QUESTION PAPER ENGLISH MAY 2014

- 1 -

MARKS: 300 TIME: 3 hours

This question paper consists of 8 pages. Annexure A: Notes to markers: 4 pages

Annexure B: Extract from Learner Question paper Memorandum: 12 pages

(Please hand this question paper and completed answer book to the administrator

after completing the test)

ECONOMICS MAY 2014

COMPETENCY TEST FOR MARKERS PAPER 1 & 2

WCED Markers Competency Test Paper 1 & 2 Economics

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INSTRUCTIONS AND INFORMATION Read the following instructions carefully before answering the questions.

1. This question paper consists of TWO PARTS, with Annexures, and includes elements of topics from Macroeconomics and Contemporary Economic Issues.

Part A PAPER 1: Content knowledge Question 1: Objective questions (20) Question 2: Shorter questions (40) Question 3: Essay question (40) Part A PAPER 2: Content knowledge Question 4: Objective questions (20) Question 5: Shorter questions (40) Question 6: Essay question (40) Subtotal (200)

(Note: A scientific calculator is required for use in this section.)

Part B: Marking Competency: Learner script to be marked, as follows:

PAPER 1: Question 7: Extract from Learner Answers, memorandum and learner responses (Shorter questions) (20) Question 8: Extract from Learner Answers, memorandum and learner responses (Essay partially given) (30) PAPER 2: Question 9: Extract from Learner Answers, memorandum and Learner responses (Shorter questions) (10) Question 10: Extract from Learner Answers, memorandum And learner responses (Essay in full) (40)

Subtotal: 100 TOTAL: 300

NOTE: All the questions in Both Parts are compulsory.

o Annexure A: Notes to markers (For your information)

o Annexure B: Learner Questions (for reference purposes) and marking Memorandum Pertaining to Section B (For your information)


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2. Write the following information on the answer book:

2.1 Initials and surname 2.2 Name of school 2.3 ID Nr

3. Complete all the answers in the answer booklet provided.

4. Complete PART A (Content knowledge) as follows: Make use of a blue or black pen to complete this section. Complete the answer book correctly according to the numbering system

used in this question paper. Except where other instructions are given, answers must be in full

sentences. Use the mark allocation and nature of each question to determine the

length and depth of the answer. INSTRUCTIONS AND INFORMATION (Continued)

5. Complete PART B (Marking competency) as follows:

Study the Notes to Markers (Annexure A)

Use the memorandum (ANNEXURE B) and:

o Allocate marks for the learner’s responses from the:

- extract from learner Question 7 Paper 1 (Section B- type); and - extract from learner Question 8 Paper 1 (Section C, essay type)

- extract from learner Question 9 Paper 2 (Section B-type); and - extract from learner Question 10 Paper 2 (Section C, essay type)

Make use of a red pen to mark this section


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6. Use the table below as a guide for time allocation when answering each question:

PART QUESTION MARKS

A:

Content

knowledge

PAPER 1

Question 1: Section A type question

20

Question 2: Section B type question 40

Question 3: Section C type question 40

PAPER 2

Question 4: Section A type question

20

Question 5: Section B type question 40

Question 6: Section C type question 40

B:

Marking

competency

PAPER 1

Question 7: Marking of Learner

Section B-type answer

20


Section C-type answer (extract)

30

PAPER 2


Section B-type answer (Paper 2)

10


Section C-type answer (extract)

40

7. Write neatly and legibly. PAPER 1: PART A: CONTENT KNOWLEDGE

QUESTION 1

1.1. Various options are provided as possible answers to the following questions. Choose the answer and write only the letter (A – C) next to the question number (1.1.1 – 1.1.5) in the ANSWER BOOK.

1.1.1 If the rand appreciates, prices and the rate of inflation will ...

A. increase. B. remain the same. C. decrease. (2)


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1.1.2 Parastatals are business entities of the … sector.

A. private B. public C. commercial (2)

1.1.3 The ratio of the index of export prices to the index of import prices is called ...

A. terms of trade. B. balance of trade. C. balance of payments. (2)

1.1.4 In the business cycle, the employment rate increases during a …

A. depression. B. recovery. C. recession. (2)

1.1.5 Dumping means selling goods at prices which are … than their cost of production.

A. higher B. equal C. lower (2)

1.2 Give ONE concept for each of the following descriptions. Write only the correct answer to the question number in the answer book.

