June P1 Medium
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Questions and Answers

In an open economy, which sector involves trade activities, including exports and imports?

  • Firms
  • Foreign Sector (correct)
  • Government
  • Households

    • What type of flow represents the movement of goods and services in the circular flow model?

  • Labor Flows
  • Money Flows
  • Real Flows (correct)
  • Financial Flows

    • What is the primary function of the Financial Market in the circular flow model?

  • Manages the flow of money (correct)
  • Facilitates international trade
  • Manages the flow of labor
  • Provides public services

    • What metric measures the total economic output at market prices?

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

    Which market deals in resources like labor and capital?

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

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

    <p>Collects taxes and injects spending</p> Signup and view all the answers

    Which sector provides labor and resources in the circular flow model?

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

    What is the name of the market that handles the trading of currencies necessary for international trade?

    <p>Foreign Exchange Market</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 objective of directing government spending towards public goods and services?

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

    The Laffer Curve suggests that there is an optimal tax rate that:

    <p>Maximizes tax revenue without discouraging economic activity</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 inclusion of government and foreign transactions</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 a potential consequence of administered prices set below market equilibrium?

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

    What is a consequence of bureaucracy in the public sector?

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

    What is the characteristic of the expansion phase of a business cycle?

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

    What is the highest point of a business cycle?

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

    What is the primary function 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 type of factor influences business cycles, according to the Keynesian Theory?

    <p>Endogenous factors, such as changes in consumer confidence</p> Signup and view all the answers

    What is a challenge faced by the public sector in South Africa?

    <p>Proper needs assessment and accountability</p> Signup and view all the answers

    What is the main goal of monetary policy, according to the content?

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

    What is the purpose of fiscal policy during an economic downturn?

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

    Which theory explains business cycles as driven by external shocks and normal market processes?

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

    What is the focus of the Schumpeterian Theory in explaining business cycles?

    <p>Technological innovation</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 is the main focus of demand-side policies?

    <p>Regulating aggregate demand through fiscal stimuli or monetary adjustments</p> Signup and view all the answers

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

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

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

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

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

    <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 the primary function of taxation as a fiscal policy instrument?

    <p>To adjust tax rates to manage economic activity</p> Signup and view all the answers

    What is the primary goal of the public sector in terms of economic growth?

    <p>To promote sustainable growth through various sectoral supports</p> Signup and view all the answers

    What is the primary challenge faced by state-owned enterprises in the public sector?

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

    What is the primary goal of the public sector in terms of income distribution?

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

    What is the circular flow model used to illustrate?

    <p>The interactions among various sectors of an open economy</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 primary purpose of directing government spending towards public goods and services?

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

    What is the 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

    Which metric measures the total economic output at market prices?

    <p>GDP</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 type of flow represents the financial transactions for goods and services?

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

    What is a consequence of administered prices set below market equilibrium?

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

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

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

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

    <p>To provide labor and resources, receiving income</p> Signup and view all the answers

    What is a challenge faced by the public sector in South Africa?

    <p>All of the above</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 multiplier effect related to in the circular flow model?

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

    What is a consequence of bureaucracy in the public sector?

    <p>Stifling innovation and responsiveness</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 is the main focus of supply-side policies?

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

    What type of economic indicator predicts future economic activity?

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

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

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

    What is a major 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 primary goal 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 function of taxation as a fiscal policy instrument?

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

    What is the primary goal of the public sector in terms of economic growth?

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

    What is the primary challenge faced by state-owned enterprises in the public sector?

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

    What is the focus of supply-side policies in achieving economic stability?

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

    What is the primary objective of understanding business cycles in economic policy?

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

    What is the difference between the prices categorized in the production, income, and expenditure approaches?

    <p>The prices are categorized as Basic Prices, Factor Cost, and Market Prices</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 role of government in the Keynesian Theory of business cycles?

    <p>To smooth out the cycles through fiscal and monetary policies</p> Signup and view all the answers

    What is the characteristic of 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 primary objective of monetary policy?

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

    What is the focus of the Schumpeterian Theory in explaining business cycles?

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

    What is the primary function of fiscal policy during an economic downturn?

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

    What is the primary objective of analyzing business cycles?

    <p>To develop effective economic policies and strategies</p> Signup and view all the answers

    What is the characteristic of the peak point of a business cycle?

    <p>Economic activity reaches its highest point</p> Signup and view all the answers

    What is the main purpose of the Goods Market in the circular flow model?

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

    Which sector injects spending into the economy through public services and infrastructure?

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

    What is the main purpose of the circular flow model?

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

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

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

    Which market is responsible for the flow of money, including savings and investments?

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

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

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

    What is the main difference between Real Flows and Money Flows in the circular flow model?

    <p>Real Flows involve goods and services, while Money Flows involve financial transactions</p> Signup and view all the answers

    What is the primary function of monetary policy?

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

    What is the metric that measures the total economic output at market prices?

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

    Which theory emphasizes the role of government in smoothing out business cycles?

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

    What is the highest point of a business cycle?

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

    What is the purpose of fiscal policy during an economic downturn?

    <p>To stimulate demand</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 function of the government sector in the circular flow model?

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

    What is the focus of the Schumpeterian Theory in explaining business cycles?

