Economics Grade 11 P1 November Mock Exam 2 2026 Memo (Eng)

Mock hlayiso mock exams Practice Series: Grade 11 Exam Preparation WWW.HLAYISO.COM NATIONAL SENIOR CERTIFICATE GRADE 11 ECONOMICS P1 NOVEMBER EXAMINATION 2026 (MOCK) MARKING GUIDELINES MARKS: 150 These marking guidelines consist of 19 pages. Copyright reserved Please turn over

Economics/P1 2 Hlayiso/Mock 2026 NSC – Marking Guidelines PRINCIPLES FOR MARKING ECONOMICS (HLAYISO MOCK 2026) • Mark ALL responses in the candidate’s script, whether correct or incorrect. • Where a candidate gives more responses than required: in Section A mark the FIRST response only; in 2.1.1, 3.1.1 and 4.1.1 mark the first TWO responses only; in Sections B and C (choice questions) mark only the required number of questions and write EXTRA on any additional question. • Use ONE tick (✓) for each mark awarded, placed at the fact being credited. Use a neat cross for incorrect responses. • One-word answers are acceptable for: list, name, state, identify. FULL sentences are required for: describe, explain, evaluate, analyse, suggest, differentiate, distinguish, define, discuss, why, how. The words provide, what, tabulate, identify and give are read in context. • Calculations: 3 marks for the method/workings and 1 mark for the correct final answer. If only the correct answer is given without workings, award 2 marks. • Accept responses that are correct and relevant but expressed differently. Spelling errors are not penalised if the meaning is clear. • In multiple-choice questions, accept the correct answer written in words instead of the letter. • Record the sub-total of each sub-question in the right margin and transfer question totals to the cover of the answer book. Copyright reserved Please turn over

Economics/P1 3 Hlayiso/Mock 2026 NSC – Marking Guidelines SECTION A (COMPULSORY) QUESTION 1 30 MARKS – 20 MINUTES 1.1 MULTIPLE-CHOICE QUESTIONS 1.1.1 B – free goods ✓✓ 1.1.2 C – gross national income ✓✓ 1.1.3 B – leakages ✓✓ 1.1.4 C – SANRAL ✓✓ 1.1.5 C – AsgiSA ✓✓ 1.1.6 C – United Nations Development Programme ✓✓ 1.1.7 B – bank of issue ✓✓ 1.1.8 C – durable ✓✓ (8 x 2) (16) 1.2 MATCHING ITEMS 1.2.1 C – the person who combines the other factors of production and takes the risk of starting a business ✓ 1.2.2 E – the flow of goods, services and factors of production between the participants in the economy ✓ 1.2.3 G – the value of total output minus the value of the intermediate goods used to produce it ✓ 1.2.4 H – the buying of goods and services by the state, often used to favour previously disadvantaged suppliers ✓ 1.2.5 B – money that must, by law, be accepted as a means of payment ✓ 1.2.6 D – the percentage of adults in a country who can read and write ✓ 1.2.7 A – the direct exchange of goods and services for other goods and services without the use of money ✓ 1.2.8 F – the selling of state-owned enterprises or assets to the private sector ✓ (8 x 1) (8) 1.3 GIVE THE TERM 1.3.1 (National) budget ✓ 1.3.2 Economically marginalised (people/groups) ✓ 1.3.3 Human capital/human resources ✓ 1.3.4 Prime (lending) rate ✓ 1.3.5 (Technical) recession ✓ 1.3.6 Profit ✓ (6 x 1) (6) [30] TOTAL SECTION A: 30 Copyright reserved Please turn over

