ECONOMICS
GRADE 12
PAPER 1 
NSC PAST PAPERS AND MEMOS
SEPTEMBER 2017

MEMORANDUM

SECTION A (COMPULSORY) 
QUESTION 1  
1.1 MULTIPLE-CHOICE QUESTIONS 

1.1.1 C leakages ✔✔
1.1.2 B reducing production costs ✔✔
1.1.3 A provide merit goods ✔✔
1.1.4 D an embargo ✔✔
1.1.5 A the prevention of dumping ✔✔
1.1.6 D wealth ✔
1.1.7 C repo rate ✔✔
1.1.8 B interdependent ✔✔ (8 x 2) (16)

1.2 MATCHING ITEMS  

1.2.1 G Value of all final goods and services produced by the  permanent residents of the country for a specific year ✔
1.2.2 A Financial grants to support the production of exports  goods✔
1.2.3 D Money received without any productive service  rendered ✔
1.2.4 F Business owned by the state and run by public  authorities ✔
1.2.5 H An inter-government organisation that aim to promote  socio-economic cooperation and integration ✔
1.2.6 I The total amount of money in circulation in the  economy ✔
1.2.7 B Focuses on improving the competitiveness of the  manufacturing industries ✔
1.2.8 E Are used to analyse the changes in a series of data over  a period of time ✔  (8 x 1) (8)

1.3 IDENTIFY THE CONCEPT  

1.3.1 Consumption spending✔
1.3.2 Exogenous / Monetarist ✔
1.3.3 Exchange rate ✔
1.3.4 Corridor ✔
1.3.5 Devaluation ✔
1.3.6 RDP ✔ (6 x 1) (6)

TOTAL SECTION A: 30

SECTION B 
Answer TWO of the three questions from this section in the ANSWER BOOK.
QUESTION 2: MACROECONOMICS 
2.1 2.1.1 Name the TWO periods in a business cycle.  

• Contraction/downswing ✔
• Expansion/upswing ✔ (Any 2 x 1) (2) 

2.1.2 What is the impact of the multiplier, if the equilibrium  income increases by more than the increase in initial  expenditure? 

• The total income and expenditure increase the multiplier will  also increase. ✔✔(1 x 2) (2)

2.2 DATA RESPONSE 
2.2.1 Which source was used to compile the data in the above  table? 

• Quarterly bulletin, March 2017 ✔ (1)   

2.2.2 Which year is currently used as the base year by the  Reserve Bank? 

• 2015 ✔ (1) 

2.2.3 Briefly explain the difference between nominal GDP and  real GDP. 

• Nominal GDP 
  • Referred to as GDP at current price. ✔✔
  • Also known as market or money value. ✔✔
  • Inflation has not yet been taken into account. ✔✔
  • These prices do not reflect whether economic activity has  increased. ✔✔
• Real GDP
  • Referred to GDP at constant prices.✔✔
  • Real prices are adjusted for price changes.✔✔
  • Real national product is the national product expressed in  prices which applied in a certain base year. ✔✔  
     (Accept any other correct relevant responses.) (Any 2 x 2) (4)

2.2.4 Calculate the deflator for 2016. Show all your calculations. 

• Deflator: Nominal GDP ÷ Real GDP x 100
• Deflator for 2016 = 4 336 988 ✔ ÷ 3 009 860 ✔ x 100 ✔
  = 144 ✔ (4)

2.3 DATA RESPONSE 

2.3.1 At which point will the government maximise revenue? (1) 

• A ✔

2.3.2 What curve is depicted above? 

• Laffer ✔ (1)

2.3.3 What effect will point C have on government revenue?

• Tax revenue will increases ✔✔ (2)

2.3.4 What are the dangers of high personal income tax rates?  

• Tax avoidance ✔✔
• Tax evasion ✔✔
• People will be discouraged to work ✔✔ (Any 1 x 2) (2) 

2.3.5 How can the South African government avoid public – sector failure? 

• Improving the quality of management skills in the public  sector ✔✔
• Reducing corruption, including nepotism when hiring public  sector employees ✔✔
• Reducing bureaucracy by investing in modern systems such as a IT system✔✔
• Increasing accountability ✔✔
   (Accept any other correct relevant response.) (Any 2 x 2) (4) 

2.4 Briefly explain how a deficit on a balance of payment will  automatically be corrected under a free floating exchange rate  system. 

