Economics Grade 12 P1 EC June 2016 Question Paper (English)

NATIONAL SENIOR CERTIFICATE GRADE 12 JUNE 2016 ECONOMICS P1 MARKS: 150 TIME: 2 hours This question paper consists of 12 pages.

2 ECONOMICS P1 (EC/JUNE 2016) INSTRUCTIONS AND INFORMATION 1. Answer FOUR questions as follows in the ANSWER BOOK. SECTION A: COMPULSORY SECTION B: Answer TWO of the three questions. SECTION C: Answer ONE of the two questions. 2. Write the question number above each answer. 3. Number the answers correctly according to the numbering system used in this question paper. 4. Read the questions carefully and start each question on a NEW page. 5. Leave 2−3 lines between subsections of questions. 6. Answer questions in full sentences and ensure that the format, content and context of your responses comply with the cognitive levels of the questions. 7. Write neatly and legibly. 8. Only the required number of questions will be marked in the order in which they appear in the ANSWER BOOK. 9. Use only black or blue ink. 10. Non-programmable pocket calculators may be used. Copyright reserved Please turn over

(EC/JUNE 2016) ECONOMICS P1 3 SECTION A (COMPULSORY) QUESTION 1 30 MARKS − 20 MINUTES 1.1 Various options are provided as possible answers to the following questions. Choose the correct answer and write only the letter (A–C) next to the question number (1.1.1–1.1.8) in the ANSWER BOOK. 1.1.1 The transfer of ownership from the public to the private sector is known as … A decentralisation. B nationalisation. C privatisation. 1.1.2 In a business cycle, estimating something known from information that is unknown, is called … A amplitude. B extrapolation. C trend. 1.1.3 The money market in the RSA is a market for … savings and loans. A short-term B medium-term C long and short term 1.1.4 A tax paid on goods to reduce imports is known as an/a ... A embargo. B quota. C tariffs. 1.1.5 Which ONE of the following can cause a deficit on the balance of payments? A Inward foreign investments B Increase in foreign currency reserves C Decline in mineral exports Copyright reserved Please turn over

4 ECONOMICS P1 (EC/JUNE 2016) 1.1.6 The process to increase production of goods and services in the economy. A Economic development B Economic growth C Economic indicator 1.1.7 During the ... phase, the economy experiences high inflation. A prosperity. B recovery. C recession. 1.1.8 A trade agreement between a group of emerging markets. A BRICS B AGOA C MERCUSOR (8 x 2) (16) 1.2 Choose the correct description from COLUMN B that matches the item in COLUMN A. Write only the letter (A−I) next to the question number (1.2.1−1.2.8) in the ANSWER BOOK. COLUMN A COLUMN B 1.2.1 Kuznets cycle A public goods 1.2.2 Full employment B buying and selling equities / shares 1.2.3 Deregulation C the flow of goods and services 1.2.4 Portfolio D caused by changes in the building investments and construction industry 1.2.5 Real flow E provided by the state and used by all 1.2.6 Trade F removal of unnecessary restrictions liberalisation by law 1.2.7 Non-excludability G human resources used to maximum capacity 1.2.8 Real figures H involve removing barriers to international trade I GDP figures that has taken into account the changes in the level of prices (8 x 1) (8) Copyright reserved Please turn over

(EC/JUNE 2016) ECONOMICS P1 5 1.3 Give ONE term for each of the following descriptions. Write only the term next to the question number (1.3.1–1.3.6) in the ANSWER BOOK. 1.3.1 A trade policy whereby a country encourages the local production of goods, rather than importing the goods 1.3.2 The largest contributor to the government revenue 1.3.3 A statement of a country’s trade and financial transactions with the rest of the world, over a particular time period 1.3.4 The ratio between the imports and exports index 1.3.5 A curve that illustrates the relationship between unemployment and inflation 1.3.6 The withdrawal of money from the circular flow (6 x 1) (6) TOTAL SECTION A: 30 Copyright reserved Please turn over

