS/September 2022 Grade 12 Prep. Exam. Marking Guidelines SECTION B Answer any TWO of the three questions in this section in the ANSWER BOOK. QUESTION 2: MACROECONOMICS 40 MARKS – 30 MINUTES 2.1 Answer the following questions. 2.1.1 Name any TWO prices used in the conversion of national aggregates.  Basic prices   Market prices   Factor costs (2 x 1) (2) 2.1.2 What determines complete cycles of fluctuations in the economy? Complete cycles of fluctuations are determined by distances from peak to peak or trough to trough.  (1 x 2) (2) 2.2 Data response 2.2.1 Which economic concept, according to the extract, rely more on export and import prices? Terms of trade  (1) 2.2.2 Give the current account item for recording donations. Current transfers  (1) 2.2.3 Briefly describe the term balance of payment. Systematic record of the country's transactions with the rest of the world over a given period of time.  (Accept any other correct relevant response) (2) 2.2.4 Why did South African merchandise exports experience a decline in 2020 in relation to the COVID-19 pandemic?  Operations in the mining and processing of gold had to observe the COVID-19 pandemic protocols, and this slowed down productivity dramatically.   Sensitivity and attitudes of many leading countries towards South Africa and its way of dealing with the pandemic, also impacted negatively on merchandise exports.   Closing down of cross-borders as temporary precautionary measures for the pandemic, also had a negative effect on gold exports by South Africa.  (Accept any other correct relevant response.) (2) Copyright reserved Please turn over

Downloaded from hlayiso.com Downloaded Economics P1 f rom St anmorephysics. 5 com FS/September 2022 Grade 12 Prep. Exam. Marking Guidelines 2.2.5 Calculate the percentage change of the surplus in the current account of balance of payments in the second and third quarter of 2021. Show ALL your calculations. Percentage change of the surplus =2nd quarter surplus – 3rd quarter surplus/2nd quarter surplus x 100% =R311billion – R226 billion/R311billion x 100%  =R85 billion / R311 billion x 100%  =0,273 x 100% =27,3%  (4) 2.3 Data response 2.3.1 Identify ONE factor from the extract which might cause economic fluctuations. Shocks  (1) 2.3.2 Name the type of business cycle caused by changes in investment in equipment and machinery. Jugler  (1) 2.3.3 Briefly describe the term business cycle. Successive periods of increasing and decreasing economic activities.  (Accept any other correct relevant response.) (2) 2.3.4 Explain the reason why government intervention is not needed under exogenous explanations. Markets are inherently stable under exogenous explanations, and any government can destabilise markets.  (Accept any other correct relevant response.) (2) 2.3.5 How can fiscal policy be used to 'stimulate' a depressed economy?  The finance ministry can lower taxation so that aggregate demand can be increased due to more disposable income.   They can also increase government spending, especially for the historically marginalised groups.   Increased government spending has a way of increasing aggregate demand and total spending by circular flow participants. (Accept any other correct relevant response.) (4) Copyright reserved Please turn over

Downloaded from hlayiso.com Downloaded Economics P1 f rom St anmorephysics. 6 com FS/September 2022 Grade 12 Prep. Exam. Marking Guidelines 2.4 Differentiate between factor market and goods market. Factor market  This is the market where factors of production are traded.   Factor market is also known as input or resource market.   E.g. labour trading  Goods market  This is the market where goods and services are traded.   Goods market is also known as output or product market.   E.g. trading consumer and capital goods.  (Accept any other correct relevant response.) (A maximum of 4 marks may be allocated for mere listing of facts/examples.) (2 x 4) (8) 2.5 Evaluate South Africa's efforts in reducing costs in order to promote supply side policies. Successes  In terms of infrastructural costs, South Africa has adopted a cheaper option recently in the construction of roads by municipalities using paving instead of expensive tarred roads.   Cash incentives by the DTI have been assisting South African exporters in developing markets abroad, and thus lowering or reducing the cost of production for them.  (Accept any other correct relevant response.) Failures  The country, through NERSA, has failed to lower the costs of electricity to the benefit of all South Africans.   These high costs of electricity have also affected the production of goods and services due to higher costs incurred by the businesses.  Tender systems awarded by municipalities for supply of water to areas with water shortages using water trucks, have benefited a few at unreasonable costs that could have been used to stimulate the economy.   Administrative costs have been unnecessarily high due to incompetence and maladministration by the personnel, and as a result affecting supply of the much needed goods and services.  (Accept any other correct relevant response) (A maximum of 2 marks may be allocated for the mere listing of facts/examples) (4 x 2) (8) [40] Copyright reserved Please turn over

