JUNE EXAMINATION

GRADE 12

2023
MARKING GUIDELINES

ECONOMICS

(PAPER 1)

19 pages
 ECONOMICS
MARKING GUIDELINES
(PAPER 1) GR12 0623

SECTION A (COMPULSORY)

QUESTION 1

1.1 MULTIPLE-CHOICE QUESTIONS

1.1.1. D – The flow of goods and services from firms to households 
1.1.2. C – Kuznets cycle 
1.1.3. B – the interest rate 
1.1.4. A – Financial account 
1.1.5. C – national 
1.1.6. A – Streetlights 
1.1.7. B – consumption 
1.1.8. D – welfare  (8 x 2) (16)

1.2 MATCHING COLUMNS

1.2.1 E – A school of thought which believes the economy is best controlled

by market forces 
1.2.2 D – It measures the severity of the cyclical fluctuations 
1.2.3 C – A period of rapid economic expansion
1.2.4 A – A short-term debt obligation of the central government 
1.2.5 H – The difference in value between a country's imports and exports of
goods 
1.2.6 F – Actual values of goods and services 
1.2.7 I – It is almost impossible to prohibit any person from using the good 
1.2.8 G – Increasing integration of economies around the world  (8 x 1) (8)

1.3 GIVE A TERM

1.3.1 Systems of national account 

1.3.2 Real business cycle 
1.3.3 Subsidies 
1.3.4 Absolute advantage 
1.3.5 Parastatals 
1.3.6 Money flow/Monetary flow  (6 x 1) (6)

TOTAL SECTION A: 30

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SECTION B

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

QUESTION 2: MACROECONOMICS

2.1 Answer the following questions.

2.1.1 Name TWO features of the expansionary phase in the business

cycle.

• An increase in spending 
• Increase in GDP 
• Increase in employment 
• Inflation increases 
• Deficit on current account of Balance of payments 
• High demand for credit 
• Property prices rise 
• Interest rates increase 
(Accept any other correct relevant response.) (2 x 1)

2.1.2 Why is parliamentary questioning on the main budget important?

• Parliamentary scrutiny acts as an important inspection system of the

government, the way that the state's assembly holds ministers to
account for their decisions and actions. 
• This helps improve government policies, legislation, and public
services. 
• Scrutiny helps to make sure that the changes are fit for purpose and
justified. 
(Accept any other correct relevant response.) (1 x 2) (4)

2.2 DATA RESPONSE

2.2.1 Identify the participant that uses the factors of production to

produce goods and services.

Firms 
(1)
2.2.2 Through which market will goods and payment for goods and
services flow?

Product market  (1)

2.2.3 Briefly describe the term goods market.

Any place where buyers and sellers of goods meet for potential
transactions. 
(Accept any other correct relevant response.) (2)

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2.2.4 How does the government reduce economic activities in the

circular flow model?

• The government levies taxes on the other participants which

becomes a leakage in the flow of money, reducing economic
activities. 
(Accept any other correct relevant response.) (2)

2.2.5 Explain the impact on the circular flow if leakages are greater than
injections.

• Leakages reduce the flow of income in an economy. 

• There will be less funds available for economic activities which
leads to national income decreasing.  (2 x 2) (4)
(Accept any other correct relevant response.)

2.3 DATA RESPONSE

2.3.1 Name ONE exchange rate system.

• Managed exchange rate system 

• Free floating exchange rate system 
• Fixed managed exchange rate system  (1)

2.3.2 Give ONE reason for the shift of the demand curve above.

• Importing goods from the USA 

• Paying for services from the USA 
• SA tourists spend money in the USA 
• Buying shares in the USA 
• Interest and dividends paid to USA investors in SA 
• Loan repayments from loans from the USA 
(Accept any other correct relevant response.) (1)

2.3.3 Briefly describe the term foreign exchange.

Foreign exchange is the conversion of one country's currency into

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

2.3.4 Explain the value of the rand against the dollar after the shift in the
demand curve in the graph above.

• The rand has decreased in value against the dollar 

• The rand has depreciated against the dollar.  (2)

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2.3.5 How can an appreciation of a currency be negative to a country?

