2.1 Answer the following questions - NSC Economics - Question 2 - 2024 - Paper 1
Question 2
2.1 Answer the following questions.
2.1.1 Name the TWO factors that determine the size of the multiplier in a two-sector model.
2.1.2 How can the South African Res... show full transcript
Worked Solution & Example Answer:2.1 Answer the following questions - NSC Economics - Question 2 - 2024 - Paper 1
Step 1
Name the TWO factors that determine the size of the multiplier in a two-sector model.
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Answer
Marginal propensity to consume (MPC) - This indicates the fraction of additional income that households spend on consumption.
Marginal propensity to save (MPS) - This indicates the fraction of additional income that households save.
Step 2
How can the South African Reserve Bank (SARB) use open-market transactions to increase money supply?
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Answer
The SARB can buy government securities or bonds from banks. This purchase injects more money into the banking system, thereby increasing the money supply available for lending.
Step 3
Identify the category of consumer goods that recorded growth in the third quarter of 2022 (Q3, 2022).
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Answer
Durable goods.
Step 4
Give ONE example of non-durable goods.
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Answer
Food.
Step 5
Briefly describe the term consumption.
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Answer
Consumption refers to the use of final goods and services to satisfy human needs and wants. It involves the act of utilizing resources to satisfy current needs.
Step 6
Why are savings regarded as leakages in the circular flow model?
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Answer
Savings are considered leakages because they reduce the amount of money in circulation. When households save, the money is not spent on goods and services, leading to a decrease in overall economic activity.
Step 7
How can an increase in interest rates influence households in the circular flow?
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Answer
Households will borrow less money from financial institutions due to higher interest rates.
Consumers may buy fewer goods and services as credit becomes more expensive.
Households might receive higher returns on their savings that have flexible interest rates, encouraging saving rather than spending.