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

    What is the characteristic of the expansion phase of a business cycle?

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

    What type of factors influence business cycles, according to the Keynesian Theory?

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

    What is the main goal of monetary policy?

    <p>To stabilize economic activity</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

    What is the focus of supply-side policies?

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

    What is the purpose of leading indicators in forecasting business cycles?

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

    What is the primary challenge faced by state-owned enterprises in the public sector?

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

    What is the main objective of the public sector in terms of income distribution?

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

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

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

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

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

    What is the primary goal of the public sector in terms of economic growth?

    <p>To promote sustainable growth through sectoral supports</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 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 in the public sector?

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

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

    <p>Decisions are based on incomplete or inaccurate information</p> Signup and view all the answers

    What is a challenge faced by the public sector in South Africa?

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

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

    <p>The number of sectors considered</p> Signup and view all the answers

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

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

    According to the Schumpeterian Theory, what drives business cycles?

    <p>Technological innovations</p> Signup and view all the answers

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

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

    What is the primary goal of fiscal policy during an economic downturn?

    <p>Stimulating demand through government spending</p> Signup and view all the answers

    What type of prices are used in the production approach to calculating GNI?

    <p>Basic Prices</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 type of factor influences business cycles, according to the Keynesian Theory?

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

    What is the highest point of a business cycle?

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

    What is the primary objective of government policy in addressing business cycles?

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

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

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

    What is the Laffer Curve primarily used to illustrate?

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

    What is a potential consequence of administered prices set below market equilibrium?

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

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

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

    What is the primary function 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 a consequence of moral hazard in the public sector?

    <p>Policies that do not align costs with benefits</p> Signup and view all the answers

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

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

    Which market facilitates the flow of money, including savings and investments, via institutions like banks?

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

    What is the primary objective of the circular flow model?

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

    What is the multiplier effect related to in the circular flow model?

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

    What type of flow represents the movement of goods and services in the circular flow model?

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

    Which sector collects taxes and injects spending into the economy through public services and infrastructure?

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

    What is the primary function of the foreign sector in 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 metric measures the total economic output at market prices?

    <p>GDP</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 is the main focus of demand-side policies?

    <p>Regulating aggregate demand through fiscal stimuli or monetary adjustments</p> Signup and view all the answers

    What is a characteristic of leading economic indicators?

    <p>They predict future economic activity by moving ahead of the business cycle</p> Signup and view all the answers

    What is the primary function of provincial governments in the public sector?

    <p>Handling regional issues, funded by both national budget and their own tax revenues</p> Signup and view all the answers

    What is a challenge faced by state-owned enterprises in the public sector?

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

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

    <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 the primary function of taxation as a fiscal policy instrument?

    <p>To adjust tax rates to manage economic activity</p> Signup and view all the answers

    What is the primary goal of the public sector in terms of economic growth?

    <p>To promote sustainable growth through various sectoral supports</p> Signup and view all the answers

    What is a major 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 primary goal of the public sector in terms of income distribution?

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

    What is the primary 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 illustrated by the Laffer Curve?

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

    What is a potential consequence of information failure in the public sector?

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

    What is a challenge faced by the public sector in South Africa?

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

    What is a consequence of subsidies and taxes if not carefully managed?

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

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

    <p>Managing resources and providing 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 and achieve stable growth</p> Signup and view all the answers

    What type of economic indicator would predict future economic activity?

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

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

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

    What is the primary objective of the public sector in terms of economic growth?

    <p>To promote sustainable growth through various sectoral supports</p> Signup and view all the answers

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

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

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

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

    What is the primary challenge faced by state-owned enterprises (SOEs) in the public sector?

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

    What is the primary goal of fiscal policy during an economic downturn?

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

    What is the primary objective of the public sector in terms of income distribution?

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

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

    <p>To involve trade activities, including exports and imports</p> Signup and view all the answers

    What is the main purpose 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 circular flow model used to illustrate in an open economy?

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

    What is the multiplier effect related to in the circular flow model?

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

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

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

    What type of flows are involved in the circular flow model?

    <p>Real and money flows</p> Signup and view all the answers

    What is the primary function 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 the primary objective of national account aggregates and conversions?

    <p>To measure the economic performance through different metrics</p> Signup and view all the answers

    What is the primary function of the government sector in terms of fiscal policy?

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

    What is the characteristic of the contraction phase of a business cycle?

    <p>Businesses start to slow down production and reduce workforce</p> Signup and view all the answers

    What is the focus of the Keynesian Theory in explaining business cycles?

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

    What is the primary function of monetary policy?

    <p>To utilize tools such as interest rates and control of money supply to stabilize economic activity</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 objective of directing government spending towards public goods and services?

    <p>To correct market failures and provide goods and services that are underprovided by the market</p> Signup and view all the answers

    What is the primary function of the Multiplier Effect?

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

    What is the characteristic of the peak point of a business cycle?

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

    What is the primary function of the Schumpeterian Theory in explaining business cycles?

    <p>To emphasize the role of technological innovation in causing business cycles</p> Signup and view all the answers

    What is the primary function of the Two-Sector Model in the multiplier effect?

    <p>To focus on the interactions between households and firms, with spending adjustments influenced by the marginal propensity to consume and save</p> Signup and view all the answers

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