• Currency appreciation may increase export expenses. 

• When a country's currency appreciates, the number of commodities
exported from that country decreases. 
• This situation can drastically cause a country's GDP to decrease. 
(Accept any other correct relevant response.) (2 x 2) (4)

2.4 Briefly discuss the trendline and extrapolation as features used in the
forecasting of business cycles.

Trendline
• Trendlines indicate a general direction of a country’s economy. 
• An upward trend indicates a growing economy, and a downward trend indicates a
slowdown of an economy. 
• Most countries have a positive slope over time indicating a growing economy. 
(Max. 4)

Extrapolation
• Extrapolation means to estimate future events from known data. 
• Role players use extrapolation to make predictions about the economy that are
based on data and not opinion 
• Extra polation may be based on the trendline of the business cycle by extending
its pattern onwards to make assumptions about where the economy is
headed.  (Max. 4) (8)
(Accept any other correct relevant response.)

2.5 How can efficiency of inputs be used in the supply-side policies to improve the
economy?

• Inputs refer to all the costs involved in the production of goods and services. 
• When inputs are used more efficiently, the production cost of the producers will
decrease. 
• Taxes must be fair for businesses to be encouraged to produce high levels of
production. 
• Individuals become motivated to work when taxes are fair which could lead to
higher productivity levels. 
• Lower indirect taxes and corporate taxes on businesses will decrease the cost of
production, which could increase the supply. 
• Depreciation allowances on machinery and equipment is an incentive for
businesses to explore the latest methods of production because it reduces tax
liabilities for them. 
• The quality of labour can be improved through education, training courses and
improved health care. 
• The government provides free advisory services to small, medium and micro
businesses to establish growth in their activities. 
• The government also provides services in the form of research, statistical
information etc. to businesses that are involved in promoting the export
industry. 
(Accept any other correct relevant response.) (4 x 2) (8)
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QUESTION 3: MACROECONOMICS

3.1 Answer the following questions

3.1.1 Name any TWO sub-accounts in the financial account.

• Net portfolio investment 

• Net direct investment 
• Net other investments  (2 x 1)

3.1.2 How is national income determined in the four-sector economy?

C + I + G + (X – M)  (1 x 2) (4)

3.2 DATA RESPONSE

3.2.1 What is the natural rate of unemployment according to the graph

above?

11%  (1)

3.2.2 Name ONE supply side measure that can be applied to shift the
curve to the left.

• Improved education/skills training/skills development 

• Fewer legal restrictions on businesses to reduce unemployment 
(Accept any other correct relevant response.) (1)

3.2.3 Briefly describe the term natural rate of unemployment.

The natural unemployment rate is the minimum unemployment rate

resulting from real or voluntary economic forces. 
(Accept any other correct relevant response.) (2)

3.2.4 How would trade unions react if the Phillips curve moves from point
A to B?

Trade unions will demand higher wages because the cost of living
(inflation) has increased. 
(Accept any other correct relevant response.) (2)

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3.2.5 How can provision of infrastructural services by government reduce

the cost of doing business?

• The government provides funding for infrastructure e.g., roads, traffic

lights, railways etc. 
• If this infrastructure is not reliable or maintained, it becomes difficult for
businesses to achieve high productivity rates.  (2 x 2) (4)
(Accept any other correct relevant response.)

3.3 DATA RESPONSE

3.3.1 What is the international benchmark public debt percentage-GDP

ratio?

60%  (1)

3.3.2 List ONE example of a community good.

• Streetlights 
• Traffic lights 
(Accept any other correct relevant response.) (1)

3.3.3 Briefly describe the term full employment.

Full employment is the situation where all people who are available and
searching for work can find a job at the prevailing remuneration rates and
conditions. 
(Accept any other correct relevant response.) (2)

3.3.4 How can the progressive tax system affect redistribution of wealth
in South Africa?

• To redistribute income from those of higher incomes to those of lower

incomes by disproportionately taxing higher in-comes. 
• The higher tax share of those who are wealthier will result in an
increased income share to the low-income earners 
(Accept any other correct relevant response.) (2)

3.3.5 Analyse the cartoon and state what impact the situation will have on
the main budget.

• The cartoon indicates that the current taxpayers (5.8%) is totally

inadequate for government expenditure. 
• The revenue that will be collected from the small base of taxpayers
cannot sustain all their responsibilities in providing for the nation. 
(Accept any other correct relevant response.) (2 x 2) (4)

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3.4 Discuss export promotion and import controls as measures used to correct
the balance of payments.

