Photo AI
Answer the following questions - NSC Economics - Question 2 - 2023 - Paper 1
Question 2
Answer the following questions. 2.1.1 Name the TWO turning points of a business cycle. 2.1.2 Why would a decrease in South African exports lead to the depreciation... show full transcript
Worked Solution & Example Answer:Answer the following questions - NSC Economics - Question 2 - 2023 - Paper 1
Step 1
Name the TWO turning points of a business cycle.
Answer
The two turning points of a business cycle are:
-
Peak: This is the point at which economic growth hits its highest point before a downturn begins.
-
Trough: This is the lowest point in the business cycle, where economic activity is at its weakest before recovery starts.
Step 2
Why would a decrease in South African exports lead to the depreciation of the rand?
Answer
A decrease in South African exports can lead to a reduction in the supply of foreign currency entering the country. As demand for the rand falls relative to other currencies, the value of the rand depreciates. This scenario occurs because foreign buyers have less incentive to purchase South African goods, which diminishes the demand for the rand used in those transactions.
Step 3
Step 4
Step 5
Briefly describe the term progressive tax.
Answer
A progressive tax is a tax system where the tax rate increases as the taxable income increases. This means that higher-income earners pay a larger percentage of their income in taxes compared to lower-income earners, thus aiming to reduce income inequality.
Step 6
Explain the effect of a regressive tax system on income distribution.
Answer
A regressive tax system places a higher burden on lower-income individuals compared to those with higher incomes. In such a system, lower-income earners pay a larger proportion of their income in taxes than higher-income earners, exacerbating income inequality and resulting in a wider gap between wealth classes.
Step 7
Why will tax revenue decrease if the government imposes very high tax rates?
Answer
If the government imposes very high tax rates, several factors can lead to a decrease in tax revenue:
-
Tax Evasion: Individuals and businesses may seek to evade taxes, leading to lower revenue.
-
Decreased Economic Activity: Higher taxes can discourage investment and spending, shrinking the tax base and thus reducing overall tax revenue.