Downloaded from hlayiso.com Downloaded Economics P1 f rom St anmorephysics. 7 com FS/September 2022 Grade 12 Prep. Exam. Marking Guidelines QUESTION 3: ECONOMIC PURSUITS 40 MARKS – 30 MINUTES 3.1 Answer the following questions. 3.1.1 Name any TWO examples of services as social indicators.  Refuse removal   Sanitation   Water  (Accept any other correct relevant response.) (Any 2 x 1) (2) 3.1.2 What effect will a decline in secondary school enrolment have on the future of the South African economy?  Tertiary enrolment will also experience a decline.   The country will as a result run short of skills needed by the economy.  (Accept any other correct relevant response.) (Any 1 x 2) (2) 3.2 Data response 3.2.1 Which economic concept is illustrated in the cartoon above? North-South Divide  (1) 3.2.2 Give ONE measure of unequal standard of living.  Per capita income   Life expectancy   Education  (1) 3.2.3 Briefly describe the term globalisation. It is the world-wide interaction and interfacing of economies with trade as an important element.  (Accept any other correct relevant response.) (2) 3.2.4 Explain the purpose for the introduction of the GEAR policy It was introduced for the purpose of creating more growth in the economy, employment opportunities as well as more even redistribution of income.  (Accept any other correct relevant response.) (2) Copyright reserved Please turn over

Downloaded from hlayiso.com Downloaded Economics P1 f rom St anmorephysics. 8 com FS/September 2022 Grade 12 Prep. Exam. Marking Guidelines 3.2.5 Why would the Monetary Authorities in South Africa rely mostly on interest rates as the instrument of the monetary policy?  Historically interest rates and repo rates have been used by the SARB for price stabilisation purposes.   Stabilising prices has a direct impact on the inflation level.   Restrictive monetary policy through the use of interest rates is effective in cooling down the overheated economy.  (Accept any other correct relevant response.) (2 x 2) (4) 3.3 Data response 3.3.1 Who will benefit most from this SEZ initiative? Maluti-a-Phofung community  (1) 3.3.2 Give any ONE aim in creating a Special Economic Zone. Creation of jobs  (Accept any other correct relevant response.) (1) 3.3.3 Briefly describe the term Industrial Development Zones They are purpose-built industrial estates, physically enclosed and linked to port or airport.  (2) 3.3.4 Why is regional development important to the economy of the Free State?  It reduces the unequal development of economic activities within a country.   Stimulation of development in poor areas of Free State.   New imbalances are prevented from emerging.  (Accept any other correct relevant response.) (2) 3.3.5 How can good governance be utilised as the best international practice for regional development?  Regional development strategies should be managed effectively and free of corruption.   Principles of accountability and transparency should be applied to ensure financial control.   Projects should be correctly programmed, monitored and evaluated.  (Accept any other correct relevant response.) (2 x 2) (4) Copyright reserved Please turn over

Downloaded from hlayiso.com Downloaded Economics P1 f rom St anmorephysics. 9 com FS/September 2022 Grade 12 Prep. Exam. Marking Guidelines 3.4 Distinguish between economic growth and economic development. Economic growth  An increase in the production capacity of the economy.   It is measured in terms of increases in real GDP.   Focus is on goods and services.  (Accept any other correct relevant response.) Economic development  An improvement in the standard of living of people.   It is measured in terms of real GDP per capita.   Focus is on people.  (Accept any other correct relevant response.) (A maximum of 4 marks may be allocated for mere listing of facts/ examples.) (2 x 4) (8) 3.5 How important are employment statistics in the South African economy as indicators?  In any healthy economy, it is important to fully employ all the available factors of production.   High level of employment will enable more people to spend more income, resulting in more production by firms.   Employment has a direct relation to total output, total income and total expenditure of an economy.   Employment statistics provide the basis for the calculation of labour cost, earnings per worker and labour productivity.   Economic indicators on employment include the data on the number and percentages of employed and unemployed.  (Accept any other correct relevant response.) (A maximum of 2 marks may be allocated for mere listing of facts/examples.) (4 x 2) (8) [40] Copyright reserved Please turn over