6 ECONOMICS P1 (EC/JUNE 2016) SECTION B Answer 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 an example each of a lagging and a coincident indicator. (2 x 1) (2) 2.1.2 What effect will corruption have on the efficiency of the government? (1 x 2) (2) 2.2 Study the table below and answer the questions that follow. GROSS VALUE ADDED BY 2014 KIND OF ECONOMIC ACTIVITY (R MILLIONS) At current prices Primary sector 371 268 Agriculture, forestry, fishing 84 662 Mining, quarrying 286 606 Secondary sector (C) 2.2.3 Manufacturing 452 326 Electricity, gas and water 125 377 Construction 138 917 Tertiary sector 2 316 605 GVA @ basic prices 3 404 493 [Source: Quarterly Bulletin SARB 2105] 2.2.1 Identify the method used in the above table to calculate GVA. (2) 2.2.2 Classify any activity under the tertiary sector. (2) 2.2.3 Calculate the contribution of the secondary sector to the GDP (C). (2) 2.2.4 Highlight the importance of National Account Aggregates. (4) Copyright reserved Please turn over

(EC/JUNE 2016) ECONOMICS P1 7 2.3 Study the information below and answer the questions that follow. E-TOLL IS HERE TO STAY! “E-toll tariffs will be adjusted downwards but government remains committed to the principle of road users funding improvements to keep Sanral solvent,” the National Treasury said on Wednesday. In his 2015/16 budget speech in the National Assembly, Finance Minister Nhlanhla Nene said. “Concerns regarding the socio- economic impact of toll tariffs have been heard, and revised monthly ceilings will shortly be proposed.” [Adapted from the National budget 2015] 2.3.1 Explain the term e-toll. (2) 2.3.2 What does the acronym SANRAL stand for? (2) 2.3.3 What negative socio-economic impact can e-toll tariffs have on the South African economy? (2) 2.3.4 In your opinion what is the most important cause of public sector failure in SA? Motivate your answer. (4) 2.4 Explain the exogenous cause (monetarism) for a business cycle. (4 x 2) (8) 2.5 How effective is international trade for South Africa? (4 x 2) (8) [40] Copyright reserved Please turn over

8 ECONOMICS P1 (EC/JUNE 2016) QUESTION 3: ECONOMIC PURSUITS 40 MARKS – 30 MINUTES 3.1 Answer the following questions. 3.1.1 Give TWO methods to promote exports. (2 x 1) (2) 3.1.2 What effect will an increase in investment have on the economy? (1 x 2) (2) 3.2 Study the graph below and answer the questions that follow. 3.2.1 At what point on the graph does equilibrium for exchange originally occur? (2) 3.2.2 Give TWO reasons for the shift of the demand curve from DD to D1D1. (4) 3.2.3 What happens to the value of the rand, when DD shifts to D1D1? Motivate your answer. (4) Copyright reserved Please turn over

(EC/JUNE 2016) ECONOMICS P1 9 3.3 Study the following graph and answer the questions that follow. 3.3.1 What do dotted lines a and b represent? (2 x 1) (2) 3.3.2 Define the term real (actual) business cycle. (2) 3.3.3 What is the importance of the length (T2 T3) of the business cycle? (2) 3.3.4 What can government do to ensure that high inflation does not occur during peaks of business cycles? (2 x 2) (4) 3.4 Argue in favour of import substitution. (4 x 2) (8) 3.5 How are interest rates and taxation influenced in expansionary and contractionary situations? (4 x 2) (8) [40] Copyright reserved Please turn over