Economics/P1 4 Hlayiso/Mock 2026 NSC – Marking Guidelines SECTION B QUESTION 2: MACROECONOMICS 40 MARKS – 30 MINUTES 2.1.1 Name any TWO factors that influence the price of natural resources. • Supply and demand ✓ • Scarcity of the resource ✓ • Climate/weather conditions ✓ • Technology ✓ • Location/accessibility of the resource ✓ • Quality of the resource, e.g. fertility of soil, grade of ore ✓ • Government policy, e.g. taxes, regulations and zoning ✓ (Accept any other correct relevant response) (2 x 1) (2) 2.1.2 Why is self-interest regarded as an advantage of a market economy? The desire to earn profits and improve their own well-being motivates people and businesses to work hard, be efficient and innovate, which increases production and benefits society as a whole ✓✓ (Accept any other correct relevant response) (1 x 2) (2) 2.2.1 Identify the item that represents the payment to workers. Compensation of employees ✓ (1) 2.2.2 Name ONE other method of calculating GDP. • Production (value-added/output) method ✓ • Expenditure method ✓ (1) 2.2.3 Briefly describe the term factor cost. The value of production measured by the payments (costs) to the factors of production, i.e. wages, rent, interest and profit, before taxes and subsidies on production are taken into account ✓✓ (Accept any other correct relevant response) (2) 2.2.4 Explain why other subsidies on production are subtracted. Subsidies reduce the cost of production of firms and are paid by the government, not earned through production; they are subtracted so that GVA at basic prices reflects the actual value of production ✓✓ • Subsidies received by producers are already included in factor incomes (operating surplus); they are subtracted so that GVA at basic prices is not overstated ✓✓ (Accept any other correct relevant response) (2) Copyright reserved Please turn over

Economics/P1 5 Hlayiso/Mock 2026 NSC – Marking Guidelines 2.2.5 Calculate the gross value added at basic prices (B). GVA at basic prices = compensation of employees + net operating surplus + consumption of fixed capital + other taxes on production – other subsidies on production = R2 140 bn + R1 210 bn + R610 bn ✓ ✓ (= R3 960 bn at factor cost) + R95 bn – R40 bn ✓ = R4 015 billion ✓ (Correct answer only: 2 marks) (4) 2.3.1 Identify ONE renewable source of energy. • Solar (energy/farm/rooftop panels) ✓ • Wind (energy/farm) ✓ (1) 2.3.2 Name the SOE that generates most of South Africa’s electricity. Eskom ✓ (1) 2.3.3 Briefly describe the term economic infrastructure. The physical structures and networks, such as power stations, roads, railways, ports, water and communication networks, that support production and economic activity ✓✓ (Accept any other correct relevant response) (2) 2.3.4 Explain how an unreliable electricity supply affects the secondary sector. Factories cannot run their machines during power cuts, so production is lost and costs (e.g. generators, wasted raw materials) increase, which lowers output and may force firms to retrench workers or relocate ✓✓ (Accept any other correct relevant response) (2) 2.3.5 How can the government improve the supply of electricity in South Africa? • Allow and buy more electricity from independent power producers ✓✓ • Invest in the maintenance and repair of existing power stations ✓✓ • Expand and upgrade the transmission grid so that new (renewable) generators can be connected ✓✓ • Offer tax incentives/rebates to households and firms that install rooftop solar ✓✓ • Diversify the energy mix, e.g. solar, wind, gas, hydro and nuclear ✓✓ • Fight corruption, theft of cables and mismanagement at Eskom/municipalities ✓✓ • Encourage energy saving, e.g. energy-efficient appliances and smart meters ✓✓ (Accept any other correct relevant response) (2 x 2) (4) Copyright reserved Please turn over

Economics/P1 6 Hlayiso/Mock 2026 NSC – Marking Guidelines 2.4 Briefly discuss the role of households and the business sector in the circular flow of an open economy. Households ✓ • Households own the factors of production and sell them to firms in the factor market ✓✓ • They receive income (wages, rent, interest and profit) in return ✓✓ • They spend their income on consumer goods and services in the goods (product) market ✓✓ • They pay taxes to the government and receive goods, services and transfer payments (e.g. grants) from it ✓✓ • They save part of their income in financial institutions and buy imported goods (leakages) ✓✓ (Max. 4) Business sector (firms) ✓ • Firms buy (hire) factors of production from households in the factor market ✓✓ • They combine the factors to produce goods and services that are sold in the goods market ✓✓ • They pay remuneration (wages, rent, interest and profit) to households ✓✓ • They pay taxes to government and sell goods to the government ✓✓ • They export goods to the foreign sector and import capital goods and raw materials ✓✓ • They borrow savings from financial institutions to invest in capital goods (injection) ✓✓ (Max. 4) (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

