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Questions and Answers

What is the primary function of the foreign sector in an open economy?

  • To collect taxes and inject spending into the economy
  • To facilitate trade activities and manage exports and imports (correct)
  • To provide labor and resources to firms
  • To manage the flow of money and savings
  • What is the term used to describe the movement of goods and services in an open economy?

  • Goods Flows
  • Financial Flows
  • Money Flows
  • Real Flows (correct)
  • What is the primary purpose of the goods market?

  • To trade consumer goods and services (correct)
  • To facilitate international trade
  • To manage the flow of money and savings
  • To deal in resources like labor and capital
  • What does the GDP (Gross Domestic Product) measure?

    <p>The total economic output at market prices</p> Signup and view all the answers

    What is the primary function of firms in an open economy?

    <p>To utilize labor and resources to produce goods and services</p> Signup and view all the answers

    What is the primary purpose of the financial market?

    <p>To manage the flow of money, including savings and investments</p> Signup and view all the answers

    What does GNI account for?

    <p>All income earned by a country's residents, adjusting for income received from abroad</p> Signup and view all the answers

    What is the primary function of the government in an open economy?

    <p>To collect taxes and inject spending into the economy through public services and infrastructure</p> Signup and view all the answers

    What is the basic formula for the multiplier in a simple two-sector model?

    <p>k = 1 / (1 - MPC)</p> Signup and view all the answers

    What is the highest point of economic activity in a business cycle?

    <p>Peak</p> Signup and view all the answers

    What does the circular flow model illustrate?

    <p>The movement of money and goods across different sectors of the economy</p> Signup and view all the answers

    What is the primary function of households in an open economy?

    <p>To provide labor and resources, receiving income used for consumption, savings, and taxes</p> Signup and view all the answers

    What is the role of technological innovation in causing business cycles according to the Schumpeterian Theory?

    <p>It leads to bursts of activity followed by periods of adjustment</p> Signup and view all the answers

    What is the term used to describe the financial transactions for goods and services in an open economy?

    <p>Money Flows</p> Signup and view all the answers

    What is the purpose of monetary policy in stabilizing economic activity?

    <p>To utilize tools such as interest rates and control of money supply</p> Signup and view all the answers

    What is the phase of the business cycle marked by an increase in economic activities?

    <p>Expansion</p> Signup and view all the answers

    What is the primary factor that drives business cycles according to the Keynesian Theory?

    <p>Changes in aggregate demand</p> Signup and view all the answers

    What is the purpose of fiscal policy in times of economic downturn?

    <p>To increase government spending and reduce taxes</p> Signup and view all the answers

    What is the phase of the business cycle that follows the peak and can lead to a recession if it is prolonged and severe?

    <p>Contraction</p> Signup and view all the answers

    What is the lowest point of a business cycle, marking the end of a recession before a new expansion begins?

    <p>Trough</p> Signup and view all the answers

    What is the main objective of the New Economic Paradigm?

    <p>To smooth out the volatility in business cycles and achieve stable growth</p> Signup and view all the answers

    What type of indicator confirms trends that are already in process?

    <p>Lagging Indicator</p> Signup and view all the answers

    What type of forecasting technique predicts future behavior based on historical data and trends?

    <p>Extrapolation</p> Signup and view all the answers

    What is the main role of the national government?

    <p>Handling national affairs like defense and education</p> Signup and view all the answers

    What is a major challenge facing the public sector?

    <p>Inefficiency due to lack of clear performance metrics and accountability</p> Signup and view all the answers

    What is the main objective of the public sector's pricing policy?

    <p>To fulfill social responsibilities rather than maximizing revenue</p> Signup and view all the answers

    What is the main purpose of the Medium-Term Expenditure Framework (MTEF)?

    <p>To plan over a three-year period, allowing for more predictable and strategic allocation of resources</p> Signup and view all the answers

    What is one of the main objectives of the public sector?

    <p>To promote economic equity through progressive taxation and social welfare programs</p> Signup and view all the answers

    What is a fiscal policy instrument used to manage economic activity?

    <p>Taxation</p> Signup and view all the answers

    What is a major problem with state-owned enterprises?

