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PMA512S - PRINICIPLES OF MACROECONOMICS - 2ND OPP - JAN 2020 |
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1 Pages 1-10 |
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1.1 Page 1 |
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NAMIBIA UNIVERSITY
OF SCIENCE AND TECHNOLOGY
FACULTY OF MANAGEMENT SCIENCES
DEPARTMENT OF ACCOUNTING, ECONOMICS AND FINANCE
QUALIFICATION: BACHELOR OF ECONOMICS
QUALIFICATION CODE: 07BECO
LEVEL: 7
COURSE CODE: PMA512S
COURSE NAME: PRINCIPLES OF MACROECONOMICS
SESSION: JANUARY 2020
PAPER: THEORY
DURATION: 2 HOURS
MARKS: 100
SECOND OPPORTUNITY EXAMINATION QUESTION PAPER
EXAMINER(S) | Mr. Pinehas Nangula
Ms. Elina Haivela
Mr. Makaisapi Tjiumbirua
Mr. Ben Biwa
Ms. Lavinia Hofni
MODERATOR: | Mr. Eden Shipanga
INSTRUCTIONS
1. This question paper is made up of Five (5) sections.
2. Answer Section A and B on the attached answer sheet
3. Write each question on a separate page in your answer booklet
4. Write neatly and legibly
THIS QUESTION PAPER CONSISTS OF 15 PAGES (Including this front page)
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1.2 Page 2 |
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SECTION A
20 Marks
Instructions:
Read all questions carefully
Answer all questions
All answers should be on the answer sheet provided on page.14. Tear the page off and
place it inside your examination script.
QUESTION 1 [20 marks]
1.1 The annual charge which estimates the amount of capital equipment used up in each
year’s production is called ...
Indirect business taxes.
Inventory reduction.
Depreciation.
Investment.
1.2
Autonomous consumption:
a)
varies with income
b)
is independent of the prices in the market
does not vary with income levels
dq)
Is not equal to autonomous dissaving.
1.3 If your father buy a newly built retirement home, this transaction would affect
Investment spending
b)
Net exports
c)
Government spending
d)
Consumption spending
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1.3 Page 3 |
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A financial intermediary is a middleperson between ...
Buyers and sellers.
Husbands and wives.
Borrowers and lenders.
Labour unions and firms.
Stagflation is when?
prices and wages rise because of a slowdown in the economy
where there is both rising inflation and unemployment
where inflation rises inexplicably
where unemployment rises because of oil price hikes
The labour force is the sum of the:
working age population and the number of unemployed people
number of employed people and the working-age population
number of employed people and the number of unemployed people
Total population and the number of unemployed people.
1.7 The quantity of money demanded for transactions and precautionary purposes is
related to the:
a)
interest rate
b)
level of income in the economy
inflation rate
d)
None of the above
The supply of money is determined by:
the demand for money
the supply curve
the interest rates
The monetary authority.
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1.4 Page 4 |
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Macroeconomics is the branch of economics that attempts to
Explain why certain firms are less efficient than others.
Explain the price difference between two products.
Study output, employment and inflation in the economy as a whole.
explain changes in the prices of goods and services produced in an economy
To calculate real GDP, we measure the total value of output using:
The prices that prevailed during a selected base year.
Current prices, with base-year quantities.
Estimated quantities, based on population growth.
Estimated quantities, based on average family size.
Which of the following will not cause aggregate demand to increase?
An increase in investment.
An increase in taxes.
An increase in consumer spending.
A decrease in imports.
1.12 The basic (two-sector) circular flow diagram indicates that:
Households sell goods and services to the government.
Firms buy goods and services from households.
Firms buy factors of production from the government.
Households sell factors of production to firms.