Export promotion
• Export promotion can be used to ensure that more goods and services are
locally produced. 
• Imports will be discouraged as more locally goods are produced. 
• Government incentives, such as subsidies, are implemented to encourage the
production of goods that can be exported. 
• The income received from exports eliminates the disequilibrium on the
balance of payments.  (Max. 4)

Import controls
• Import controls are measures to discourage the import of certain goods and
services, therefore restricting the amount of money flowing out of the economy
which affects the BOP negatively. 
• They include import tariffs, other duties and quotas.
(Accept any other correct relevant response.) (Max. 4) (8)

3.5 Why is it important to calculate real GDP?

• GDP is important because it gives information about the size of the economy
and how an economy is performing. 
• The growth rate of real GDP is often used as an indicator of the general health
of the economy. 
• In broad terms, an increase in real GDP is interpreted as a sign that the
economy is doing well. 
• Real GDP makes comparing GDP from year to year and from different years
more meaningful because it shows comparisons for both the quantity and
value of goods and services. 
• Real GDP measures an economy's total goods and services in a given year,
taking into account changes in price levels. 
(Accept any other correct relevant response.) (4 x 2) (8)
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QUESTION 4: MACROECONOMICS

4.1 Answer the following questions

4.1.1 Name TWO transactions in the capital transfer account.

• Debt forgiveness 
• Grants relating to the ownership of fixed assets 
• Financial claims and liabilities from migrants  (2 x 1)

4.1.2 Why does the government conserve and preserve resources?

• The government protects resources to ensure sustainability of

resources. 
• There are, for example, laws against the poaching of rhinoceros and
abalone as these species may become extinct if they are not
protected. 
• Government conserves resources to ensure less expenditure is
spent on recovering the resources. 
(Accept any other correct relevant response.) (1 x 2) (4)

4.2 DATA RESPONSE

4.2.1 Identify the number of participants represented in the multiplier

model above.

3 (1)

4.2.2 What is the purpose of the 45° line in the graph?

Equality line/Line where income and expenditure are equal.  (1)

4.2.3 Briefly describe the term marginal propensity to save.

The portion of additional income that households choose to save. 

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

4.2.4 How can a negative multiplier occur in the circular flow model?

Leakages can cause negative multiplier effects as the amount in

circulation is reduced. 
(Accept any other correct relevant response.) (2)

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4.2.5 Calculate the multiplier from the information provided in the graph
above. Show all calculations

Change in income (Y)

K = 
Change in total expenditur e (AD)

1 000 − 400

600 − 300

OR

600

300

= 2  (Max. 4) (4)

4.3 DATA RESPONSE

4.3.1 Name ONE example of leading economic indicators.

• The number of new vehicles sold 

• The number of building plans approved 
• The job advertising space used by job advertisements 
(Accept any other correct relevant response.) (1)

4.3.2 Which economic indicator confirms the behaviour of co-incident

indicators?

Lagging indicator  (1)

4.3.3 Briefly describe the term composite indicator.

It is a summary of the various indicators of the same type into a single

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

4.3.4 Explain the effect of government spending during a recession in the

business cycle.

Government spending should increase to stimulate the economy. 

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

4.3.5 Calculate the first 6 months moving average for the leading
economic indicator. Show ALL calculations.

127,3 + 133,3 + 136,2 + 130,2 + 127,0 + 127,9 = 781,9 

781,9/6  = 130,31  (4)

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4.4 Explain the Laffer curve with the aid of a graph.

Mark allocation
Correct labelling of axes: 1 mark
Correct drawing of graph: 2 marks
Indicating max tax. rate/tax revenue: 1 mark
Max. 4 marks

• Government will obtain zero revenue when tax rate is 100%. 

