NATIONAL

SENIOR CERTIFICATE

GRADE 12

SEPTEMBER 2019

ECONOMICS P1
MARKING GUIDELINE

MARKS: 150

This marking guideline consists of 19 pages.

2 ECONOMICS P1 (EC/SEPTEMBER 2019)

SECTION A (COMPULSORY)

QUESTION 1

1.1 MULTIPLE CHOICE QUESTIONS

1.1.1 C money 
1.1.2 D Phillips 
1.1.3 A reserve assets 
1.1.4 A money 
1.1.5 B moral suasion 
1.1.6 B Joint Initiative on Priority Skills Acquisition 
1.1.7 D Integrated Manufacturing Strategy 
1.1.8 C formation  (8 x 2) (16)

1.2 MATCHING ITEMS

1.2.1 H C+G+I+(X-M) 

1.2.2 F obtained when the effects of irregular events and seasons

are removed from time series data 

1.2.3 A complete ban or embargo on certain goods from a certain

country 

1.2.4 I one country can produce goods and services cheaper than
another

1.2.5 B a passageway allowing access from one area to another 

1.2.6 C developed a new support programme for clothing and

textiles 

1.2.7 D minister of Finance informs Parliament of any changes that

have occurred since February 

1.2.8 E important social indicator  (8 x 1) (8)

1.3 GIVE ONE TERM

1.3.1 Exogenous/monetarist view 

1.3.2 Taxes/taxation 
1.3.3 Transfer payment 
1.3.4 Urbanisation 
1.3.5 Repurchase rate/repo rate 
1.3.6 Land Restitution  (6 x 1) (6)

TOTAL SECTION A: 30

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(EC/SEPTEMBER 2019) ECONOMICS P1 3

SECTION B

Answer TWO of the three questions in this section in the ANSWER BOOK.

QUESTION 2: MACROECONOMICS

2.1 2.1.1 Name any TWO member countries of BRICS.

• Brazil 
• Russia 
• China 
• South Africa 
• India  (Any 2 x 1) (2)

2.1.2 Why is the GDP at market prices normally higher than the GDP
at factor cost?

• GDP at market prices takes into account the prices actually paid
for buying goods and services which already includes indirect
taxes. 
• Indirect taxes are added to GDP at factor cost to calculate GDP at
market price which makes GDP at market prices higher. 
(Accept any other correct relevant response) (Any 1 x 2) (2)

2.2 DATA RESPONSE

2.2.1 Give an example of a leakage.

• Savings 
• Taxes 
• Imports  (Any 1 x 1) (1)

2.2.2 What factor influences the size of the multiplier?

• A change in spending (mps) 

• A change in consumption (mpc) 
(Accept any other correct relevant response) (Any 1 x 1) (1)

2.2.3 Briefly describe the term multiplier

• A small initial increase in spending produces a larger than

proportionate increase in aggregate national income. 
(Accept any other correct relevant response) (2)

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4 ECONOMICS P1 (EC/SEPTEMBER 2019)

2.2.4 Explain the effect on national income when injections are more
than leakages.

• Injections that are more than leakages increase demand of goods

and services. 
• More goods and services will be produced and more income will
be generated. 
• National income increases. 
(Accept any other correct relevant response) (Any 1 x 2) (2)

2.2.5 Suppose the South African government spends R250m on the

economy. Calculate the multiplier effect if mpc= 0,7. Show all
calculations.

α=1/1 – mpc.
=1/1 – 0,7 
= 1/0,3
= 3,33 
Multiplier effect = 3,33 x R250 m 
= R832,5 m 

OR
α = 1/mps
= 1/0,3 
= 3,33 
Multiplier effect = 3,33 x R250 m 
= R832,5 m 
NB: (one mark awarded for answer only) (4)

2.3 DATA RESPONSE

2.3.1 Except AfCTA, name any other free trade area in the world.

• The North American Free Trade Agreement (NAFTA) 

• Southern African Development Community (SADC) 
• European Free Trade Association (EFTA) 
• South Asian Free Trade Area (SAFTA) 
(Accept any other relevant correct response) (1)

2.3.2 Which trade protocol is behind the establishment of a single

market in Africa?