    <p>Inefficiency due to lack of competition and accountability</p> Signup and view all the answers

    What is the primary goal of directing government spending towards public goods and services?

    <p>To encourage economic growth and stability</p> Signup and view all the answers

    What illustrates the relationship between tax rates and tax revenue?

    <p>The Laffer Curve</p> Signup and view all the answers

    What can lead to shortages or surpluses in a market?

    <p>Administered Prices</p> Signup and view all the answers

    What is the role of the public sector in South Africa?

    <p>To manage resources and provide essential services</p> Signup and view all the answers

    What is the primary function of the foreign exchange market?

    <p>To establish the value of currencies</p> Signup and view all the answers

    What affects the supply and demand of currencies in the forex market?

    <p>All of the above</p> Signup and view all the answers

    What is the purpose of central bank intervention in the forex market?

    <p>To stabilize the currency's value</p> Signup and view all the answers

    What records all economic transactions between a country and the rest of the world?

    <p>Balance of Payments (BoP)</p> Signup and view all the answers

    What does a BoP surplus indicate?

    <p>That the country is exporting more than it imports</p> Signup and view all the answers

    What do policymakers use data from the forex market and BoP to formulate?

    <p>Economic strategies</p> Signup and view all the answers

    What is the primary difference between Gross Domestic Product (GDP) and Gross National Income (GNI)?

    <p>GDP accounts for income earned by foreigners, while GNI accounts for income earned by residents</p> Signup and view all the answers

    What is the main purpose of the Multiplier Effect in economics?

    <p>To calculate the impact of initial spending on overall economic output</p> Signup and view all the answers

    What is the name of the model that focuses on household and firm interactions in the Multiplier Effect?

    <p>Two-Sector Model</p> Signup and view all the answers

    What is the phase of the business cycle characterized by a decline in economic activity?

    <p>Contraction</p> Signup and view all the answers

    Which theory suggests that business cycles are driven by changes in aggregate demand?

    <p>Keynesian Theory</p> Signup and view all the answers

    What is the primary tool used in monetary policy to stabilize economic activity?

    <p>Interest rates</p> Signup and view all the answers

    What is the term used to describe the external influences that affect business cycles?

    <p>Exogenous Factors</p> Signup and view all the answers

    What is the term used to describe the lowest point of a business cycle?

    <p>Trough</p> Signup and view all the answers

    What is the primary purpose of fiscal policy in times of economic downturn?

    <p>To stimulate economic activity</p> Signup and view all the answers

    What is the term used to describe the fluctuations in economic activity that an economy experiences over time?

    <p>Business Cycles</p> Signup and view all the answers

    In an open economy, what is the primary purpose of the government?

    <p>To collect taxes and inject spending into the economy</p> Signup and view all the answers

    What type of market deals in resources like labor and capital?

    <p>Factor Market</p> Signup and view all the answers

    What is the term used to describe the flow of goods and services in an open economy?

    <p>Real Flows</p> Signup and view all the answers

    What is measured by the GDP in an open economy?

    <p>The total economic output at market prices</p> Signup and view all the answers

    What is the primary sector that provides labor and resources in an open economy?

    <p>Households</p> Signup and view all the answers

    What type of market manages the flow of money?

    <p>Financial Market</p> Signup and view all the answers

    What is the primary function of the foreign sector in an open economy?

    <p>To involve trade activities</p> Signup and view all the answers

    What is the term used to describe the financial transactions for goods and services?

    <p>Money Flows</p> Signup and view all the answers

    What is the primary purpose of the circular flow model?

    <p>To illustrate the movement of money and goods</p> Signup and view all the answers

    What is the term used to describe the market that trades consumer goods and services?

    <p>Goods Market</p> Signup and view all the answers

    What is the primary goal of directing government spending towards public goods and services?

    <p>To stabilize the economy and promote growth</p> Signup and view all the answers

    What illustrates the relationship between tax rates and tax revenue?

    <p>Laffer Curve</p> Signup and view all the answers

    What can distort market operations and lead to inefficiencies?

    <p>All of the above</p> Signup and view all the answers

    What determines the exchange rates for currencies?

    <p>Supply and demand of currencies</p> Signup and view all the answers

    What is the purpose of central bank intervention in the forex market?