Economics/P1 7 Hlayiso/Mock 2026 NSC – Marking Guidelines 2.5 Evaluate the efficiency of the South African government in delivering social services. Positive • Access to basic education has expanded, e.g. no-fee schools and school nutrition programmes reach millions of learners ✓✓ • Free primary health care is available at public clinics, and HIV treatment programmes have increased life expectancy ✓✓ • Millions of subsidised (RDP) houses have been built since 1994 ✓✓ • Most households now have access to electricity and piped water, and poor households receive free basic services ✓✓ • Social grants paid through SASSA reach a large part of the population and reduce poverty ✓✓ Negative • The quality of services is often poor, e.g. overcrowded classrooms and long queues at hospitals ✓✓ • Housing backlogs remain and many informal settlements still lack sanitation ✓✓ • Corruption, mismanagement and a lack of skills in municipalities lead to service-delivery protests ✓✓ • Water and electricity interruptions, ageing infrastructure and unpaid municipal debt reduce reliability ✓✓ • Rural areas have fewer and lower-quality services than urban areas ✓✓ (Accept any other correct relevant evaluation; a maximum of 4 marks if only one side is evaluated) (A maximum of 2 marks may be allocated for mere listing of facts/examples) (4 x 2) (8) [40] Copyright reserved Please turn over

Economics/P1 8 Hlayiso/Mock 2026 NSC – Marking Guidelines QUESTION 3: ECONOMIC PURSUITS 40 MARKS – 30 MINUTES 3.1.1 Name any TWO functions of money. • Medium of exchange ✓ • Measure (unit) of value/unit of account ✓ • Store of value ✓ • Standard of deferred payment ✓ (2 x 1) (2) 3.1.2 Why is wealth regarded as a better indicator of economic security than income? Wealth (assets such as savings, property and shares) can be used or sold when income stops, e.g. after retrenchment, and can also generate further income, such as interest, rent or dividends ✓✓ (Accept any other correct relevant response) (1 x 2) (2) 3.2.1 Identify the year with negative economic growth. 2020 ✓ (1) 3.2.2 Name the institution that publishes official GDP figures in South Africa. Statistics South Africa (Stats SA) ✓ (Accept: South African Reserve Bank) (1) 3.2.3 Briefly describe the term real GDP. The value of all final goods and services produced within a country in a period, measured at constant prices (of a base year) so that the effect of inflation is removed ✓✓ (Accept any other correct relevant response) (2) 3.2.4 Explain how the closing of businesses in 2020 resulted in negative economic growth. When businesses were closed, fewer goods and services were produced and many workers lost income, so spending fell and real GDP decreased compared with the previous year ✓✓ (Accept any other correct relevant response) (2) 3.2.5 Calculate the economic growth rate of Country K for 2025. Real GDP2025 − Real GDP2024 100 Economic growth rate = × Real GDP2024 1 4 933 − 4 860 100 73 = × ✓✓ = × 100 ✓ 4 860 1 4 860 = 1,5% (1,50%) ✓ (Correct answer only: 2 marks) (4) Copyright reserved Please turn over