• There is an excess demand for foreign currency on the foreign  exchange market. ✔✔
• Exports will become cheaper and will increase.✔✔
• Imports will become more expensive and decrease. ✔✔
• The deficit will decrease. ✔✔
  (Accept any other correct relevant response.) (Any 4 x 2) (8)

2.5 How does the entry of domestic businesses into foreign markets  benefit South Africa? 
South Africa will benefit from entering foreign markets by: 

• Local businesses becoming more competitive. ✔✔
• Improving quality and decreasing prices. ✔✔
• Earning foreign exchange. ✔✔
• Enabling us to import products from other countries that we are not  able to produce for ourselves. ✔✔
  (Accept any other correct relevant response.) Max. 8 (8)

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QUESTION 3: ECONOMIC PURSUITS 
3.1 3.1.1 Name TWO instruments that the SARB can use to influence  the economy.  

• Interest rates ✔
• Open market transactions ✔
• Moral persuasion ✔
• Cash reserve requirements ✔
• Exchange rate policy ✔ (Any 2 x 1) (2) 

3.1.2 What effects will a huge increase in electricity costs have on  smaller businesses in South Africa? 

• Businesses will run at a loss / closing down / more will be forced  into bankruptcy. ✔✔
  (Accept any other correct relevant response.) (Any 1 x 2) (2)

3.2 DATA RESPONSE 
3.2.1 What does the abbreviation IPAP stand for?  

• Industrial Policy Action Plan ✔ (1)

3.2.2 Name ONE focus area of this policy for 2017/2018. 

• Education and skills ✔
• Infrastructure ✔ and regulatory environment ✔
• The labour relations environment ✔
• Inclusive growth ✔ (Any 1 x 1) (1)

3.2.3 Explain ONE reason for industrial development  

• Job creation ✔✔
• Maintain macroeconomic stability. ✔✔
• Develop and maintain appropriate incentives to attract  investors. ✔✔
• Diversification of the economy ✔✔
• Contribute to the industrial development of the African  continent. ✔✔
  (Accept any other correct relevant response) (Any 1 x 2) (2)

3.2.4 How successful is the industrial development policies in  South Africa?  

• Promotes incentives for investors to establish  industries. ✔✔
• Promote industrialisation by manufacturing developments  policies which offer incentives ✔✔ such as loans, export  promotion, subsidies and establishment allowances.
• Promote globalisation by having a liberal policy towards  foreign investment. ✔✔
• Improve infrastructure of transport, power and modern  communication including access to the internet. ✔✔
• Innovation and technology. ✔✔
   (Accept any other correct relevant response.) (Any 1 x 2) (2) 

3.2.5 What impact might IPAP have on industrial development  in the private sector of South Africa? 

• Rapid increase in the price of electricity and petrol which  increase business costs. ✔✔
• Labour unrest which has led to reduced productivity ✔✔
• Structural unemployment as new skills are needed and  others become outdated. ✔✔
• The global financial crisis and the continuing instability  resulting in low foreign demand for South African  exports. ✔✔
  (Accept any other correct relevant response) (Any 2 x 2) (4)

3.3 DATA RESPONSE 
3.3.1 Name the method used to measure economic  development of a country. 

• Human development Index (HDI) ✔ (1) 

3.3.2 Which country has the highest HDI in the table above?   

• Norway ✔(0,955) (1)  

3.3.3 Explain the term human development.  

• Is the improvement of the opportunities facing a country’s  people so that they can lead long, full educated and healthy  lives, accessing resources and participating in their  communities. ✔✔
  (Accept any other correct relevant response.) (2)

3.3.4 Why is South Africa’s economic development  underperforming?  

• Decline in life expectancy due to HIV and Aids  epidemic ✔✔
• Underperforming education system ✔✔
• Decline in employment rate ✔✔
  (Accept any other correct relevant response) (Any 1 x 2) (2) 

3.3.5 How can the South African government help to improve  economic development? 
Government plan to maintain economic development include:  

• Job creation ✔✔
• Subsidies to no-fee schools ✔✔
• Access to basic services such as a provision of solar  water geysers ✔✔
• Upgrading of informal settlements and water  structures ✔✔
• Spending on health and social assistance ✔✔
  (Accept any other correct relevant response.) (Any 2 x 2) (4) 