Downloaded from hlayiso.com Downloaded Economics P1 f rom St anmorephysics. 10 com FS/September 2022 Grade 12 Prep. Exam. Marking Guidelines QUESTION 4: MACROECONOMICS & ECONOMIC PURSUIT 40 MARKS – 30 MINUTES 4.1 Answer the following questions. 4.1.1 Name TWO acts that were introduced and are enforced by the government to promote a more effective economy.  Employment Equity Act (EEA)   Broad-Based Black Economic Empowerment (BBBEE)  (2 x 1) (2) 4.1.2 What is the government's main purpose for duty-free import incentives? The incentive is an attempt to encourage domestic and foreign businesses to settle in IDZ's and produce goods and services for export markets.  (1 x 2) (2) 4.2 Data response 4.2.1 Identify the type of flow indicated by the letter A. Money flow  (1) 4.2.2 Give ONE example of consumption spending by the households.  Durable consumer goods spending   Semi-durable consumer goods spending   Non-durable consumer goods spending   Spending on services.  (Any 1 x 1) (1) 4.2.3 Briefly describe the term marginal propensity to save. It refers to the part of income not available for spending.  (Accept any other correct relevant response.) (2) 4.2.4 Explain the influence on income if injections are less than leakages. More outflows resulting in more leakages will lead to less income generated by the economy.  (2) Copyright reserved Please turn over

Downloaded from hlayiso.com Downloaded Economics P1 f rom St anmorephysics. 11 com FS/September 2022 Grade 12 Prep. Exam. Marking Guidelines 4.2.5 What role can government play to create jobs in the economy that is negatively affected by the Covid-19 pandemic?  Organise job summits to be attended by local and foreign investors to search for possible investment areas, especially in areas of high unemployment.   Grant incentives or subsidies through the DTI to those who will invest in areas of high unemployment.   Government can form partnerships with the private sector whereby they can provide skills needed the most by the economy through skills development agencies.   Allocate COVID-19 related contracts to the co-operatives established within the area with the purpose of benefiting local residents.  (Accept any other correct relevant response.) (2 x 2) (4) 4.3 Data response 4.3.1 Give the appropriate economic concept illustrated above. Exchange rates/Foreign exchange/Foreign exchange market  (1) 4.3.2 During which exact period, according to the table, did the rand enjoy the most favourable fluctuation against the US dollar? Q2 of 2021  (1) 4.3.3 Briefly describe the term devaluation. Refers to a deliberate decrease in the value of a currency under the fixed exchange rate system.  (2) 4.3.4 Why are most economies in the world using free floating exchange rates?  The value of the currency is justifiably determined by the forces of demand and supply only.   No Central Bank Authority has the power to influence the value of the currency.  (Accept any other correct relevant response.) (2) Copyright reserved Please turn over

Downloaded from hlayiso.com Downloaded Economics P1 f rom St anmorephysics. 12 com FS/September 2022 Grade 12 Prep. Exam. Marking Guidelines 4.3.5 What could be the possible reasons for the rand to hit an extreme low against the US Dollar in term 1 of 2021?  South Africa was still fresh from a period of economic inactivity that saw the country elevated to level 5 of lockdown.   Productivity by firms was so low to an extent that very little was exported to other countries, and the current account of the balance of payment was negatively affected.   The terms of trade that rely on export prices and import prices deteriorated as well, and thereby causing unfavourable fluctuations in the exchange rate.   Many businesses had to shut down and national trade was seriously affected.  (Accept any other correct relevant response.) (2 x 2) (4) 4.4 Discuss urbanisation and housing as social indicators. Urbanisation  It is the process by which the urban population increases relative to the rural population.   Urbanisation happens because of the natural growth of population, migration to the cities and establishment of towns.   South Africa is experiencing a trend of rapid urbanisation.  (Accept any other correct relevant response.) Housing  Housing and the services that go with it are important elements demonstrating human and economic development.   A significant proportion (39,9%) of South Africans are poor and cannot afford to buy residential property.   In order to secure the social and economic advantages of suitable housing, the government facilitates home ownership by means of a subsidy and loans from the private sector.  (Accept any other correct relevant response.) (A maximum of 4 marks may be allocated for mere listing of facts/ examples.) (2 x 4) (8) Copyright reserved Please turn over