Economics/P1 9 Hlayiso/Mock 2026 NSC – Marking Guidelines 3.3.1 Identify ONE reason why Ithemba Mutual Bank failed. • It granted large loans to businesses that could not repay them (bad debts/poor credit evaluation) ✓ • Directors transferred depositors’ money to their own companies (fraud/mismanagement) ✓ • A run on the bank – many depositors withdrew their savings on the same day ✓ (1) 3.3.2 Name ONE other cause of bank failures. • Poor (inadequate) liquidity/insufficient cash reserves ✓ • Foreign exchange risk ✓ • Interest rate risk ✓ • Poor management/poor internal controls ✓ • Economic recession, e.g. rising unemployment leading to loan defaults ✓ • Inadequate supervision/regulation ✓ (Accept any other correct relevant response) (1) 3.3.3 Briefly describe the term bank failure. A situation in which a bank is unable to meet its obligations to its depositors and other creditors because it has become insolvent or illiquid ✓✓ (Accept any other correct relevant response) (2) 3.3.4 Explain how the failure of one bank can reduce confidence in the whole banking system. Depositors at other banks fear that they may also lose their money and rush to withdraw their deposits (contagion), which can cause liquidity problems even at healthy banks ✓✓ (Accept any other correct relevant response) (2) 3.3.5 How can the SARB prevent bank failures? • By supervising and regulating banks (through the Prudential Authority), e.g. regular inspections and reporting requirements ✓✓ • By requiring banks to hold minimum capital and cash (liquidity) reserves ✓✓ • By acting as lender of last resort, i.e. lending money to banks that face a temporary shortage of cash ✓✓ • By recommending that a bank in difficulty be placed under curatorship before it collapses ✓✓ • Through deposit insurance (Corporation for Deposit Insurance), which protects small depositors and prevents bank runs ✓✓ • By setting rules for responsible lending and risk management ✓✓ (Accept any other correct relevant response) (2 x 2) (4) Copyright reserved Please turn over

Economics/P1 10 Hlayiso/Mock 2026 NSC – Marking Guidelines 3.4 Differentiate between economic growth and economic development. Economic growth ✓ • An increase in the production of goods and services in a country over time ✓✓ • It is measured by the percentage increase in real GDP (quantitative) ✓✓ • It can take place without benefiting the whole population ✓✓ • It can happen over a short period ✓✓ (Max. 4) Economic development ✓ • A sustained improvement in the standard of living and well-being of the whole population ✓✓ • It is measured by indicators such as the HDI, life expectancy and literacy rates (qualitative) ✓✓ • It includes a reduction in poverty, unemployment and inequality ✓✓ • It is a long-term process that usually requires economic growth ✓✓ (Max. 4) (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

Economics/P1 11 Hlayiso/Mock 2026 NSC – Marking Guidelines 3.5 Analyse the factors that constrain economic growth in South Africa. • An unreliable electricity supply (load-shedding) reduces production and discourages investment ✓✓ • Inefficient ports and rail (logistics problems) increase the cost of exporting goods ✓✓ • A shortage of skilled workers caused by poor-quality education limits productivity ✓✓ • High unemployment, poverty and inequality limit spending in the economy ✓✓ • Crime and corruption increase the cost of doing business and reduce investor confidence ✓✓ • Policy uncertainty and red tape discourage local and foreign investment ✓✓ • Low savings rates limit the funds available for investment in capital goods ✓✓ • Weak growth in major trading partners and lower commodity prices reduce export earnings ✓✓ • Droughts and other climate shocks reduce agricultural output ✓✓ (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

Economics/P1 12 Hlayiso/Mock 2026 NSC – Marking Guidelines QUESTION 4: MACROECONOMICS AND ECONOMIC PURSUITS 40 MARKS – 30 MINUTES 4.1.1 Name any TWO functions of commercial banks. • Accept deposits ✓ • Grant loans/credit ✓ • Provide payment services, e.g. debit cards, EFTs and cheques ✓ • Buy and sell foreign exchange ✓ • Safekeeping of valuables ✓ • Credit creation ✓ (Accept any other correct relevant response) (2 x 1) (2) 4.1.2 How can local communities benefit from indigenous knowledge systems? Communities can earn income from selling traditional products, e.g. crafts, herbal medicines and rooibos, or from cultural tourism, which creates jobs and improves their standard of living ✓✓ (Accept any other correct relevant response) (1 x 2) (2) 4.2.1 Identify the percentage of income earned by the richest 20%. 72% ✓ (1) 4.2.2 Name ONE social grant that helps to reduce income inequality. • Child support grant ✓ • Older persons’ grant (old age pension) ✓ • Disability grant ✓ • Foster child grant ✓ • Care dependency grant ✓ • Social relief of distress (SRD) grant ✓ • War veterans’ grant ✓ (Accept any other correct relevant response) (1) 4.2.3 Briefly describe the term Gini coefficient. A number between 0 and 1 that measures the degree of inequality in the distribution of income, where 0 indicates perfect equality and 1 indicates perfect inequality ✓✓ (Accept any other correct relevant response) (2) 4.2.4 Explain whether the Gini coefficient of Country D will be closer to 0 or 1. Closer to 1 ✓, because income is very unequally distributed: the richest 20% of households earn 72% of income while the poorest 20% earn only 2% ✓ (Accept any other correct relevant response) (2) Copyright reserved Please turn over