• African Union (AU)  (1)

2.3.3 Briefly describe the term free trade area.

• Free trade area is where restrictions such as tariffs and quotas

have been removed. 
(Accept any other relevant correct response) (2)

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(EC/SEPTEMBER 2019) ECONOMICS P1 5

2.3.4 Briefly explain the role of the World Trade Organisation as part
of globalisation.

The role of WTO is to:

• Oversee the implementation and administering of trade

agreements. 
• Identify non-compliance with trade agreements. 
• Resolve trade disputes. 
(Accept any other relevant correct response) (Any 1 x 2) (2)

2.3.5 How can Africa benefit from being a single market?

Africa can benefit through:

• A boost in intra-African trade. 
• An opportunity for African countries to increase the share of
industrial goods in production and exports 
• Substantial opportunities for industrialisation and
employment. 
(Accept any other relevant correct response) (Any 2 x 2) (4)

2.4 Discuss the length and amplitude of a business cycle.

LENGTH

• This is the time that it takes for a business cycle to move through one
complete cycle. ✓✓
• It is measured from peak to peak/trough to trough. ✓✓
• It is useful to know the length because the length tends to remain relatively
constant over time. ✓✓
• If business cycles have a longer length, we consider the economy to be
strong. ✓✓
• If business cycles have a shorter length, we consider the economy to be
weak ✓✓ (Any 2 x 2)

AMPLITUDE

• It is the difference between the total output between a peak and a

trough. ✓✓
• It measures the distance of the oscillation of a variable from the trend
line. ✓✓
• It is the intensity of the upswing and downswing in economic
activity. ✓✓
• The larger the amplitude the more extreme the changes that may
occur. ✓✓
(Any 2 x 2) (8)

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6 ECONOMICS P1 (EC/SEPTEMBER 2019)

2.5 Evaluate the effects of a currency depreciation in an economy.

Positives

Currency depreciation:

• Can be used as an expansionary monetary policy to counter cyclical

measures to stimulate demand, profits, output and jobs when an
economy is in recession. ✓✓
• Brings an improvement in the balance trade through higher export
sales. ✓✓
• Provides a competitive boost to an economy through increasing the
value of profits and income for a country’s businesses with investments
overseas. ✓✓
• Leads to a positive multiplier within the circular flow of income and
spending. ✓✓

Negatives

Currency depreciation:

• Makes it harder for the government to finance a budget deficit if foreign

investors lose confidence. ✓✓
• Increases the cost of imports e.g. rising prices for essential foodstuffs,
raw materials, which affects long-run productive potential of an
economy. ✓✓
• Makes it hard to pay for a trade deficit that is owed to overseas
creditors. ✓✓
(Accept any other correct relevant response) (8)
[40]

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(EC/SEPTEMBER 2019) ECONOMICS P1 7

QUESTION 3: ECONOMIC PURSUITS

3.1 3.1.1 Name TWO demand side approach policies to growth and
development.

• Monetary policy 
• Fiscal policy  (2)

3.1.2 How can interest rates be used by the South African Reserve
Bank to stimulate production of goods and services?

• Decreasing interest rates increases consumer spending. 

• Production is stimulated as businesses and firms make large
equipment purchases due to low cost of borrowing. 
• More goods and services will be produced in the long run to meet
the increase in demand on goods and services. 
(Accept any other correct relevant response) (Any 1 x 2) (2)

3.2 DATA RESPONSE

3.2.1 Name ONE example of a country of the North divide.

• Canada 
• France 
• Italy 
• Germany 
• Japan 
• Russia 
• United Kingdom 
• United States 
• Australia 
• New Zealand  (Any 1 x 1) (1)

3.2.2 Provide a characteristic of the group of countries represented by

‘South’

