June P1 Easy
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Questions and Answers

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

  • To utilize labor and resources to produce goods and services
  • To facilitate trade activities, including exports and imports (correct)
  • To collect taxes and inject spending into the economy
  • To provide labor and resources, receiving income used for consumption

    • What is measured by GDP?

  • The total economic output at wholesale prices
  • The total economic output at production cost
  • The total economic output at market prices (correct)
  • The total economic output at retail prices

    • Which market deals in resources like labor and capital?

  • Factor Market (correct)
  • Financial Market
  • Foreign Exchange Market
  • Goods Market

    • What is the main role of households in the circular flow model?

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

    What is the name of the economic model that illustrates the economic activities among various sectors and their interactions through markets?

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

    What is the term for the movement of goods and services in the circular flow model?

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

    Which sector of the economy utilizes labor and resources to produce goods and services?

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

    What is the name of the market that manages the flow of money?

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

    What is Gross National Income (GNI)?

    <p>The total income earned by a country's residents, including income received from abroad.</p> Signup and view all the answers

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

    <p>Household and firm interactions.</p> Signup and view all the answers

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

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

    What characterizes the expansion phase of a business cycle?

    <p>Increase in economic activities.</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 is an example of an exogenous factor influencing business cycles?

    <p>Natural disasters.</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?

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

    What is the purpose of Fiscal Policy?

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

    What is the function of the Multiplier Effect?

    <p>To measure the impact of initial spending on economic output.</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 economic indicators confirm trends that are already in process?

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

    What is the main purpose of the public sector?

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

    What is a challenge faced by the public sector in terms of efficiency?

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

    What is the objective of pricing policy in the public sector?

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

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

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

    What is the main objective of fiscal policy?

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

    What is the Laffer Curve related to?

    <p>Fiscal policy</p> Signup and view all the answers

    What is the main purpose of forecasting business cycles?

    <p>To prepare for economic fluctuations and mitigate adverse effects</p> Signup and view all the answers

    What is the role of state-owned enterprises (SOEs) in the public sector?

    <p>To operate in the public interest</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 does the Laffer Curve illustrate?

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

    What is a potential consequence of price controls being set below market equilibrium?

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

    What is a result of decisions based on incomplete or inaccurate information?

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

    What is a potential consequence of excessive bureaucracy?

    <p>Stifled innovation</p> Signup and view all the answers

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

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

    What is the primary purpose of the circular flow model?

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

    Which market facilitates international trade?

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

    What is the name of the economic model that measures the total economic output at market prices?

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

    What is the primary function 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 term for the movement of goods and services in the circular flow model?

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

    Which sector of the economy receives income used for consumption, savings, and taxes?

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

    What is the term for the financial transactions for goods and services in the circular flow model?

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

    What is the result of additional spending in the economy?

    <p>An amplification of economic activity</p> Signup and view all the answers

    What is the main difference between GNI and GDP?

    <p>GNI accounts for foreign income, while GDP does not</p> Signup and view all the answers

    What is the Two-Sector Model focused on?

    <p>Household and firm interactions</p> Signup and view all the answers

    What is the purpose of the Multiplier Effect?

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

    What characterizes the contraction phase of a business cycle?

    <p>Decreased economic activity and decline in economic indicators</p> Signup and view all the answers

    What is the purpose of Fiscal Policy?

    <p>To stabilize economic activity through government spending and taxation</p> Signup and view all the answers

    What is the Schumpeterian Theory focused on?

    <p>The role of technological innovation</p> Signup and view all the answers

    What is the peak of a business cycle?

    <p>The highest point of economic activity</p> Signup and view all the answers

    What is an example of an endogenous factor influencing business cycles?

    <p>Changes in consumer confidence</p> Signup and view all the answers

    What is the purpose of Monetary Policy?

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

    What is the 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 main objective 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 a potential consequence of price controls being set below market equilibrium?