• Revenue will increase to the taxpayers’ willingness and ability to pay
maximum tax (R max.) on the graph. 
• Any increase beyond this point will reduce tax revenue because fewer and
fewer workers will be willing to work as the tax rate increases. 
• Higher tax rates could lead to tax avoidance. 
(Accept any other correct relevant response.) (Max. 6) (8)

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4.5 Analyse the conditions during a boom and how monetary policy “cools
down” the economy in the business cycle.

Conditions
• During a boom high levels of production, employment and economic activities
prevail. 
• GDP activities increase 
• Credit and high wages will prevail because employment levels are high. 
• Inflation will accelerate because aggregate demand will exceed aggregate
supply. 
• The business sector will over invest to keep up with the accelerated demand
for goods and services.  (Max. 6)

"Cool down economy"

• A policy of contractionary monetary policy must be applied. 
• Interest rate should be increased to discourage economic activities, such as
increased borrowing. 
• Increase the cash reserve requirements to lower amounts available for
loans. 
• Stricter conditions of obtaining credit. 
• The SARB can use moral suasion to convince banks to act in a desirable
manner.  (Max. 6)
(Accept any other correct relevant response.)
(A maximum of 8 marks for discussion. Candidates must answer both subsections (8)
of the question.)
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TOTAL SECTION B: 80

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SECTION C

Answer ONE of the TWO questions from this section in the ANSWER BOOK.

Your answer will be assessed as follows

MARK
STRUCTURE OF ESSAY
ALLOCATION
Introduction

The introduction is a lower-order response.

• A good starting point would be to define the main concept
related to the question topic.
Max. 2
• Do not include any part of the question in your introduction.
• Do not repeat any part of the introduction in the body.
• Avoid mentioning in the introduction what you are going to
discuss in the body.
BODY

Main part: Discuss in detail/In-depth discussion/Examine/

Critically discuss/Analyse/Compare/Evaluate/Distinguish/
Max. 26
Differentiate/Explain/Draw a graph and explain/Use the graph
given and explain/Complete the given graph/Assess/Debate
A maximum of 8 marks may be allocated for headings/
examples.

Additional part: Critically discuss/Evaluate/Critically evaluate/

Debate/ Deduce/Compare/Distinguish/Interpret/How?/Suggest
Max. 10
A maximum of 2 marks may be allocated for mere listing
facts.
Conclusion

Any higher-order conclusion should include:

• A brief summary of what has been discussed without
repeating facts already mentioned
Max. 2
• Any opinion or value judgement on the facts discussed
• Additional support information to strengthen the
discussion/analysis
• A contradictory viewpoint with motivation, if required
• Recommendations
TOTAL 40

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QUESTION 5: MACROECONOMICS

• Discuss, in detail, reasons for public sector failure and link them to typical
problems experienced through public sector provisioning. (26 marks)
• Evaluate the implementation of a basic income grant in South Africa.
(10 marks)

INTRODUCTION
Public sector failure occurs when government intervention fails to meet the desired
outcome making the existing economic situation worse. 
(Accept any other relevant introduction.) (Max 2)

MAIN PART

Management failure 
• Since the assessing of needs is difficult, the state might oversupply some goods
and undersupply some goods. 
• In this way management was not able to satisfy the needs of the consumers and
there will be wastages leading to the public sector failure. 
• People working in parastatals might lack management skills and might end up
implementing wrong policies that may cause the public sector to fail. 
• If the management cannot explain the decisions that they took and explain how they
spend the money they have been allocated then they are not accountable and this
may be a result of corruption.
• Corruption results in inefficiencies that lead to failure in public sector. 
• This can be linked to inefficiency, due to their lack of training or skills. 
• A state judge continually arrives late for court sessions due to tardiness; this in turn
causes a backlog of court cases, the judge is not taken to task. 
• This can be linked to accountability. 

Apathy 
• Government servants do not provide an efficient service to the public as a result of
corruption. 
• Corruption and poor service delivery are signs of apathy and may cause poor
accountability. 
• Parastatal employees lack the interest or concern because they know they will get
paid even when they are underperforming. 
• A ward councilor receives the approval for the building of new communal toilets at
the local park, but the building of the toilets is delayed because the required
paperwork was never submitted to the building contractor. 
• This can be linked to inefficiency. 

