UNIVERSITY OF THE WESTERN CAPE, ECONOMICS DEPARTMENT
ECO152: MACROECONOMICS
2024
WEEK 9 (15 April – 19 April) Tutorial 3 (Chapter 5 and 6)
Surname, Ini: ……………………………………… Student no.:………………………………
Marks: …………/20
MULTIPLE CHOICE QUESTIONS [5 marks]
Question 1
Price stability is one of the key macroeconomic objectives. Which of the following is the
correct indicator used to measure price stability?
A. CPI (Consumer Price Indicator)
B. CPI (Current Price Index)
C. CPI (Consumer Price Index)
D. PPI (Producer Price Index)
E. PPI (Price Product Index)
Question 2
Which of the following is NOT a part of the financial account in the balance of payments for
a country?
A. Imports and exports
B. Direct investment
C. Portfolio investment
D. Other investment
E. Balance on financial account
Question 3
Below is a list of five countries and their Gini coefficients for 2022. The data was obtained
from the World Bank. Which of the countries has the most equitable distribution of income?
A. Bangladesh, Gini-coefficient = 31,8
B. Bhutan, Gini-coefficient = 28,5
C. Costa Rica, Gini-coefficient = 47,2
D. Ecuador, Gini-coefficient = 45,5
E. Indonesia, Gini-coefficient = 37,9
Question 4
Which of the following is NOT an assumption in the Simple Keynesian model?
A. There is a government.
B. There is no foreign sector.
C. Prices and wages are given.
D. The money stock and interest rates are fixed.
E. Spending (demand) is the driving force that determines the level of economic activity.
Question 5
If the marginal propensity to consume is equal to 0.7 in an economy with a simple Keynesian
model, what is the multiplier equal to?
A. 1.43
B. 3.33
C. 1.67
D. 3.67
E. 0.14
STRUCTURED QUESTIONS [15 marks]
Question 1
Use the table and scenario below to illustrate the difference between total value of sales in an
economy and the value added or total production in the economy. Write ONE short sentence
to explain the reason why total sales an accurate description of production in the economy is
not. [5]
A farmer produces 1 000 bags of wheat which he sells to the miller at R10 per bag, yielding a
total of R10 000. The miller processes the wheat to flour which he then sells to the baker for
R12 500. The baker uses the flour to bake bread and sells the bread to a shop for R18 000.
The shop sells the bread to the final consumers for R21 000.
Participant Value of sales Value added
Farmer R10 000
Miller
Baker
Shopkeeper
Total
Question 2
The figure below shows the breakdown of population into labour market status in South Africa
for the fourth quarter of 2023. Use your knowledge from Macroeconomics to verify the narrow
unemployment rate and to calculate the broad unemployment rate for the last quarter of 2023.
Be sure you show all calculations, including your formula and any steps. Round your answer
to one decimal. [4]
Figure 1: Key labour market indicators
Source: StatsSA (2024). Quarterly Labour Force Survey: Quarter 4 2023. Pretoria: Government Printer. Available
at: https://www.statssa.gov.za/publications/P0211/P02114thQuarter2023.pdf. [Accessed: 14 March 2023]
Question 3
Assume an economy is a simple Keynesian model – i.e. only households and firms, no
government and no foreign sector. The functions below describe the economy’s spending
functions [NOTE: You do not need to calculate the equilibrium values but clearly indicate the
functions for the graph and where equilibria are on the axis]. [6]
𝐶 = 𝐶0 + 𝑐𝑌 = 2 + 0.6𝑌
𝐼=2
𝐴=𝑌
1. Draw the functions on the Cartesian plane and show the initial equilibrium. [3]
2. Assume that autonomous investment increases by 2.8 million rand. Add the new
spending graph to your Cartesian plane and indicate the new equilibrium. [2]
3. Explain how the economy moves from the initial (first) equilibrium to the new (second)
equilibrium. [1]