• Low standard of living 

• Lack of adequate infrastructure 
• Low life expectancy 
• Lack of education 
(Accept any other correct relevant response) (Any 1 x 1) (1)

3.2.3 Briefly describe the term globalisation.

The worldwide interaction of economies with trade as an important

element. 
(Accept any other correct relevant response) (2)

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8 ECONOMICS P1 (EC/SEPTEMBER 2019)

3.2.4 Briefly explain trade as a challenge of globalisation.

Trade is a challenge of globalisation as:

• Rich countries continue to subsidise production of their
agricultural goods, making it difficult for developing countries to
compete. 
• They do this while insisting that developing countries must
remove their tariffs on manufactured goods. 
• Most of the world’s poor countries have very little foreign trade
and blame globalisation for that. 
(Accept any other correct relevant response) (Any 1 x 2) (2)

3.2.5 How do countries in the North contribute to the destruction of

the environment?

They contribute to the destruction of the environment by:

• Causing pollution through mass production of goods and
services. 
• Causing climate change by being involved in high levels of
industrial activities. 
• Exhausting natural resources due to over industrialisation. 
• Deforestation due to over industrialisation. 
(Accept any other correct relevant response) (Any 2 x 2) (4)

3.3 DATA RESPONSE

3.3.1 Name ONE category of the secondary sector.

• Manufacturing 
• Food processing 
• Oil refining 
• Energy production 
(Accept any other correct relevant response) (Any 1 x 1) (1)

3.3.2 What was the trend in the primary sector between 2017 and
2018?

It is declining  (1)

3.3.3 Briefly describe the term Gross Domestic Product

• Gross Domestic product is the value of all final goods and

services produced within the borders of a country over a
specific period. 
(Accept any other correct relevant response) (2)

3.3.4 Explain the use of per capita GDP figures.

• They are used to compare the standard of living of different

countries. 
(Accept any other relevant correct response) (2)

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(EC/SEPTEMBER 2019) ECONOMICS P1 9

3.3.5 How does the real growth of 0,8% negatively affect the
economy?

A low real growth of 0,8% is lower than the anticipated growth

rate. It affects the economy negatively by:
• Reducing employment opportunities as firms are unable to hire
more workers. 
• Decreasing demand of goods and services as consumer’s
spending decreases. 
• Reducing investment confidence. 
(Accept any other correct relevant response) (Any 2 x 2) (4)

3.4 Briefly discuss cost of doing business as a supply-side approach in

promoting growth and development in South Africa.

Transport costs 

• Transport options are air, road, rail and sea transport. 

• Government controls air and rail transport in South Africa. 
• A substantial proportion of cargo and passenger transport is moved by
road. 
• Only a reliable rail service that is cheaper than road transport will turn
this around. 

Communication costs 

• Communication options are in cable, signal and mail. 

• Government controls cable (land or fixed lines) and mail communication
services. 
• Cable communication services in South Africa is one of the most
expensive in the world but reasonably efficient. 
• High costs make IT services for businesses and individuals expensive
and inhibits global competitiveness. 

Energy costs 

• Electricity and liquid fuels are the main sources of energy in South
Africa. 
• Eskom is the only supplier (monopoly) 
• Government regulates the prices for petrol and paraffin 
• The prices for imported crude oil are linked to international market
prices, which are high 
• High liquid energy prices undermine the efficiency of the economy  (8)

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10 ECONOMICS P1 (EC/SEPTEMBER 2019)

3.5 How do international organisations such as the World Bank and United
Nations standardise the indicators of member countries?

WORLD BANK

• The World Bank Group of Institutions provide definitions for a range of

economic and social indicators. 
• In partnership with International Organisation for Standardisation (ISO),
the World Bank provides standards which give world class specifications
for products, services and systems. 

UNITED NATIONS

• Developed the best-known manual of economic indicators, the System of

National Accounts (SNA). 
• It focuses on production, income and expenditure and how to avoid
double counting. 
• It compiles data in the SARB Quarterly Bulletin in terms of the SNA
specifications. 
(Accept any other correct relevant response) (8)
[40]

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(EC/SEPTEMBER 2019) ECONOMICS P1 11

QUESTION 4: MACROECONOMICS AND ECONOMIC PURSUITS

4.1 4.1.1 Name TWO types of business cycles.