Economics/P1 13 Hlayiso/Mock 2026 NSC – Marking Guidelines 4.2.5 Draw a fully labelled Lorenz curve for Country D. 100 Cumulative % of income 80 ity 60 qual )e ct 40 er fe (p of 20 e lin Lorenz curve of Country D 0 20 40 60 80 100 Cumulative % of households (population) Mark allocation: • Correct labelling of both axes (cumulative % of population and cumulative % of income) ✓ • Line of equality drawn and labelled (diagonal) ✓ • Lorenz curve plotted correctly from the cumulative data (2; 6; 13; 28; 100) ✓ • Lorenz curve labelled and bending away from the line of equality ✓ (4) 4.3.1 Identify ONE method of payment that does not use cash. • Debit card ✓ • Instant electronic transfer from a cellphone (EFT) ✓ (1) 4.3.2 Name the currency of South Africa. Rand (ZAR) ✓ (1) 4.3.3 Briefly describe the term financial inclusion. Giving all individuals and businesses, including the poor and informal traders, access to affordable financial services such as bank accounts, payments, savings, credit and insurance ✓✓ (Accept any other correct relevant response) (2) 4.3.4 Explain ONE advantage of paying with a debit card rather than a credit card. • Money is taken directly from the consumer’s own account, so the consumer cannot spend more than he/she has and avoids debt ✓✓ • No interest is charged, as the consumer does not borrow money ✓✓ • It helps the consumer to stick to a budget ✓✓ (Accept any other correct relevant response) (2) Copyright reserved Please turn over

Economics/P1 14 Hlayiso/Mock 2026 NSC – Marking Guidelines 4.3.5 How can the increased use of electronic payments benefit the South African economy? • It reduces the risk of theft and robbery, as fewer people carry and keep cash ✓✓ • Transactions are faster and cheaper, which increases efficiency in trade ✓✓ • It reduces the cost of printing, transporting and securing banknotes and coins ✓✓ • Informal traders gain access to the formal banking system (financial inclusion), which helps them to save and obtain credit ✓✓ • Electronic records make it easier to collect taxes and fight money laundering/corruption ✓✓ • It supports online trade (e-commerce) and new businesses ✓✓ (Accept any other correct relevant response) (2 x 2) (4) 4.4 Briefly discuss low life expectancy and high population growth as characteristics of developing countries. Low life expectancy ✓ • People in developing countries live, on average, fewer years than people in developed countries ✓✓ • It is caused by poor health care, malnutrition, a lack of clean water and sanitation ✓✓ • Diseases such as HIV/Aids, tuberculosis and malaria lower life expectancy ✓✓ • A short working life lowers productivity and reduces the return on investment in education ✓✓ (Max. 4) High population growth ✓ • The population grows faster than the economy, so income per capita stays low ✓✓ • Birth rates are high, e.g. because of limited access to family planning and children being seen as security for old age ✓✓ • It results in a high dependency ratio, as a large share of the population is young and does not work ✓✓ • The government is unable to provide enough schools, clinics, houses and jobs ✓✓ (Max. 4) (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

Economics/P1 15 Hlayiso/Mock 2026 NSC – Marking Guidelines 4.5 Examine the importance of the primary sector for the South African economy. • Agriculture provides food for the population and contributes to food security ✓✓ • Mining and agriculture earn foreign exchange through exports, e.g. gold, platinum, coal and citrus ✓✓ • It supplies raw materials to the secondary sector, e.g. iron ore for steel and wool for textiles (backward linkages) ✓✓ • It creates jobs for many unskilled and semi-skilled workers, especially in rural areas ✓✓ • It contributes to GDP and to government revenue through taxes and mineral royalties ✓✓ • It attracts foreign direct investment into mining and commercial farming ✓✓ • It stimulates the development of infrastructure, e.g. railways and ports built to move minerals ✓✓ • It supports the tertiary sector, e.g. transport, banking and insurance services ✓✓ (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] TOTAL SECTION B: 80 Copyright reserved Please turn over