    <p>To stabilize or guide the exchange rate towards desired levels</p> Signup and view all the answers

    What records all economic transactions between a country and the rest of the world?

    <p>Balance of Payments</p> Signup and view all the answers

    What does a BoP surplus indicate?

    <p>A country is exporting more than it imports</p> Signup and view all the answers

    What can lead to shortages or surpluses in a market?

    <p>Administered prices</p> Signup and view all the answers

    What is the primary function of the foreign exchange market?

    <p>To facilitate international trade and investments</p> Signup and view all the answers

    What is the primary objective of the New Economic Paradigm?

    <p>To smooth out the volatility in business cycles and achieve stable growth</p> Signup and view all the answers

    What affects the supply and demand of currencies in the forex market?

    <p>All of the above</p> Signup and view all the answers

    What type of indicator predicts future economic activity?

    <p>Leading indicator</p> Signup and view all the answers

    What is the main role of the national government?

    <p>To handle national affairs like defense and education</p> Signup and view all the answers

    What is a major challenge facing the public sector?

    <p>Inefficiency due to lack of clear performance metrics</p> Signup and view all the answers

    What is the primary goal of the public sector's pricing policy?

    <p>To fulfill social responsibilities</p> Signup and view all the answers

    What is the main purpose of the Medium-Term Expenditure Framework (MTEF)?

    <p>To plan and manage the national budget</p> Signup and view all the answers

    What is a fiscal policy instrument used to manage economic activity?

    <p>Taxation</p> Signup and view all the answers

    What is a major problem with state-owned enterprises?

    <p>Lack of competition</p> Signup and view all the answers

    What illustrates the relationship between tax rates and tax revenue?

    <p>Laffer Curve</p> Signup and view all the answers

    What is the primary goal of directing government spending towards public goods and services?

    <p>To provide essential services that are not profit-driven</p> Signup and view all the answers

    What is the primary goal of directing government spending towards public goods and services?

    <p>To encourage economic growth and stability</p> Signup and view all the answers

    What is the term used to describe the relationship between tax rates and tax revenue?

    <p>Laffer Curve</p> Signup and view all the answers

    What is a major challenge facing the public sector?

    <p>Efficiency and accountability</p> Signup and view all the answers

    What is the purpose of the foreign exchange market?

    <p>To facilitate international trade</p> Signup and view all the answers

    What is the Balance of Payments (BoP)?

    <p>A comprehensive record of all economic transactions between a country and the rest of the world</p> Signup and view all the answers

    What is the effect of a BoP surplus?

    <p>A net inflow of money</p> Signup and view all the answers

    What is the purpose of central bank intervention in the forex market?

    <p>To stabilize or guide the exchange rate towards desired levels</p> Signup and view all the answers

    What can lead to shortages or surpluses in a market?

    <p>Price controls</p> Signup and view all the answers

    What is the primary role of the public sector in South Africa?

    <p>To manage resources and provide services that are not suitable for private sector delivery</p> Signup and view all the answers

    What can distort market operations and lead to inefficiencies if not carefully managed?

    <p>Subsidies and taxes</p> Signup and view all the answers

    What is the primary objective of the New Economic Paradigm?

    <p>To smooth out the volatility in business cycles</p> Signup and view all the answers

    What is the main role of the provincial governments in the public sector?

    <p>To manage regional issues</p> Signup and view all the answers

    What is the main challenge facing the public sector in terms of efficiency?

    <p>Lack of clear performance metrics</p> Signup and view all the answers

    What is the primary objective of the public sector's pricing policy?

    <p>To fulfill social responsibilities</p> Signup and view all the answers

    What is the Medium-Term Expenditure Framework (MTEF) used for?

    <p>To allocate resources over a three-year period</p> Signup and view all the answers

    What is the primary objective of fiscal policy in times of economic downturn?

    <p>To stimulate economic growth</p> Signup and view all the answers

    What is a major problem facing state-owned enterprises?

    <p>Lack of competition</p> Signup and view all the answers

    What type of indicators confirm trends that are already in process?

    <p>Lagging indicators</p> Signup and view all the answers

    What is the primary objective of demand-side policies?