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Bureaucracy 
• Complex rules and procedures might lead to inefficiencies in the public sector and
the public sector might fail to provide the goods and services in time for the
consumers. 
• For example, if there is a water leakage at one house the municipality will send their
workers to fix the leakage and the workers will only fix that leakage because they
were told to fix that one only, even if there is a leakage in the neighbouring house
they will not fix it but they will need that fault to be reported, then only can they
fix. 
• This simply means that the municipality cannot satisfy the needs of consumers in
time because of the rules and procedures that have to be followed, which may take
time. 
• Civil servants may feel overwhelmed by the rules and regulations resulting in
complacency and demoralisation. ✓✓
• This problem can be linked to efficiency and assessing needs. ✓✓

Lack of motivation 
• Nationalisation of companies may demotivate workers from working hard as their
hard work would not be recognised. 
• When calling a private medical aid facility, clients are often encouraged at the end
of the call to complete a survey to evaluate the service, helpfulness, and willingness
to assist that they have received from the service provider, however, state
departments have no mechanisms with which to evaluate the service that the public
has received. 
• This can be linked to efficiency and assessing of needs. 

Politicians 
• Lack of accountability by politicians may be a result of corruption and this may lead
to them not fulfilling the promises they made to individuals when they were running
their campaigns. 
• As the politicians are not accountable for their actions, resources may not be
allocated fairly because of corruption. 
• The Minister of Health approves a contract for a vaccination programme from a
company where he is a major stakeholder without disclosing this pertinent
information. 
• This can be linked to accountability and efficiency. 

Structural weaknesses 
• Incompetency of workers may lead to the workers not being able to provide efficient
services to the public. 
• Nationalisation of companies that provide a different good than which the state
provides may make it difficult for the state to be able to provide that good. 
• Eskom is the only service provider of electricity in South Africa and when power
outages occur, it impacts the efficiency of the entire country. 
• This can be linked to accountability and efficiency. 

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Special interest groups 

• Special interest groups can be viewed as using their political power to raise demand
for public services, as well as using their bargaining power to fight for higher
wages. 
• Special interest groups' political power leads to more government spending which
strain the government expenditure for the fiscal year. 
• Huge strikes caused by special interest groups, such as South African Taxi
Association, decreases production of the economy since people will not be have
alternative transportation to work. 
• Trade unions could pressure the government to pass certain legislation to favour
their members but at the cost of long-term investment from potential investors
• This can be linked to efficiency. 
(Accept any other correct relevant link that is explained sufficiently.) (Max. 26)

A maximum of 8 marks should be allocated for headings and examples.

ADDITIONAL PART

Evaluate the implementation of a basic income grant in South Africa.

Positive effect of a basic income grant

• The social relief of distress grant will ease some of the hardship faced by the
societies and make everyone feel recognised and included. 
• It will boost the purchasing power of the poorest, will create income multipliers,
stimulating local economic growth and livelihoods. 
• It would improve the effectiveness of the existing social grants. The child support
grant is intended to meet the basic needs of children in low-income households. But
instead, this cash is spread among the entire family because unemployed parents
and carers also need food and clothes. 
• A basic income could have a positive impact on reducing medical costs associated
with types of poverty and homelessness. 
• A basic income grant will assist in narrowing the inequality gap, as South Africa is
one of the most unequal societies in the world (we have a high Gini Coefficient). 
• Basic income support also helps boost investment aimed at improving nutrition,
healthcare, housing and transport, 
• The basic income grant could add 0,5% to GDP growth by 2025 by improving
household demand and boosting employment. 

Negative effect of a basic income grant

• A basic income grant would require significant long-term tax increases and would
likely lead to employment losses. 
• Without sustained higher economic growth, much higher social transfers could
threaten fiscal sustainability. 
• It removes the incentive to work, adversely affecting the economy and leading to a
labour and skills shortage. 