Downloaded from hlayiso.com Downloaded Economics P1 f rom St anmorephysics. 13 com FS/September 2022 Grade 12 Prep. Exam. Marking Guidelines 4.5 How effective is the contribution of Spatial Development Initiatives in the economy? SDI Effectiveness:  SDI projects have been able to bring more focus on the traditional sectors of the South African economy, i.e., agriculture, mining and Manufacturing.  Globalization and the 'New Economy' have pushed that the focus be also extended to other sectors.  This is the reason why more growth in the economy is beginning to be realised in sectors like Tourism, Financial & Business Services and 'hi-tech' manufacturing because of SDI programmes.  SDI programmes have shown more focus in the past and they are still doing that on SMME support, job creation and welfare enhancement.  SDI's are able to demonstrate economic potential of underutilised natural resources and spaces.  Gradual widening of the SDIs to include more areas of the country has resulted in an alignment of SDIs with those areas which have experienced employment growth. (Accept any other correct relevant response.) SDI Ineffectiveness: Several factors that constrain an SDI's effectiveness include among other things:  Poor location, small market size and low market demand.  Lack of good quality physical infrastructure, effective regulatory infrastructure regimes as well as social infrastructure contributes to the underperformance of many SDIs.  Several deficits in the SDI-specific and national soft infrastructure impede the performance and sustainability of SDIs.   A variety of governance failures as well as political economy factors impact on the sustainability of spatial development approaches.  (Accept any other correct relevant response.) (A maximum of 2 marks may be allocated for mere listing of facts/examples.) (4 x 2) (8) [40] Copyright reserved Please turn over

Downloaded from hlayiso.com Downloaded Economics P1 f rom St anmorephysics. 14 com FS/September 2022 Grade 12 Prep. Exam. Marking Guidelines SECTION C Answer any ONE of the two questions in this section in the ANSWER BOOK. QUESTION 5: MACROECONOMICS 40 MARKS – 40 MINUTES Discuss in detail the reasons for public sector failure. INTRODUCTION Public sector failure refers to when the government fails to manage the economy and the resources under its control.  (Accept any other correct relevant introduction.) (Max. 2) BODY Main Part Reasons 1. Apathy:   Apathy is a feeling of not caring and insensitivity of those in leadership towards the demands of the people.   Successful public production relies on long-term accountability.   Accountability has a way to expose inefficiency, corruption and poor service delivery.  2. Management failure:   Government departments and state-owned enterprises sometimes are poorly managed because of a lack of leadership, inadequate skills and lack of experience.   They are poorly managed because they are not even expected to maximise profits.   They are financed by budget allocations based on costs and needs.   Management failure can result in budget allocations not being spent.  3. Bureaucracy:   Bureaucrats are those who try to maximise their income, status or power.   Bureaucrats are usually empathic and insensitive to the needs of the public.   There is always poor service delivery for the communities due to this insensitive attitude of bureaucrats.       Copyright reserved Please turn over

Downloaded from hlayiso.com Downloaded Economics P1 f rom St anmorephysics. 15 com FS/September 2022 Grade 12 Prep. Exam. Marking Guidelines 4. Lack of motivation:   Lack of motivation among government employees leads to low levels of productivity, poor service and inefficient use of resources.   Essential service workers rarely receive incentives for successful service delivery.   Less motivated workers usually produce low in quality, limited and high in costs services.  5. Politicians:   They are those who aim to be re-elected and pursue vote-maximising strategies to retain their offices.   Politicians usually do not take into account the long-term availability of resources.  This act can lead to the misallocation of resources.  6. Special interest groups:   They are those who try to further their own interest by means of rent- seeking.   They make use of laws, lobbying, bribes and other favours to influence government to act in their favour with regard to profitable contracts.   Public sector failure occurs when individual interests override public interests.  (Accept any other correct relevant response.) (Allocate a maximum of 8 marks for mere listing of facts/examples.) (Max. 26) Copyright reserved Please turn over