Economics/P1 16 Hlayiso/Mock 2026 NSC – Marking Guidelines SECTION C QUESTION 5: MACROECONOMICS 40 MARKS – 40 MINUTES Discuss in detail the characteristics of the South African mixed economy and show how they differ from those of a centrally planned economy. (26 marks) Evaluate the role of state-owned enterprises in South Africa’s economy. (10 marks) INTRODUCTION A mixed economy is an economic system in which the factors of production are owned by both the private sector and the state, and decisions are made partly through the market (price mechanism) and partly by the government. ✓✓ (Accept any other correct relevant introduction) (Max. 2) BODY: MAIN PART Ownership of the factors of production ✓ • Mixed economy: most factors of production are privately owned by households and businesses, while the state owns some strategic enterprises, e.g. Eskom and Transnet ✓✓ • Centrally planned economy: the state owns and controls most (or all) of the factors of production; private property is very limited ✓✓ Decision-making (what, how and for whom to produce) ✓ • Mixed economy: most decisions are made by individuals and firms in markets; the government intervenes where the market fails ✓✓ • Centrally planned economy: a central planning authority decides what, how much, how and for whom to produce, e.g. through five-year plans ✓✓ Price determination ✓ • Mixed economy: prices are mostly set by demand and supply, but the state regulates some prices, e.g. fuel prices and electricity tariffs (administered prices) ✓✓ • Centrally planned economy: prices are fixed by the state and do not reflect scarcity, which can lead to shortages and queues ✓✓ Profit motive and competition ✓ • Mixed economy: businesses compete for customers and are motivated by profit, which encourages efficiency and innovation; the Competition Commission protects competition ✓✓ • Centrally planned economy: there is little or no competition and no profit motive, so there is little incentive to innovate and improve quality ✓✓ Freedom of choice (consumer sovereignty) ✓ • Mixed economy: consumers are free to choose what to buy and workers to choose their jobs, within limits set by law ✓✓ • Centrally planned economy: consumer choice is limited to what the state produces and the state may allocate jobs ✓✓ Role of government ✓ • Mixed economy: the government provides public and merit goods (education, health, roads), regulates markets, protects workers (e.g. minimum wages) and redistributes income through taxes and grants ✓✓ • Centrally planned economy: the government is the main producer, employer and distributor Copyright reserved Please turn over

Economics/P1 17 Hlayiso/Mock 2026 NSC – Marking Guidelines of goods and services ✓✓ Economic goals and income distribution ✓ • Mixed economy: aims at both economic growth (private initiative) and social goals such as reducing poverty and inequality ✓✓ • Centrally planned economy: collective (common) goals set by the state; incomes are more equal but standards of living are usually lower ✓✓ (Accept any other correct relevant response) (A maximum of 8 marks may be allocated for headings/examples) (Max. 26) ADDITIONAL PART Positive role of SOEs • SOEs provide essential services and infrastructure that private firms may not provide profitably, e.g. electricity (Eskom), rail and ports (Transnet) and national roads (SANRAL) ✓✓ • They can supply services to poor and rural areas at affordable prices ✓✓ • They create jobs and develop skills, e.g. through apprenticeships ✓✓ • Large infrastructure investment by SOEs supports economic growth ✓✓ Negative role of SOEs • Many SOEs are inefficient and poorly managed, e.g. load-shedding and port delays have reduced economic growth ✓✓ • Corruption and state capture have caused large financial losses ✓✓ • Government bail-outs of loss-making SOEs place a heavy burden on taxpayers and increase government debt ✓✓ • SOEs that are monopolies face little competition, which may lead to high prices and poor service ✓✓ (Accept any other correct relevant evaluation) (A maximum of 2 marks may be allocated for mere listing of facts/examples) (Max. 10) CONCLUSION The South African mixed economy combines the efficiency of markets with the social goals of the state; it performs better than a centrally planned system, but its success depends on capable and well-managed state institutions. ✓✓ (Accept any other correct relevant higher-order conclusion) (Max. 2) [40] Copyright reserved Please turn over