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• The problem is that it must be administered. The government already struggles

endlessly to distribute existing grants. 
• There are frequent delays, grants are never paid until well after the end of the
month, and fraud is rife. 
(Accept any other correct relevant response.) (Max. 10)

CONCLUSION

The South African public sector is known for its widespread corruption and inefficiency;
it would be more efficient if they built planning and control systems based on
results. 
(Accept any higher-order conclusion.) (Max. 2)

QUESTION 6: MACROECONOMICS

• Discuss, in detail, the supply reasons for international trade

(26 marks)

• Examine comparative advantage in international trade, by using an

appropriate example. (10 marks) (40)

INTRODUCTION
International trade is the exchange of goods and services across many countries. 
(Accept any other relevant introduction.) (Max. 2)

BODY: MAIN PART

The following are supply reasons for international trade:

Natural resources 
• These resources are not evenly distributed across all countries of the world. 
• They vary from one country to another and can only be exploited in places where
the resources exist. 
• South Africa is well equipped with different natural resources, but less resourced
with skilled labour and capital. 
• Examples are Japan and Ireland, which have an abundance of skilled labour, but
they lack natural resources. 

Labour resources 
• Labour differs between different countries in terms of skills, knowledge, training,
quality, quantity and cost. 
• Some countries such as Switzerland have highly skilled, well-paid workers, and high
productivity levels. 

The availability of capital 

• Some countries need to modernise their industries and economies with advanced
machinery, equipment (plants), but cannot manufacture this equipment, because
they lack the capital to do so. 
• This factor has therefore increased the need for international trade. 

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Lack of entrepreneurship 
• Those countries that have good entrepreneurial skills offer more goods and services
for trade. 
• Efficiency determines the supply of goods and services produced at lower prices
and also reduces the opportunity cost of acquiring them. 

Climatic conditions 
• These countries make it possible for others to produce certain goods at a lower
price than other countries. 
• An example is Brazil, which is the largest producer of coffee. 
• Countries have different climatic conditions and are therefore able to produce
different products. 

Technological resources 
• The developmental levels and innovation processes of countries will always differ
and as a result some countries may have them in abundance, while others may
not. 
• Countries such as Germany and the USA can use capital which represents high
levels of technology, while other countries do not have access to the latest
technology, such as basic internet services and healthcare. 
• Those countries that have high technological labour forces can produce certain
goods and services at a low unit cost, such as the developed countries. 

Specialisation 
• The production of certain goods and services allows some countries to produce
them at a lower cost than other producers. 
• Japan produces electronic goods and sells them at a much lower price. 
• International trade enables countries to specialise in the production of goods and
services in which they have a comparative advantage above others. 
• Most of the surplus production gets exported to other countries and the revenue
earned from these exports can be used to finance their imports. 
(Accept any other correct relevant response.) (Max. 26)

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 ECONOMICS
MARKING GUIDELINES
(PAPER 1) GR12 0623

ADDITIONAL PART

Examine comparative advantage in international trade, by using an appropriate

example.

• A country has comparative advantage when the opportunity cost of producing a

good is lower than the other country’s cost. 
Consider the following example:
• South Africa and Botswana have climates in the production of beans and
subtropical fruits. 
• Let us assume the production of both countries are:

Beans Subtropical fruits

South Africa 10 40
Botswana 5 30


• South Africa clearly produces more beans and subtropical fruits than Botswana,
however, the principle of opportunity cost principle must be identified. 
• In South Africa the cost of producing subtropical fruits to beans is 1:4, meaning they
will have to sacrifice 40 tons of subtropical fruits to produce 10 tons of beans. 
• In Botswana, the opportunity cost is 1:6, they must sacrifice 30 tons of subtropical
fruits to produce 5 tons of beans. 
• It is therefore more cost effective for SA to produce subtropical fruit in comparison
to Botswana. 
• SA has comparative advantage in the production of subtropical fruit and Botswana
has comparative advantage in the production of beans. 
• SA will therefore specialise and export subtropical fruits to Botswana, while
Botswana will specialise and export beans to SA. 
(Accept any other correct relevant response.) (Max. 10)

CONCLUSION

Consumers may exhaust the available supply of locally produced goods while exploring
international markets for surplus production and unique products.  (Max. 2)
(Accept any higher-order conclusion.) (40)

TOTAL SECTION C: 40

TOTAL: 150

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