Downloaded from hlayiso.com Downloaded Economics P1 f rom St anmorephysics. 16 com FS/September 2022 Grade 12 Prep. Exam. Marking Guidelines How successful has the South African government been in dealing with public sector provisioning problems? Additional Part Failures:  Those in power have failed to account or show responsibility for their actions, by misusing taxes raised and thus abusing the powers it was granted.   Officials exploit their positions for personal gain by taking bribes, committing fraud, nepotism, behaving dishonestly, committing discrimination and showing inefficiency.  Parastatals have been nothing else but liability for the government because they failed to live within their grant from the budget allocation that leads to higher tax rates.   State-owned enterprises are not able to assess the needs of consumers by over-or under-supplying public goods.  Successes  The South African government addressed challenges such as housing and social security systems, which indicates the needs assessment ability of the government.   The South African government safeguarded jobs by not privatising SOE's like Eskom, SAA and Armscor.   The government tries to keep civil servants accountable to the public. The Auditor-General reports on financial management and points out fraudulent and unauthorized spending  (Accept any other correct relevant response.) (Max. 10) CONCLUSION Taking charge of the economy and state resources, requires daily accountability to those being led.      (Max. 2) [40] Copyright reserved Please turn over

Downloaded from hlayiso.com Downloaded Economics P1 f rom St anmorephysics. 17 com FS/September 2022 Grade 12 Prep. Exam. Marking Guidelines QUESTION 6: ECONOMIC PURSUITS 40 MARKS – 40 MINUTES Discuss in detail export promotion as a trade strategy. INTRODUCTION  Export promotion involves providing incentives to encourage local businesses to produce goods for export.   When government pay incentives to encourage the production of goods that can be exported.  (Accept any other correct relevant introduction.) (Max. 2) BODY Main Part Reasons for export promotion  The country achieves significant export-led economic growth.   Export promotion enlarges the production capacity of the country.   Export markets are much bigger than local markets.   Larger production units create more job opportunities.   It leads to lower retail prices.  Methods of export promotion Incentives:   The government supplies information on export markets in order to stimulate exports   Other examples are research on new markets, concessions on transport charges, export credit  Subsidies:   Incentives which encourage exporters to increase the amount of their production   It includes direct and indirect subsidies: o Direct subsidies: Cash payments to exporters  o Indirect subsidies: Refunds on import tariffs and general tax rebates   Trade neutrality:   Subsidies, equal in size to import duties, are paid   Neutrality can be achieved through trade liberalisation  Copyright reserved Please turn over

Downloaded from hlayiso.com Downloaded Economics P1 f rom St anmorephysics. 18 com FS/September 2022 Grade 12 Prep. Exam. Marking Guidelines Disadvantages of export promotion 1. The real cost of production is hidden:   It reduces the total costs by subsidies and incentives   The real cost of production is concealed by the subsidies   The product may thus never be able to compete in the open market   2. Lack of competition:   Incentives and subsidies reduce prices and force competitors who may be able to create sustainable and profitable businesses out of the market   Total potential trade is therefore reduced with subsidies rather than  without subsidies  3. Increased tariffs and quotas:   Overseas countries may retaliate with tariffs and even quotas when  similar goods are sold domestically below their real cost of production   Powerful overseas businesses can afford to offer similar products at much lower prices   Compared to their production, the subsidised business's domestic market may be so small that it will destroy the business that received the subsidy   4. Protection of labour-intensive industries:   Developed countries often maintain high levels of effective protection for their industries that produce labour-intensive goods in which developing countries already have or can achieve comparative advantage   Export promotion results in the protection of labour-intensive industries by developed countries     (Max. 26) Evaluate import substitution as trade policy in South Africa. Additional Part Positive responses:  A decrease in imports has a positive effect on the balance of payments as more exports than imports will take place.   Import substitution improves industrialisation which increases employment opportunities.   Tariffs introduced in South Africa led to increased demand for locally manufactured goods and services.  Copyright reserved Please turn over

Downloaded from hlayiso.com Downloaded Economics P1 f rom St anmorephysics. 19 com FS/September 2022 Grade 12 Prep. Exam. Marking Guidelines Negative responses:  Import substitution is restrictive as the choice of goods and services available to consumers may be limited.   It is not easy to implement the policy of import substitution due to unrecorded informal/illegal transactions.   Inefficient local production may occur because local producers are shielded from international competition.    Import substitution does not necessarily lead to an overall reduction in imports, South Africa had to import capital and intermediate goods to manufacture consumer goods.  '.'. ~ (Allocate a maximum of 2 marks for the mere listing of facts/examples.) <C CONCLUSION = orep 'J com (Max. 10) The South African government have done everything to protect its local industries from foreign and harmful competition and to protect the existing jobs as well.  (Accept any other correct high order conclusion.) (Max. 2) [40] TOTAL SECTION C: 40 GRAND TOTAL: 150 Copyright reserved Please turn over