1.13 If the banks in an economy operate with a reserve ratio of 20 per cent then the money
multiplier is:
a)
4
b)
20
c)
25
dq) 5
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1.5 Page 5 |
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1.14 The amount of unemployment that the economy normally experiences is known as:
The natural rate of unemployment.
b)
Cyclical unemployment.
c)
Efficiency wage unemployment.
d)
Namibian unemployment
1.15 All final goods and services that make the Gross Domestic Product (GDP) can be
Expressed as
GDP =C+I-G+(X+M)
b)
GDP =C +1+G +(X -M)
c)
GDP =C+1+G (X+M)
d) GDP =C+1+(X-M)
1.16 The ratio of the change in the equilibrium level of income to a change in some
Autonomous increase in spending is the
Elasticity coefficient
Multiplier
Automatic stabilizer
Marginal propensity of the autonomous variable
1.17 If the interest rates falls, then
a)
Bond prices will remain the same
b)
Bond prices will rise
Bond prices will fall
d)
None of the above
If Namibia is experiencing an inflationary gap, equilibrium level of income would be:
Greater than planned investment.
Greater than the full employment income level.
Less than the full employment income level.
Equal to the full employment income level.
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1.6 Page 6 |
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1.19 Indirect tax such as Value-added tax (VAT) can be classified as:
a)
progressive taxes
b)
proportional taxes
c)
regressive taxes
d)
Per capita taxes.
1.20
a)
b)
c)
d)
Which of the following statements is true about a country with a trade deficit?
Net exports are negative.
Net capital outflow must be positive.
Exports exceed imports.
Net exports are positive
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1.7 Page 7 |
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SECTION B
20 Marks
Instructions:
Read all questions carefully
Answer all questions
All answers should be on the answer sheet provided on page .15. Tear the page off and
place it inside your examination script.
QUESTION 1 [20 marks]
1.1 GDP is defined as the market value of all goods and services produced in South Africa.
[T/F]
1.2 All countries keep record of transactions with the rest of the world in the Balance of
Payment (BoP.)
[T/F]
1.3 Gross capital formation is also known as investment expenditure.
[T/F]
1.4 The following are functions of money; Medium of exchange, Unit of account and shop
of value.
[T/F]
1.5 The value of the multiplier with an initial deposit of 1500 and a reserve requirement of
15% is equal to 10000.
[T/F]
1.6 One of the objectives of taxation is to finance government expenditure.
[T/F]
1.7 Fiscal policy is an instrument used by government to correct market failure through
reducing the reserve requirement and increasing interest rate.
[T/F]
1.8 According to David Ricardo’s theory of comparative advantage, each country will
specialize and trade in the product for which it has the lowest opportunity cost. [T/F]
1.9 If a country’s currency appreciates, net exports will decrease.
(T/F]
1.10 Suppose Ca = 100 and c = 0.8, if income is NS 400, consumption is equal NS 420. [T/F]
1.11 Labor force includes Unemployed persons, Full time employed and retired pensioners.
[T/F]
1.12 When Job quits his job in Khorixas and moves to Ongha in search of a new job he is
considered to be frictionally unemployed.
(T/F]
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1.8 Page 8 |
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1.13 Demand-pull inflation occurs when there is an increase in production costs resulting ina
decrease in supply.
[T/F]
1.14 Changes in resource supply such as energy prices, technology and wages may cause
expansions or contractions.
[T/F]
1.15 If a country’s currency appreciates, its imports will become cheaper and export will
decrease.
[T/F]
1.16 Economic development is concerned with human development as well as with the
production of goods and services.
[T/F]
1.17. One of the basic reasons for international trade is that all countries do not possess the
same natural resources.
(T/F]
1.18 A tariff is a tax imposed on exported goods.
[T/F]
1.19 If you are retired than you are considered part of the labour force.
[T/F]
1.20 MPC+MPS = 150.
[T/F]
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1.9 Page 9 |
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QUESTION 1 [10 marks]
SECTION C
20 Marks
1.1 Explain how each of the following events is likely to affect GDP?
a)
Environmental laws prohibit the firms from emitting pollution
b)
Strikes by trade unions.
c)
Discovery of new seed increases farm harvest.