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

    What is a result of decisions based on incomplete or inaccurate information?

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

    What is a consequence of excessive bureaucracy in the public sector?

    <p>Stifling innovation and responsiveness</p> Signup and view all the answers

    What does the Laffer Curve illustrate?

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

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

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

    What is the focus of supply-side policies?

    <p>Increasing productivity and efficiency</p> Signup and view all the answers

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

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

    What is the main objective of forecasting business cycles?

    <p>To mitigate the adverse effects of downturns</p> Signup and view all the answers

    What is the primary role of the public sector?

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

    What is a challenge faced by the public sector in terms of efficiency?

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

    What is the objective of pricing policy in the public sector?

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

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

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

    What is the main objective of fiscal policy?

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

    What is the Laffer Curve related to?

    <p>Fiscal policy and taxation</p> Signup and view all the answers

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

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

    What is the term for the movement of money in the circular flow model?

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

    What is the role of firms 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 measured by the GDP?

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

    What is the function of the foreign exchange market?

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

    What is the result of additional spending in the economy?

    <p>An amplification of economic activity</p> Signup and view all the answers

    What is the role 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 name of the economic model that illustrates the economic activities among various sectors and their interactions?

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

    What is the main objective 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 a potential consequence of subsidies and taxes if not carefully managed?

    <p>Distortion of market operations leading to inefficiencies</p> Signup and view all the answers

    What is a result of decisions based on incomplete or inaccurate information?

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

    What is the Laffer Curve related to?

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

    What is a potential consequence of price controls being set below market equilibrium?

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

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

    <p>To manage resources and provide services not suitable for private sector delivery</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 type of economic indicators predict future economic activity?

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

    What is the primary goal of the public sector?

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

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

    <p>Inefficient use of resources</p> Signup and view all the answers

    What is the primary objective of fiscal policy?

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

    What is the Laffer Curve related to?

    <p>The relationship between taxation and economic growth</p> Signup and view all the answers

    What is the primary purpose of forecasting business cycles?

    <p>To mitigate the adverse effects of downturns</p> Signup and view all the answers

    What is the role of state-owned enterprises (SOEs) in the public sector?

    <p>To operate in the public interest</p> Signup and view all the answers

    What is the main objective of the public sector in terms of pricing policy?

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

    What is the primary purpose of the Medium-Term Expenditure Framework (MTEF) in the public sector?

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

    What is the main difference between calculating GNI and GDP?

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

    What is the primary focus of the Three-Sector Model in the Multiplier Effect?

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

    What is the name of the economic model that measures the total economic output at different price levels?

    <p>National Income Model</p> Signup and view all the answers

    What is the primary cause of business cycles according to the Keynesian Theory?

    <p>Changes in aggregate demand influenced by collective behavior of consumers and businesses</p> Signup and view all the answers

    What is the primary tool used to stabilize economic activity during booms and downturns?

    <p>Monetary Policy</p> Signup and view all the answers

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

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

    What is the main objective of Fiscal Policy?

    <p>To stabilize economic activity during booms and downturns</p> Signup and view all the answers

    What is the 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 primary role of government in the Schumpeterian Theory?

    <p>To promote technological innovation</p> Signup and view all the answers

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

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

    What is the primary function of the markets in the circular flow model?

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

    Which sector of the economy is responsible for generating revenue and expenditures within the economy?

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

    What is the term for the financial transactions for goods and services in the circular flow model?

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

    What is the result of additional spending in the economy, according to the multiplier effect?

    <p>An increase in economic activity</p> Signup and view all the answers

    What is the focus of the circular flow model?

    <p>Illustrating the economic activities among various sectors and their interactions through markets</p> Signup and view all the answers

    Which market facilitates international trade?

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

    What is the name of the economic model that measures the total economic output at market prices?

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

    Which sector of the economy receives income used for consumption, savings, and taxes?

    <p>Households</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

    Which type of economic indicators confirm trends that are already in process?