• Kitchen cycles 
• Jugler cycles 
• Kuznets cycles 
• Kondratieff cycles  (Any 2 x 1) (2)

4.1.2 How can SMMEs contribute to economic growth?

SMMEs can contribute to economic growth by:

• Increasing production processes. 
• Creating employment opportunities for structurally unemployed
people. 
• Increasing competition. 
• Increasing opportunities for exports.
• Increasing entrepreneurial skills that will lead to higher
production and investment. 
(Accept any other correct relevant response) (Any 1 x 2) (2)

4.2 DATA RESPONSE

4.2.1 Identify the demand curve that indicates a decrease in the

demand for dollars?

D2D2  (1)

4.2.2 What type of exchange rate system is currently used in South

Africa?

Free floating exchange rate system/ flexible exchange rate

system  (1)

4.2.3 Briefly describe the term devaluation.

Devaluation refers to the deliberate decrease in the value of the

currency in terms of another currency as a result of central bank
intervention. 
(Accept any other correct relevant response) (2)

4.2.4 Explain ONE factor that can influence the demand for the
dollar.

• Importing goods increases demand of foreign goods, therefore

payment needs to be made in a foreign currency. 
• Payment for services from foreign countries needs to be made
in foreign currency. 
• Buying shares or assets in another country increases the
demand. 
• Tourists spending money overseas. 
• Repayment of debt borrowed from foreign countries. 
(Accept any other correct relevant response) (Any 1 x 2) (2)

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12 ECONOMICS P1 (EC/SEPTEMBER 2019)

4.2.5 What is the effect on the rand when there is a decrease in the
demand for dollars?

A decrease in the demand of dollars will:

• US$ – Depreciates 
• The Rand appreciates  Reason: The demand for rand
increases from DD to D1D1 and the equilibrium point from e to
f.  The price will be fixed at R10 which is higher than R8. 
(Accept any other correct relevant response) (Any 2 x 2) (4)

4.3 DATA RESPONSE

4.3.1 In which year is the NDP aiming to eliminate poverty?

2030  (1)

4.3.2 Name ONE way how the government can reduce the poverty of
the vulnerable groups in South Africa.

• Providing social grants 

• Improving quality of education 
• Offering skills training 
(Accept any other correct relevant response) (Any 1 x 1) (1)

4.3.3 Briefly describe the term economic development.

• It implies an increase in the capacity of the population to produce

more goods and services 
• The process by which the standard of living improves. 
(Accept any other correct relevant response) (Any 1 x 2) (2)

4.3.4 What negative effect can the NDP have on taxpayers?

For implementation of the NDP the state will:

• Need more revenue, therefore more and higher taxation will be
needed. 
(Accept any other correct relevant response) (1 x 2) (2)

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(EC/SEPTEMBER 2019) ECONOMICS P1 13

4.3.5 How will the South African economy benefit from the
implementation of the NDP?

The South African economy will benefit from NDP implementation

by:
• Reducing youth unemployment/ providing young people with
broader opportunities. 
• Increasing the competitive capacity of the economy. 
• Improving the standard of living of the people. 
• Increasing industrialisation. 
(Accept any other correct relevant response) (Any 2 x 2) (4)

4.4 Briefly discuss the demographic social indicators.

Population growth 
• Measuring population growth is important for delivering social
services. 
• Identifying the size of the tax base. 
• South Africa’s population numbered 58 million in 2019. 
(Accept any other correct relevant response) (Any 2 x 2)

Life expectancy 
• Estimated at 61 for males and 67 for females in South Africa. 
• Expresses the number of years a newborn infant will live if prevailing
patterns of mortality remained the same. 
• Used by the government and assurance companies. 
• The government uses it to determine the range of social services. 
• Assurance companies use it to determine their premiums. 
(Any 2 x 2) (8)

4.5 How will an increase in export prices and import prices affect the South
African economy?

An increase in export prices will:

• Result in terms of trade improving. 
• Increase economic welfare because more revenue is earned with the
same expenditure. 
• However, over the long-term result in a decrease in sales volume
depending on the price elasticity of demand. 
• Result in welfare loss eventually. 