[1 mark]
[1 mark]
[1 mark]
Let us say Namibia only produces one good, for example maize. In 2017 the country
produced 2000 tons of maize, which sold at NS1500 per ton. In 2018, the country
produced and 2200 tons of maize at a price of NS1700 per ton.
i)
Calculate the nominal GDP for this country for the years 2017 and 2018.
ii)
By what percentage did GDP increase in 2018?
iii)
Calculate the GDP in constant 2017 prices for 2018.
[4 marks]
[1 mark]
[2 marks]
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1.10 Page 10 |
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QUESTION 2 [10 marks]
2.1 Explain three main motives of holding money outlined in Keynes’ Liquidity
Preference Theory
[6 marks]
2.2 What would happen to the money supply in each of the following cases, ceteris
paribus?
The BON increases the required cash reserve ratio from 5% to 7%.
[1 mark]
b)
The Executive Committee of the BON raises the repo rate.
[1 mark]
c)
Suppose BON pursues an aggressive open market policy by selling government
bonds. What will happen to the price of bonds and the interest rate?
[2 marks]
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2 Pages 11-20 |
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2.1 Page 11 |
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SECTION D
20 Marks
QUESTION 1 [13 marks]
1.2 The government budget forms an integral part of fiscal policy.
a)
Define the term fiscal policy.
[2 marks]
b)
Explain the difference between progressive and regressive taxes and give an example of
each.
[4 marks]
c)
List 3 functions of money in the economy.
[3 marks]
d)
Define the “keep-the-money-at- home” argument
[2 marks]
e)
If the government decides today that aggregate demand is deficient and causing a
recession, what is it likely to do?
[2 marks]
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2.2 Page 12 |
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QUESTION 2 [7 marks]
2.1 You are given the following consumption function: C = 130 + 0.55Y
(a)
Refer to the consumption function above. If disposable income (Y) is given as NS800,
calculate the total amount of consumption.
[2 marks]
(b)
Refer to the consumption function above. Calculate the income multiplier. [2 marks]
(c)
Refer to the consumption function above. If disposable income (Y) increases by NS80,
by how much will saving increase?
[2 marks]
(d)
Refer to the consumption function above. What does the figure 130 indicate? [1 mark]
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2.3 Page 13 |
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SECTION E
20 Marks
QUESTION 1 [10 Marks]
1.1 Inflation has various economic effects which may result in lower economic growth and
higher unemployment than would otherwise have occurred. Discuss this statement by
looking at the effects of inflation on the following groups of people in the economy:
a)
Creditors
[2 marks]
b)
Debtors
[2 marks]
c)
Salaried workers
[2 marks]
d)
Pensioners
[2 marks]
e)
Savers
[2 marks]
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2.4 Page 14 |
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QUESTION 2 [10 marks]
2.1
State any two shortcomings of GDP per capita as a measure of economic development.
[2 marks]
2.2 Consider each of the following cases separately. In each situation, identify the type of
unemployment and briefly explain your reasoning.
a)
The mechanisation of agriculture displaces thousands of farm workers who
cannot find employment elsewhere in the economy.
[2 marks]
Workers at Mazda Manufacturers are retrenched because car sales decreased
during a slump in the economy.
[2 marks]
c)
Rebecca and two other teachers at a private school are retrenched when the
number of children falls.
[2 marks]
d)
Farm workers in Vaalgras town help farmers to bring in their year-end harvest
from November to March.
[2 marks]
TOTAL MARKS FOR PAPER: 100
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2.5 Page 15 |
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ANSWER SHEET FOR SECTION A
Mark the correct answer with an X.
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
1.10
1.11
1.12
1.13
1.14
1.15
1.16
1.17
1.18
1.19
1.20
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2.6 Page 16 |
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ANSWER SHEET FOR SECTION B
Mark the correct answer with an X.
TRUE
FALSE
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
1.10
1.11
1.12
1.13
1.14
1.15
1.16
1.17
1.18
1.19
1.20
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