10 ECONOMICS P1 (EC/JUNE 2016) QUESTION 4: MACROECONOMICS AND ECONOMIC PURSUITS 40 MARKS – 30 MINUTES 4.1 Answer the following questions. 4.1.1 Name TWO models that are used to explain economics. (2 x 1) (2) 4.1.2 What effect will a weak rand have on foreign trade? (1 x 2) (2) 4.2 Study the table below and answer the questions that follow. PUBLIC SECTOR’S BUDGET FRAMEWORK R BILLION REVISED MEDIUM-TERM ESTIMATES(MTEF) 2012/2013 2013/2014 2014/2015 2015/2016 Revenue 830 904 1 005 1 118 Percentage of 27% 27% 27,80% 28% GDP Expenditure 972 1 058 1 149 1 239 Percentage of 32% 32% 31% 31% GDP Surplus/ -142 -153 -143 -12 Deficit Percentage of -4% -4% -4% (A) 4.2.3 GDP Gross Domestic 2995 3 301 3 622 3 997 Product [Adapted from The National treasury: Budget Review] 4.2.1 What does the abbreviation MTEF stand for? (2) 4.2.2 The deficit on the budget should NOT exceed which percentage of GDP? (2) 4.2.3 Calculate the budget deficit as a percentage of GDP (A). (2) 4.2.4 In your opinion, what can the government do to reduce the budget deficit? (4) [10] Copyright reserved Please turn over

(EC/JUNE 2016) ECONOMICS P1 11 4.3 Study the extract below and answer the questions that follow. NOTE ON THE CONVERSION AND REVISION OF SOUTH AFRICA’S BALANCE OF PAYMENTS STATISTICS In order to keep abreast of international best practice in the compilation and dissemination of balance-of-payments statistics, the South African Reserve Bank has aligned South Africa’s balance of payments statistics with the guidelines provided in the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6) of the International Monetary Fund (IMF). Revisions in the financial account. The previous three categories in the financial account of the balance of payments, namely direct investment, portfolio investment and other investment, were expanded to include two additional functional categories, namely financial derivatives and reserves assets. [Source: SARB Quarterly Bulletin 2014] 4.3.1 Name TWO items in the financial account of the balance of payment. (1 x 2) (2) 4.3.2 Which institution gives guidelines in the compilation of payments? (1 x 2) (2) 4.3.3 According to the BPM6, how many accounts does the balance of payments have? (1 x 2) (2) 4.3.4 Briefly explain how disequilibrium in the balance of payments can be corrected using borrowing and lending. (2 x 2) (4) 4.4 Explain the new economic paradigm. (4 x 2) (8) 4.5 How is the economy negatively affected by public sector failure? (4 x 2) (8) [40] TOTAL SECTION B: 80 Copyright reserved Please turn over

12 ECONOMICS P1 (EC/JUNE 2016) SECTION C Answer ONE of the two questions in this section. STRUCTURE OF ESSAY MARK ALLOCATION Introduction Max. 2 Body Max. 26 Main part: Discuss in detail/In-depth discussion/Examine/Critically discuss/Analyse/Compare/Evaluate/Distinguish/ Max. 10 Differentiate/ Explain/Assess/Debate Additional part: Give own opinion/Critically discuss/Evaluate/ Critically evaluate/Draw a graph and explain/Use the graph given and explain/Complete the given graph/Calculate/Deduce/Compare/ Explain/ Distinguish/Interpret/Briefly debate/How?/Suggest Conclusion Any relevant higher order conclusion that should include:  A brief summary of what has been discussed / analysed without repeating facts already mentioned in the body  An opinion or valued judgment on the facts discussed Max. 2  Additional support information to strengthen the discussion / analysis  A contradictory viewpoint with motivation, if so required  Recommendations TOTAL: 40 QUESTION 5: MACROECONOMICS 40 MARKS – 40 MINUTES Economists present the economy as a simplified circular flow model to show how the different participants interact with each other.  Discuss in detail, without the use of a graph, the interaction of all participants in an open economy circular flow model. (26)  Draw and explain the multiplier process by using a fully labelled graph. (10) [40] QUESTION 6: ECONOMIC PURSUITS 40 MARKS – 40 MINUTES To be internationally competitive, a country needs to have suitable trade policies in place. They have to grow their industries if they want to increase the standard of living.  Discuss, in detail, the arguments in favour of protectionism. (26)  In your opinion, how can the government use subsidies to ensure that local industries are protected against unfair competition from abroad. (10) [40] TOTAL SECTION C: 40 GRAND TOTAL: 150 Copyright reserved Please turn over