An increase in import prices will:

• Result in terms of trade deteriorating. 
• Decrease welfare because more resources were used to produce more
units to finance the higher cost of imports. 
(Accept any other correct relevant response) (8)
[40]

TOTAL SECTION B: 80

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14 ECONOMICS P1 (EC/SEPTEMBER 2019)

SECTION C

QUESTION 5: MACROECONOMICS

Discuss in detail how the following factors contribute to poor public sector
provisioning:
• Lack of accountability (10)
• Inefficiency (8)
• Difficulty in assessing needs (8)

Suggest solutions on how efficiency of state-owned enterprises can be

improved.

INTRODUCTION

• The public sector consists of the central government responsible for national
matters, provincial government responsible for regional matters and local
government responsible for street lighting. 
(Accept any other correct relevant introduction) (2)

MAIN PART

Lack of Accountability

• Accountability means to give an explanation for one’s decisions, actions and

expenditures. 
• The people require the state to use the taxes for the purpose for which they are
raised and not to abuse the powers it was granted. 
• People employed by the state do not always serve the interests of the public. 
• They seek to maximise their salaries, status and power and are not required to
produce a profit and loss statement. 
• They are budget driven. 
• The state tries to overcome this problem by making civil servants accountable to
the public. 

In South Africa, accountability is underpinned by:

• Ministerial responsibilities: ministers are spokespersons for their departments. 

• The Director General of each department is accountable for the activities of the
Department 
• Portfolio Committees: monitor individual departments and make recommendations
to Parliament 
• Treasury control: the national treasury is responsible for expenditure control 
• The Treasury committee, chaired by the Minister of Finance, evaluates all
requests for additional funding throughout the year 
• The Auditor-General reports on each government department 
• The AG reports on the standard of financial management and points out fraudulent
and unauthorised spending  (Max 10)

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(EC/SEPTEMBER 2019) ECONOMICS P1 15

Inefficiency

• Accountability does not guarantee efficiency. 

• Public goods must be efficiently provided (Pareto efficiency where the welfare of
the community is at its maximum and it is therefore impossible to increase the
welfare of one individual without making another worse off) 

Three major reasons for inefficiency:

• Bureaucracy:  (official rules and procedures) 

• Officials may focus on correct procedures and rules and are indifferent to the
quantity (e.g. the number of patients attended to) and quality of the service (e.g.
explaining the use of the medicine) 
• Some may be insensitive to the needs of their clients 
• Incompetence:  i.e. lack of skill or ability to do a task properly 
• This may be due to improper qualifications, lack of training, experience and an
attitude of apathy. 
• Corruption:  i.e. exploiting of a person’s position for personal gain 
• Taking bribes, committing fraud, nepotism, behaving dishonestly and committing
discrimination.  (Max. 8)

Difficulty in assessing needs

• In the private sector, the forces of demand and supply dictate prices 
• The market prices act as signals to the producers, communicating the needs of
consumers and the quantity demanded 
• State-owned enterprises do not operate according to the forces of demand and
supply 
• It therefore becomes difficult for state-owned enterprises to assess the needs of
consumers and they are prone to under-or over-supplying public goods 
• People’s needs are endless, so the government is unable to provide for
everyone ✓✓
• Serious structural weaknesses in the economy also cause the government to
undersupply in response to the needs that it identifies ✓✓
• Political agendas are more important than the needs that the government
identifies ✓✓ (Max. 8)

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16 ECONOMICS P1 (EC/SEPTEMBER 2019)

ADDITIONAL PART

Suggest solutions on how efficiency of state-owned enterprises can be

improved.