    <p>To regulate aggregate demand</p> Signup and view all the answers

    What is the primary role of the national government in the public sector?

    <p>To handle national affairs</p> Signup and view all the answers

    What is the main purpose of the Multiplier Effect in economics?

    <p>To demonstrate how initial increases in spending lead to a more significant overall increase in economic output</p> Signup and view all the answers

    What is the name of the model that focuses on household and firm interactions in the Multiplier Effect?

    <p>Two-Sector Model</p> Signup and view all the answers

    What is the term used to describe the phase of the business cycle characterized by a decline in economic activity?

    <p>Contraction</p> Signup and view all the answers

    Which theory suggests that business cycles are driven by changes in aggregate demand?

    <p>Keynesian Theory</p> Signup and view all the answers

    What is the primary tool used in monetary policy to stabilize economic activity?

    <p>Interest Rates</p> Signup and view all the answers

    What is the term used to describe the external influences that affect business cycles?

    <p>Exogenous Factors</p> Signup and view all the answers

    What is the term used to describe the lowest point of a business cycle?

    <p>Trough</p> Signup and view all the answers

    What is the primary purpose of fiscal policy in times of economic downturn?

    <p>To stimulate demand and pull the economy out of a recession</p> Signup and view all the answers

    What is the term used to describe the fluctuations in economic activity that an economy experiences over time?

    <p>Business Cycles</p> Signup and view all the answers

    What is the formula for the multiplier in a simple two-sector model?

    <p>k = 1 / MPC</p> Signup and view all the answers

    What is the primary function of the circular flow model in an open economy?

    <p>To illustrate the economic activities and interactions among various sectors</p> Signup and view all the answers

    Which market involves the trading of currencies necessary for international trade?

    <p>Foreign Exchange Market</p> Signup and view all the answers

    What is the term used to describe the movement of money and goods across different sectors of the economy?

    <p>Money Flows</p> Signup and view all the answers

    Which sector collects taxes and injects spending into the economy?

    <p>Government</p> Signup and view all the answers

    What is the purpose of the multiplier effect in economics?

    <p>To capture the extent to which additional spending can amplify economic activity</p> Signup and view all the answers

    What is the term used to describe the total economic output at market prices?

    <p>Gross Domestic Product (GDP)</p> Signup and view all the answers

    Which sector involves trade activities, where exports add to the economic flow and imports lead to outflows of currency?

    <p>Foreign Sector</p> Signup and view all the answers

    What is the primary function of households in an open economy?

    <p>To provide labor and resources, receiving income used for consumption, savings, and taxes</p> Signup and view all the answers

    What is the purpose of the financial market in an open economy?

    <p>To manage the flow of money, including savings and investments</p> Signup and view all the answers

    What is the primary function of the circular flow model in an open economy?

    <p>To highlight the interactions between different sectors of the economy.</p> Signup and view all the answers

    Which market facilitates the trading of currencies necessary for international trade?

    <p>Foreign Exchange Market</p> Signup and view all the answers

    What is the term used to describe the movement of money and goods across different sectors of the economy?

    <p>Money Flows</p> Signup and view all the answers

    Which of the following sectors injects spending into the economy through public services and infrastructure?

    <p>Government</p> Signup and view all the answers

    What is the primary purpose of measuring the Gross Domestic Product (GDP)?

    <p>To measure the economic performance of a country.</p> Signup and view all the answers

    What is the relationship between the goods market and the factor market?

    <p>The goods market and the factor market are interdependent markets.</p> Signup and view all the answers

    Which of the following is NOT a component of the circular flow model?

    <p>Central Bank</p> Signup and view all the answers

    What is the primary purpose of the financial market?

    <p>To manage the flow of money, including savings and investments.</p> Signup and view all the answers

    Which of the following is an example of a real flow?

    <p>Production of goods and services.</p> Signup and view all the answers

    What is the primary purpose of the multiplier effect?

    <p>To capture the extent to which additional spending can amplify economic activity.</p> Signup and view all the answers

    What is the primary objective of the New Economic Paradigm?

    <p>To smooth out the volatility in business cycles and achieve stable growth</p> Signup and view all the answers

    What type of indicator predicts future economic activity by moving ahead of the business cycle?