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

    What is the primary purpose of the public sector?

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

    What is a challenge faced by the public sector in terms of efficiency?

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

    What is the main objective of pricing policy in the public sector?

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

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

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

    What is the primary tool used in Fiscal Policy?

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

    What is the Laffer Curve related to?

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

    What is the main objective of forecasting business cycles?

    <p>To mitigate the adverse effects of downturns</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 role of state-owned enterprises (SOEs) in the public sector?

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

    What is the Laffer Curve used to illustrate?

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

    What is a potential consequence of subsidies and taxes?

    <p>They can distort market operations and lead to inefficiencies</p> Signup and view all the answers

    What is a result of decisions based on incomplete or inaccurate information?

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

    What is a potential consequence of excessive bureaucracy?

    <p>It can stifle innovation and responsiveness</p> Signup and view all the answers

    What is the crucial 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 is Gross National Income (GNI) primarily concerned with?

    <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 focus of the Three and Four-Sector Models?

    <p>Government and foreign transactions, including taxes and imports</p> Signup and view all the answers

    What is the 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 name of the phase in a business cycle where economic activity is at its highest point?

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

    Which theory suggests that business cycles are driven by external shocks and market processes?

    <p>Classical and Neoclassical Theories</p> Signup and view all the answers

    What is the primary tool used in Monetary Policy?

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

    What is the main objective of Fiscal Policy?

    <p>To stabilize economic activity through government spending and taxation</p> Signup and view all the answers

    What is an example of an exogenous factor influencing business cycles?

    <p>Natural disasters</p> Signup and view all the answers

    What is the primary purpose of the Multiplier Effect?

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

    What characterizes the contraction phase of a business cycle?

    <p>Economic indicators decline, and businesses start to slow down production</p> Signup and view all the answers

    What is the main function of the firms sector in the circular flow model?

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

    What is the main function of the households sector in the circular flow model?

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

    What is the term for the financial transactions for goods and services in the circular flow model?

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

    What is the term for the movement of goods and services in the circular flow model?

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

    What market facilitates international trade?

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

    What is the term for the amount of additional spending that amplifies economic activity?

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

    What is the term for the economic model that measures the total economic output at market prices?

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

    What is the primary purpose of the circular flow model?

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

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

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

    What does the Laffer Curve illustrate?

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

    What is a potential consequence of price controls being set below market equilibrium?

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

    What is a result of decisions based on incomplete or inaccurate information?

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

    What is a potential consequence of excessive bureaucracy?

    <p>Stifling innovation and responsiveness</p> Signup and view all the answers

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

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

    What is the main purpose of Gross National Income (GNI)?

    <p>To account for all income earned by a country's residents and adjust for income received from abroad</p> Signup and view all the answers

    What is the focus of the Three-Sector Model in the Multiplier Effect?

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

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

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

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

    <p>Peak</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?

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

    What is the main objective of Fiscal Policy?

    <p>To stabilize economic activity through government spending and taxation</p> Signup and view all the answers

    What is the term for the phase of a business cycle marked by a decrease in economic activity?

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

    Which theory focuses on the role of technological innovation in causing business cycles?

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

    What is an example of an exogenous factor influencing business cycles?

    <p>Natural disasters</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 economic indicators predict future economic activity by moving ahead of the business cycle?

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

    What is the primary function of the public sector?

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

    What is the main objective of the Medium-Term Expenditure Framework (MTEF) in the public sector?

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

    What is the primary tool used in fiscal policy?

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

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

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

    What is the primary objective of forecasting business cycles?

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

    What is the role of state-owned enterprises (SOEs) in the public sector?

    <p>To operate in the public interest</p> Signup and view all the answers

    What is the primary purpose of the Laffer Curve?

    <p>To illustrate the relationship between tax rates and government revenue</p> Signup and view all the answers

    What is the main objective of pricing policy in the public sector?

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

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