Efficiency of state-owned enterprises (SOEs) can be improved by:

• Having proper and clear guidelines to fight corruption 

• Forming Private Public Partnerships to enable a faster, more efficient delivery of
goods and service. 
• Setting clear costing and development mandates with financial implications
clearly set out. 
• Developing a framework for the appointment and remuneration of members to the
Board of State-owned companies. 
• Ensuring efficient management. 
• Focusing on scarce resources for highest financial impact, ✓✓ e.g.
encouraging a competitive work culture by hiring and retaining talented individuals
through competitive compensation packages. 
(Accept any other correct relevant response) (10)

Conclusion

Efficient public sector provisioning in South Africa is key for a higher growth rate,
higher employment rate and a better standard of living of all 
(Accept any higher order relevant conclusion) (2)
[40]

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(EC/SEPTEMBER 2019) ECONOMICS P1 17

QUESTION 6: ECONOMIC PURSUITS

Discuss in detail the appropriateness of South Africa’s regional development

policies in terms of international benchmark criteria. (26)

How successful has the SA government been in meeting the aims of regional
development? (10)

INTRODUCTION

Regional development is the promotion of economic development in areas where

poverty, unemployment and income inequality are high. 
(Accept any correct relevant introduction)

MAIN PART

• Competitiveness 

- Industries established as a result of regional policies should be

competitive. 
- Industries should not need on-going financial aid from the state 
- They should be self-sufficient in the long run and not depend on the state 

• Sustainability 

- The capacity of a region has to support its own development. 

- The natural resources and human resources should be harnessed. 
- Employment and sustainable development should be achieved. 
- Development should be a long-term approach rather than profit making. 

• Good governance 

- Development strategies to be managed effectively and free of corruption. 

- Principles of accountability and transparency should be applied. 
- Projects to be correctly programmed monitored and evaluated. 
- Efficient financial control to be exercised. 

• Partnership 

- Regional development should be the responsibility of different stake holders. 

- Partnership to be built between government, civil society, special interest group
and private sector. 

• Provision of resources 

- Sufficient resources should be provided in resource poor areas, such as the

development of infrastructure. 
- Provision of infrastructure to be a priority 

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18 ECONOMICS P1 (EC/SEPTEMBER 2019)

• Free market orientation 

- Government intervention in markets should be kept to a minimum so that the

forces of supply and demand and profit motive can allow for efficient allocation
of resource. 
- Markets to be allowed to function independently. 

• Integration 

- An integrated approach should be followed, ensuring that benefits in one part

of a region spill over to other industries and areas. 

• Investing of social capital 

- Government need to improve the quality of education and health care in a

Region. 
- Government must build more schools in different regions.  (Max. 26)

ADDITIONAL PART

South Africa has been successful in achieving regional development aims because:

• There has been an existence of vibrant economic activities in different

regions. 
• An estimated 80% of the country’s GDP is produced in various industrial
areas.  e.g. Johannesburg-Pretoria-Tshwane, Durban-Pinetown, Port
Elizabeth-Coega-Uitenhage, Maputo development corridor, Richards Bay
(Metals), Phalaborwa SDI 
• The department of Trade and Industry has formed a partnership with private
sector through the Spatial Development Initiative,  that shows that the
government together with other stakeholders is committed to improving
development. 

South Africa has been unsuccessful in achieving regional development aims because:

• There has been a lack of accountability in most public enterprises. 

• Mismanagement of funds puts the state under pressure to bail out these
enterprises when they cannot make profit. 
• The quality of service in hospitals and clinics has not improved in various
regions. 
• The country has not been able to attract significant flows of investment 
• There have been shortages of infrastructure in most regions 
(Accept any other correct relevant response) (Max. 10)

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(EC/SEPTEMBER 2019) ECONOMICS P1 19

CONCLUSION

The long-term success of achieving economic development lies in the way the
industrial policies are implemented. 
(Accept any other relevant higher order conclusion) (Max. 2) [40]

TOTAL SECTION C: 40
GRAND TOTAL: 150

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