    <p>Leading Indicators</p> Signup and view all the answers

    What is the primary challenge facing the public sector?

    <p>Efficiency Challenges</p> Signup and view all the answers

    What is the purpose of the Medium-Term Expenditure Framework (MTEF)?

    <p>To allocate resources over a three-year period</p> Signup and view all the answers

    What is the primary objective of taxation as a fiscal policy instrument?

    <p>To regulate aggregate demand</p> Signup and view all the answers

    What is the primary problem with state-owned enterprises?

    <p>Lack of competition and accountability</p> Signup and view all the answers

    What is the primary role of the national government?

    <p>To handle national affairs like defense and education</p> Signup and view all the answers

    What is the primary goal of the public sector's pricing policy?

    <p>To fulfill social responsibilities</p> Signup and view all the answers

    What is the primary objective of the public sector?

    <p>To provide structure and essential services</p> Signup and view all the answers

    What is the primary purpose of forecasting business cycles?

    <p>To predict future economic activity</p> Signup and view all the answers

    What does the Gross National Income (GNI) account for?

    <p>All income earned by a country's residents, adjusting for income received from abroad</p> Signup and view all the answers

    What is the purpose of the Multiplier Effect in economics?

    <p>To demonstrate how initial increases in spending lead to a more significant overall increase in economic output</p> Signup and view all the answers

    What is the main difference between the Two-Sector Model and the Three and Four-Sector Models?

    <p>The level of complexity in the spending and saving behaviors</p> Signup and view all the answers

    What is the term used to describe the point of highest economic activity in a business cycle?

    <p>Peak</p> Signup and view all the answers

    What is the primary purpose of fiscal policy in times of economic downturn?

    <p>To increase government spending and reduce taxes</p> Signup and view all the answers

    What is the term used to describe the fluctuations in economic activity that an economy experiences over time?

    <p>Business Cycles</p> Signup and view all the answers

    What is the purpose of monetary policy in stabilizing economic activity?

    <p>To stabilize economic activity through interest rates and money supply</p> Signup and view all the answers

    What is the term used to describe the internal influences that affect business cycles?

    <p>Endogenous factors</p> Signup and view all the answers

    What is the primary purpose of the Two-Sector Model in the Multiplier Effect?

    <p>To focus on household and firm interactions</p> Signup and view all the answers

    What is the term used to describe the phase of the business cycle that follows the peak and can lead to a recession if it is prolonged and severe?

    <p>Contraction</p> Signup and view all the answers

    What is the primary role of the public sector in South Africa?

    <p>To provide essential goods and services</p> Signup and view all the answers

    What is the term used to describe the relationship between tax rates and tax revenue?

    <p>Laffer Curve</p> Signup and view all the answers

    What can lead to shortages or surpluses in a market?

    <p>Price controls</p> Signup and view all the answers

    What is the primary function of the foreign exchange market?

    <p>To facilitate international trade</p> Signup and view all the answers

    What is the purpose of central bank intervention in the forex market?

    <p>To stabilize or guide the exchange rate towards desired levels</p> Signup and view all the answers

    What records all economic transactions between a country and the rest of the world?

    <p>Balance of Payments</p> Signup and view all the answers

    What does a BoP surplus indicate?

    <p>A country is exporting more than it imports</p> Signup and view all the answers

    What do policymakers use data from the forex market and BoP to formulate?

    <p>Economic strategies</p> Signup and view all the answers

    What is the primary goal of directing government spending towards public goods and services?

    <p>To encourage economic stability</p> Signup and view all the answers

    What is one of the main objectives of the public sector's pricing policy?

    <p>To encourage economic efficiency</p> Signup and view all the answers

    What is the primary challenge facing the public sector in terms of its spending and service delivery?

    <p>Managing resources and providing services efficiently</p> Signup and view all the answers

    What is the primary goal of the New Economic Paradigm?

    <p>To smooth out the volatility in business cycles and achieve stable growth</p> Signup and view all the answers

    Which of the following is NOT a function of the foreign exchange market?

    <p>Managing the balance of payments</p> Signup and view all the answers

    What is the primary consequence of a BoP surplus?

    <p>Net inflow of money</p> Signup and view all the answers

    Which of the following indicators is used to predict future economic activity?