3.4 Compare the standard of living between the North-South countries. 

(8)

3.5 How successful is Black Economic Empowerment in the South  African economy? 

• Number of black people who own, manage and control  businesses in the country increases significantly. ✔✔
• Income and inequalities decreases substantially.✔✔
• Businesses spend money on projects that empower workers and  other member of disadvantaged communities. ✔✔
• It brings about transformation of the ownership, management and  employment equity aspect of businesses in S.A. ✔✔
• Ensures employees are not placed in position within a company  because of their race. ✔✔
• They are promoted and encouraged to move up the ranks if they  meet the minimum criteria. ✔✔
  (Accept any other correct relevant response.) Max. 8 (8)

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QUESTION 4 
4.1 4.1.1 List TWO problems of public sector provisioning. 

• Accountability ✔
• Efficiency ✔
• Assessing needs ✔
• Parastatals ✔
• Pricing policy ✔
• Privatisation/ Nationalisation ✔ (Any 2 x 1) (2) 

4.1.2 How does economic growth relate to economic  development? 

• Economic growth is concerned with goods and services ✔ and  economic development is concerned with people and human  development. ✔
  (Accept any other correct relevant response.) (1 x 2) (2)

4.2 DATA RESPONSE 
4.2.1 What international trade policy is reflected in the graph  above? 

• Free trade ✔ (1) 

4.2.2 What happens to the supply when the country engages in  free trade? 

• Increases ✔ (1)

4.2.3 Describe the term free trade. 

• Is when producers and consumers are free to buy goods and  services from anywhere in the world, without the interference of  government.✔✔
  (Accept any other correct relevant response.) (2) 

4.2.4 Explain why trade protocols are necessary for the economy. 

• They have a combined effect of increasing the amount of  trade between countries. ✔✔
• They restrict trade by laying down rules for the way in which  it occurs. ✔✔
  (Accept any other correct relevant response.) (Any 1 x 2) (2)

4.2.5 How does the society experience an increase in welfare  through free trade? 

• Need to examine the costs of trade barriers.✔✔
• Tariffs and quotas reduce the quantity and variety of gods  available to consumers. ✔✔
• The foreign which are imported are more expensive due the  excise taxes and customs duties. ✔✔
• Free trade increases the range of choice that is available to  consumers and reduces the general price level. ✔✔
  (Any 2 x 2) (4) 

4.3 DATA RESPONSE 
4.3.1 What economic problem is illustrated in the picture above?

• Inflation ✔ (1) 

4.3.2 How might inflation affect the consumers buying power?

• Decreasing/decline ✔ (1)

4.3.3 Briefly describe the term inflation. 

• Inflation can be described as an increase in the general level of  prices in an economy, that is sustained over a period of  time. ✔✔ (2)

4.3.4 How would an investor be influenced by inflation? 

• Profits / return on investment might decline. ✔✔
• Assets with a fixed nominal value have a fixed return and ✔✔
• Lower purchasing power as prices increases ✔✔
  (Accept any other correct relevant response.) (Any 1 x 2) (2) 

4.3.5 Why is important for the South African government to  monitor the performance of the economy? 

• Is to make decisions and form policies ✔✔
• Show whether targets have been met ✔✔
• Compare conditions between areas and in different  periods. ✔✔
  (Accept any other correct relevant response.) (Any 2 x 2) (4)

4.4 Briefly explain the critical infrastructure and skill support  programme as the incentives used by the South African  government to improve industrial development. 

• Critical infrastructure Programme 
  • Is a cost-sharing grant for projects designed to improve critical  infrastructure in South Africa.✔✔
  • Covers a qualifying development cost between 10% and 30%  towards the total development costs. ✔✔
  • Becomes available on completion of the project. ✔✔
  • It extends to both the public sector and private sector ✔✔
  • The programme deems infrastructure to be critical if investment  had not taken place or would not work optimally without the  infrastructure.✔✔
  • Government supplies financial incentives to large enterprises  requiring critical infrastructure.✔✔ such as roads, electricity and  water purification. ✔✔ (Any 2 x 2)
• Skill support programme
  • Is a cash incentive scheme to encourage greater investment in  skills training in general. ✔✔
  • To introduce new, advance skills to the immediate benefit of the  South African labour force. ✔✔
  • A maximum of 50% of a company’s trading costs are covered. ✔✔  (Any 2 x 2) (8) 

4.5 How can climate changes influence international trade?  
A change in climatic conditions might influence international trade by:

• Leading to different products being produced and exported to other  countries than before. ✔✔
• Leading to imports of different products produced locally and  exported before. ✔✔
• Causing other types of industries to arise due a change in  production pattern and types of products delivered. ✔✔
• Causing a serious need for research in unknown fields of  production to ensure international trade. ✔✔
  (Accept any other correct relevant response.) (8)

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TOTAL SECTION B: 80

SECTION C 
Answer ONE question from this section in the ANSWER BOOK. 