Economics/P1 18 Hlayiso/Mock 2026 NSC – Marking Guidelines QUESTION 6: ECONOMIC PURSUITS 40 MARKS – 40 MINUTES Discuss in detail the functions of the South African Reserve Bank as the central bank. (26 marks) How can the SARB use monetary policy to slow down an overheating economy? (10 marks) INTRODUCTION The South African Reserve Bank (SARB) is the central bank of South Africa; its main aim is to protect the value of the rand in the interest of balanced and sustainable economic growth. ✓✓ (Accept any other correct relevant introduction) (Max. 2) BODY: MAIN PART Bank of issue ✓ • The SARB has the sole right to issue banknotes and coins in South Africa ✓✓ • It manages the printing (by the South African Bank Note Company) and minting (by the South African Mint) of money ✓✓ • It distributes notes and coins to commercial banks and withdraws damaged money from circulation ✓✓ • It ensures that enough notes and coins are available and protects the currency against counterfeiting ✓✓ Bankers’ bank ✓ • Commercial banks keep accounts with the SARB and must deposit minimum cash reserves with it (cash reserve requirement) ✓✓ • It provides a clearing and settlement system for payments between banks ✓✓ • It acts as lender of last resort: it lends money to banks that face a temporary shortage of cash, at the repo rate ✓✓ Banker to the government ✓ • It keeps the government’s main account (Exchequer Account) and handles its receipts and payments ✓✓ • It manages government debt and helps the National Treasury to issue government bonds ✓✓ • It advises the government on monetary and financial matters ✓✓ Custodian of gold and foreign exchange reserves ✓ • It holds and manages the country’s official gold and foreign exchange reserves ✓✓ • The reserves are used to pay for imports and foreign debt and to finance balance of payments deficits ✓✓ • It may buy or sell foreign currency to reduce sharp fluctuations in the exchange rate of the rand ✓✓ Supervision and regulation of banks ✓ • The Prudential Authority (part of the SARB) registers, supervises and regulates banks and insurers ✓✓ • It sets capital and liquidity requirements to protect depositors and prevent bank failures ✓✓ Formulation and implementation of monetary policy ✓ • It aims at price stability through inflation targeting ✓✓ • It sets the repo rate and uses other instruments, e.g. open-market operations and cash reserve requirements, to influence the money supply ✓✓ Copyright reserved Please turn over

Economics/P1 19 Hlayiso/Mock 2026 NSC – Marking Guidelines • It promotes financial stability in the economy ✓✓ (Accept any other correct relevant response) (A maximum of 8 marks may be allocated for headings/examples) (Max. 26) ADDITIONAL PART • The Monetary Policy Committee increases the repo rate, so commercial banks raise the prime rate and borrowing becomes more expensive ✓✓ • Higher interest rates discourage households from buying on credit and businesses from borrowing to invest, so total spending decreases ✓✓ • Higher interest rates encourage saving instead of spending ✓✓ • Open-market operations: the SARB sells government bonds/securities to banks and the public, which takes money out of circulation ✓✓ • The SARB can increase the cash reserve requirement, so banks have less money available to lend (credit creation decreases) ✓✓ • Moral suasion: the SARB persuades banks to be more careful in granting loans ✓✓ • Lower spending reduces demand-pull inflation and cools the economy down ✓✓ (Accept any other correct relevant response) (A maximum of 2 marks may be allocated for mere listing of facts/examples) (Max. 10) CONCLUSION The SARB’s functions are essential for a stable financial system and stable prices; by raising interest rates in time it can prevent an overheating economy from causing high inflation, although higher rates may also slow down growth and job creation. ✓✓ (Accept any other correct relevant higher-order conclusion) (Max. 2) [40] TOTAL SECTION C: 40 GRAND TOTAL: 150 Copyright reserved