    <p>Leading Indicators</p> Signup and view all the answers

    Which of the following is a consequence of administered prices?

    <p>Shortages or surpluses</p> Signup and view all the answers

    What is the primary role of the national government in the public sector?

    <p>To handle national affairs such as defense and education</p> Signup and view all the answers

    What is the main challenge facing the public sector in terms of provisioning?

    <p>Lack of clear performance metrics</p> Signup and view all the answers

    What is the primary objective of directing government spending towards public goods and services?

    <p>Promoting economic growth and stability</p> Signup and view all the answers

    What is the primary objective of the public sector's pricing policy?

    <p>To fulfill social responsibilities</p> Signup and view all the answers

    What is the primary factor that influences exchange rates in a free-floating exchange rate system?

    <p>Market forces</p> Signup and view all the answers

    What is the Medium-Term Expenditure Framework (MTEF) used for?

    <p>To plan for a three-year period</p> Signup and view all the answers

    What is the primary role of the capital account in the balance of payments?

    <p>Monitoring capital transactions</p> Signup and view all the answers

    What is the primary consequence of information failure in the public sector?

    <p>Inefficient outcomes</p> Signup and view all the answers

    What is the primary problem with state-owned enterprises?

    <p>Lack of competition</p> Signup and view all the answers

    What is the primary purpose of central bank intervention in the forex market?

    <p>To stabilize the exchange rate</p> Signup and view all the answers

    What is the main objective of fiscal policy in times of economic downturn?

    <p>To stimulate economic activity</p> Signup and view all the answers

    What is the primary role of the financial account in the balance of payments?

    <p>Tracking investments in financial instruments</p> Signup and view all the answers

    What is the term used to describe the relationship between tax rates and tax revenue?

    <p>Laffer Curve</p> Signup and view all the answers

    What is the primary role of the public sector in an economy?

    <p>To provide essential services</p> Signup and view all the answers

    What is the primary function of the financial market in the context of the circular flow model?

    <p>To manage the flow of money, including savings and investments</p> Signup and view all the answers

    What is the significance of the multiplier effect in the context of the circular flow model?

    <p>It captures the extent to which additional spending can amplify economic activity</p> Signup and view all the answers

    What is the primary purpose of the government sector in the circular flow model?

    <p>To collect taxes and inject spending into the economy</p> Signup and view all the answers

    What is the primary function of the foreign sector in the context of the circular flow model?

    <p>To involve trade activities, where exports add to the economic flow and imports lead to outflows of currency</p> Signup and view all the answers

    What is the significance of the goods market in the context of the circular flow model?

    <p>It trades consumer goods and services</p> Signup and view all the answers

    What is the primary purpose of the factor market in the context of the circular flow model?

    <p>To deal in resources like labor and capital</p> Signup and view all the answers

    What is the significance of the foreign exchange market in the context of the circular flow model?

    <p>It handles the trading of currencies necessary for international trade</p> Signup and view all the answers

    What is the primary purpose of the circular flow model?

    <p>To illustrate the movement of money and goods across different sectors of the economy</p> Signup and view all the answers

    What is the primary role of households in the circular flow model?

    <p>To provide labor and resources to firms</p> Signup and view all the answers

    What is the primary purpose of the firms sector in the circular flow model?

    <p>To utilize labor and resources to produce goods and services</p> Signup and view all the answers

    What is the primary purpose of the Three and Four-Sector Models in the Multiplier Effect?

    <p>To include government and foreign transactions in the spending and saving behaviors</p> Signup and view all the answers

    Which of the following is a characteristic of the contraction phase of a business cycle?

    <p>Decline in economic indicators and reduction in workforce</p> Signup and view all the answers

    What is the primary difference between the Classical and Neoclassical Theories of business cycles?

    <p>The emphasis on external shocks versus normal market processes</p> Signup and view all the answers

    What is the primary purpose of fiscal policy in times of economic boom?

    <p>To reduce government spending and increase taxation</p> Signup and view all the answers

    What is the term used to describe the highest point of economic activity in a business cycle?

    <p>Peak</p> Signup and view all the answers

    What is the primary factor that drives business cycles according to the Schumpeterian Theory?