QUESTION 5: MACROECONOMICS 40 MARK − 40 MINUTES 
The business cycle plays a key role in enabling economists to make educated  guesses about the future growth of the economy. 

• Discuss indicators as features underpinning forecasting business cycles.   (26 marks)
• Why is it important that the Reserve Bank maintains price stability in the  South African economy? (10 marks)

INTRODUCTION 
Economic indicators are statistics used to measure some aspect of the  economy. ✔✔
(Accept any other correct relevant introduction.) Max. 2

BODY: MAIN PART 
Economic indicators: 
⮚ Leading economic indicators ✔

• Changes before the economy changes. ✔✔
• They peak before the peak in aggregate economic activity is reached and they  reach a trough before aggregate economic activity reaches a trough. ✔✔
• They give advance warning of changes in aggregate economic activity. ✔✔
• They give consumers, business leaders and policy makers a glimpse into  where the economy might be headed. ✔✔
• If leading indicators rise today, then the rest of the economy is likely to rise in  the coming year. ✔✔
• Examples of leading economic indicators: Job advertising space, average  manufacturing hours worked, building plans approval.✔ (Max. 8)  

⮚ Lagging economic indicators ✔

• Do not change direction until after the business cycle has changed its  direction.✔✔
• They reach a peak/trough months after the business cycle has reached a  peak/trough. ✔✔
• Follow coincident indicators after a further time elapse ✔✔
• They therefore may serve to confirm the behaviour of the coincident  indicators. ✔✔
• If they do not confirm an upswing or a downswing, this signals that the  upswing or downswing is weak and will mostly end at an early stage. ✔✔
• Economists use them to estimate whether individual indicators gave false  signals. ✔✔
• Examples of lagging economic indicators: Unemployment rate, Number of  commercial vehicles sold, Real machinery and equipment sold, Number of  hours worked in construction. ✔ (Max. 8) 

⮚ Coincident economic indicator ✔

• Move together with the aggregate economic activity. ✔✔
• They indicate actual state of the economy ✔✔
• Coincidence indicator change at the same time as the economy. ✔✔
• They reach a peak / trough at the same time as the business cycle. ✔✔
• Economists use them to compile the business cycle. ✔✔
• They follow leading indicator after some time has elapsed but they tend to  confirm the turning points of the leading indicator.✔✔
• Examples of coincident indicator: Industrial production index, Volume of  imports, Value of wholesale, retail and new vehicle sales ✔(Max. 8)

⮚ Composite economic indicator ✔

• A summary of various indicators of the same type into a single value.✔✔
• The three composite indicators are often used to calculate a single composite  indicator, ✔✔ that is single number to benchmark a country’s economic  performance. ✔✔ (Max. 4)
  (Accept any other correct relevant response.) 
  (A maximum of 8 marks may be allocated for mere listing of facts/examples) (Max. 26) 

ADDITIONAL PART 
It is important that the Reserve Bank maintains price stability in the South African  economy by: 

• Ensuring that markets can function optimally and the government can promote  economic growth and development more effectively. ✔✔
• Avoiding frequent fluctuations in the level of consumer and producer goods ✔✔ ∙ Making it easy for consumers and producers to plan and budget ✔✔ so that  consumers might be aware of costs of goods and services. ✔✔
• Boosting investors’ confidence and foreign investors who would be likely to  invest in local businesses if they were sure what production costs. ✔✔ /  revenue was going to be from one month to the next. ✔✔
  (Accept any other correct relevant response.) (Max. 10)

Conclusion 
It is difficult to do accurate economic forecasting because there are many factors  that influence the dynamics of the economy. ✔✔  
(Accept any other correct relevant conclusion.) (Max. 2)

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QUESTION 6: ECONOMIC PURSUITS 
Many people are interested in the performance of an economy, such as  ordinary citizens, businesses, investors and the government. 