    <p>Technological innovation and entrepreneurship</p> Signup and view all the answers

    What is the primary purpose of the Multiplier Effect in economics?

    <p>To reveal how initial increases in spending lead to a more significant overall increase in economic output</p> Signup and view all the answers

    What is the primary difference between the Keynesian Theory and the Classical and Neoclassical Theories of business cycles?

    <p>The focus on aggregate demand versus supply-side factors</p> Signup and view all the answers

    What is the term used to describe the external influences that affect business cycles?

    <p>Exogenous factors</p> Signup and view all the answers

    What is the primary purpose of monetary policy in stabilizing economic activity?

    <p>To control the money supply and interest rates</p> Signup and view all the answers

    Which sector of the economy generates revenue through the production of goods and services?

    <p>Firms</p> Signup and view all the answers

    What is the primary function of the financial market in an open economy?

    <p>To manage the flow of money, including savings and investments</p> Signup and view all the answers

    Which of the following national account aggregates measures the total economic output at market prices?

    <p>Gross Domestic Product (GDP)</p> Signup and view all the answers

    What is the primary purpose of the circular flow model in an open economy?

    <p>To highlight the interactions between households, firms, government, and foreign sector</p> Signup and view all the answers

    Which market facilitates the trading of currencies necessary for international trade?

    <p>Foreign Exchange Market</p> Signup and view all the answers

    What is the primary function of the government in an open economy?

    <p>To inject spending into the economy through public services and infrastructure</p> Signup and view all the answers

    What is the term used to describe the movement of money and goods across different sectors of the economy?

    <p>Circular Flow</p> Signup and view all the answers

    Which of the following sectors is responsible for collecting taxes and injecting spending into the economy?

    <p>Government</p> Signup and view all the answers

    What is the primary purpose of the goods market in an open economy?

    <p>To trade consumer goods and services</p> Signup and view all the answers

    What is the term used to describe the extent to which additional spending can amplify economic activity?

    <p>Multiplier Effect</p> Signup and view all the answers

    What is the main purpose of directing government spending towards public goods and services?

    <p>To encourage economic growth and stability</p> Signup and view all the answers

    Which of the following is a characteristic of a managed floating exchange rate system?

    <p>The government intervenes occasionally to stabilize the currency's value</p> Signup and view all the answers

    What is the primary purpose of the Balance of Payments (BoP)?

    <p>To record all economic transactions between a country and the rest of the world</p> Signup and view all the answers

    What is the result of a BoP surplus?

    <p>A net inflow of money into the country</p> Signup and view all the answers

    What is the primary function of the foreign exchange market?

    <p>To facilitate international trade by establishing the value of currencies</p> Signup and view all the answers

    What can cause appreciations or depreciations in a currency?

    <p>Changes in interest rates and economic stability</p> Signup and view all the answers

    What is the role of the public sector in South Africa?

    <p>To manage resources and provide essential services not suitable for private sector delivery</p> Signup and view all the answers

    What is the Laffer Curve illustrating?

    <p>The relationship between tax rates and tax revenue</p> Signup and view all the answers

    What can distort market operations and lead to inefficiencies?

    <p>Subsidies and taxes, if not carefully managed</p> Signup and view all the answers

    What is the main difference between Basic Prices, Factor Cost, and Market Prices?

    <p>Method of categorizing prices</p> Signup and view all the answers

    What is the multiplier effect used to explain?

    <p>Increases in spending leading to a larger increase in economic output</p> Signup and view all the answers

    What do policymakers use data from the forex market and BoP to formulate?

    <p>Strategies to stabilize the economy, manage inflation, and promote sustainable growth</p> Signup and view all the answers

    What is the purpose of the Two-Sector Model in economics?

    <p>To explain the multiplier effect</p> Signup and view all the answers

    What is the primary factor that drives business cycles according to the Classical and Neoclassical Theories?

    <p>External shocks and normal market processes</p> Signup and view all the answers

    What is the primary tool used in monetary policy to stabilize economic activity?

    <p>Interest rates and control of money supply</p> Signup and view all the answers

    What is the term used to describe the highest point of economic activity in a business cycle?

    <p>Peak</p>