• Discuss the following social indicators:
  • Nutrition and health (16 marks)
  • Demographics (10 marks ) (26 marks) 
• How can the economic development be improved through the use of  these social indicators? (10 marks) 

INTRODUCTION 
Social indicators are statistics that show the level and progress of human  development in a country. ✔✔
(Accept any other correct relevant introduction.) Max. 2

BODY: MAIN PART 
⮚ Nutrition and health 

• The health of a population and of the labour force of a country is very  important for the economic growth and development. ✔✔
• Healthy citizens are more productive, earn more, consume more and  work longer. ✔✔

Infant mortality rate. ✔

• It measures the number of infants who died before reaching one year of  age per thousand live births in a given year. ✔✔
• The infant mortality rate in South Africa is still high compared to other  countries. ✔✔
• Infant mortality is often connected to a low birth weight, which can be  caused by pregnant mother’s malnutrition, stress or by her smoking,  alcohol or drug abuse. ✔✔

⮚ Under five mortality ✔

• Is often connected to malnutrition, diarrhoea, measles, malaria and  respiratory infections. ✔✔
• he under-five mortality rate is normally given as the number of deaths  per 1 000 live births. ✔✔
• The number of children that will die before the age of five years. ✔✔

⮚ Access to health service ✔

• South Africa compares well in terms of indicators measuring access to  primary health services ✔✔ and ∙ The amount of health expenditure as a percentage of GDP. ✔✔

⮚ Access to clean drinking water ✔

• Means that people have safe drinking water out of taps in their  houses. ✔✔
• The percentage of a population that has a reasonable access to safe  drinking water ✔✔

⮚ Access to sanitation facilities ✔

•  Means that people have access to toilets or improved sanitation  facilities that keep them away from other humans, animals and  insects.✔✔
• The percentage of a population with at least adequate sanitation  facilities ✔✔

⮚ Nutrition 

• Is a process of a person‘s body getting the food necessary for health  and growth. ✔✔

⮚ Child malnutrition ✔

• Malnutrition is expressed in two ways: weight of age and height of that  age. ✔✔
• A person’s body weight is compared to an ideal for a person of that  age, sex and height. ✔✔
• Physical signs also need to be taken into account as people of normal  weight, or people who are overweight, can still be suffering from  deficiencies in particular nutrients.✔✔

⮚ Overweight children ✔

• There is an association between obesity of children and other  diseases. ✔✔
• A person is considered obese if his / her BMI is more than 30 kg.✔✔ (Max. 16) 

⮚ Demographics 

• Is the study of population relating to elements such as its total size,  population changes over time, age and gender distribution and  geographical distribution. ✔✔

⮚ The population growth ✔

• South Africa has a relatively high population growth compared with  that of developed countries.✔✔
• The population growth rate is an important indicator to the government  in terms of the number of social services that are needed. ✔✔

⮚ Life expectancy ✔

• Expresses the number of years a newborn infant may live ✔✔ if the  prevailing patterns of mortality remained the same throughout his or  her life. ✔✔
• Mortality rates in South African have been affected by the prevalence  of HIV, which has been increasing significantly. ✔✔
• It is important for government to know what the average life  expectancy is, ✔✔ because working humans require a range of social  services. ✔✔
• Assurance companies in particular are interested in life  expectancy. ✔✔ (Max. 10) (Accept any other correct relevant response)
  (A maximum of 8 marks may be allocated for mere listing of  facts/examples) (Max. 26)

ADDITIONAL PART 
Economic development can be improved by: 

• Spending more on the improvement of the quality of life of the general  population and reduce social tension. ✔✔
• Investing more in the future quality labour force for the progression of the  economy. ✔✔
• Improving health and educational facilities.✔✔
• Focusing on the areas that needs development in communities and spend  on them. ✔✔
• Improving social cohesion and interdependence. ✔✔
• Assisting the government to look into other areas of need through the  budget. ✔✔
  (Accept any other correct relevant response.) (Max. 10)

CONCLUSION 
Social indicators are directing government expenditure on issues that will  guarantee social development and a quality lifestyle. ✔✔
(Accept any other correct, relevant conclusion) (Max. 2)

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TOTAL SECTION C: 40 
GRAND TOTAL 150