1.2.1 The general direction taken by the economy. (1) 1.2.2 Government selling more than 50% of the shares of its enterprise. (1) 1.2.3 The process by which the standard of living improves. (1) 1.2.4 The index that measures prices of locally produced goods when they

leave the factory gate. (1) 1.2.5 The market where the JSE operates. (1)

1.3 Match the description in COLUMN B to the term in COLUMN A.

COLUMN A COLUMN B 1.3.1 Budget A. A useful tool that differentiates countries around

the world in terms of business or economic performances 1.3.2 Real flow B. Anticipated revenue and estimated expenditure. 1.3.3 Special Economic Zone

C. The value of the next best alternative

1.3.4 Per capita GNI D. The movement of goods, services and factors of production among the participants of the economy

1.3.5 Global Competitive Index

E. Designated area set aside for specific target value-adding manufacturers

F. Income per head of the population (5 x 1) (5)

TOTAL QUESTION 1: 20


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NEW CAR SALES IN SOUTH AFRICA

2013: JANUARY

2014: JANUARY

53 476

51 814

[Adapted from www.naamsa.co.za]

QUESTION 2

2.1 Study the data below and answer the questions that follow

2.1.1 Which type of economic indicator is reflected in the table above? (2)

2.1.2 List any TWO other factors that will influence the prediction of the economy. (2 x 1) (2)

2.1.3 Define the term economic indicator. (2)

2.1.4 What is the expected state of the economy according to this indicator? Motivate your answer. (4)


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2.2 Study the extract below and answer the questions that follow:

TRADE FAVOURS CHINA Trade between South Africa and China (our most important trade partner) increased from R205 milliard in 2012 to R270 milliard in 2013. An alarming tendency noticed from the increased trade is that 90% of South African exports consisted of raw materials and 100% imports were finished products. The Department of Trade and Industry reacted on these figures by demanding more investments from China in South Africa and more exports from South Africa to China. The Commercial Bank of China already owns 20% of Standard Bank and invested R13,3 milliard in infrastructure that created 10 000 jobs locally.

Resource: Beeld February 26th, 2014.

2.2.1 Define the concept import substitution. (2) 2.2.2 How would the import/export figures between South Africa and China have influenced the trade balance of South Africa? Motivate your answer. (2 x 2) (4) 2.2.3 Why should we promote the export of final goods? (2 x 2) (4)

2.3 Critically discuss any TWO incentives used by the government to improve industrial development. (2 x 4) (8) 2.4 The South African Reserve Bank uses the repo rate to signal its intended direction of economic activities. Argue the effectiveness of the use of the repo rate. (4 x 2) (8)



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QUESTION 3

STRUCTURE OF ESSAY MARK

ALLOCATION

Introduction Max. 2

Body: Main part: Discuss in detail / In-depth discussion / Examine / Critically discuss / Analyse / Compare / Evaluate / Distinguish / Differentiate / Explain / Assess / Debate Additional part: Give own opinion / Critically discuss / Evaluate / Critically evaluate / Draw a graph and explain / Use the graph given and explain / Complete the given graph / Calculate / Deduce / Compare / Explain / Distinguish / Interpret / Briefly debate

Max. 26

Max. 10

Conclusion Max. 2

TOTAL 40

The performance of the country‘s economy is measured by two kinds of indicators namely, economic indicators and social indicators. Discuss the economic indicators relating to inflation and foreign trade. (26 marks) How can service delivery - relating to nutrition and health – enhance

people’s lifestyles and level of social development? (10 marks)

40



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PAPER 2: PART A: CONTENT KNOWLEDGE

QUESTION 4

4.1 Various options are provided as possible answers to the following questions. Choose the correct answer and write only the letter (A – C) next to the question number (1.1.1 – 1.1.5) in the ANSWER BOOK.

4.1.1 Under perfect competition, a business attains maximum profit where marginal revenue is equal to … cost.

A. marginal B. average C. total (2)

4.1.2 The demand curve of a monopoly is also the … curve.

A. AR B. MR C. MC (2)

4.1.3 Business failure to produce goods and services at the lowest possible cost is called … inefficiency.

A. productive B. allocative C. demand (2)

4.1.4 The measure of total inflation in the economy is called … inflation.

A. core B. hyper C. headline (2)

4.1.5 Taxes levied on consumption or outputs for the adverse effects on the environment are called … taxes.

A. normal B. green C. indirect (2)

4.2 Give ONE concept for each of the following descriptions. Write only the correct answer to the question number in the answer book.

4.2.1 The difference in total revenue for each additional unit produced. (1) 4.2.2 Legal rights granted to inventors of a product or production process. (1) 4.2.3 Climate change that affects the whole world. (1) 4.2.4 Development that meets current needs without compromising capacity of future generations. (1) 4.2.5 High levels of unemployment and price increases. (1)


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CONSTRUCTION: MANY FINES ON THE WAY Steffanutti Stocks, a construction company who reported on alleged collusion in the construction industry has to pay a fine of R323 million to the Competition Commission. Widespread collusion with big government contracts throughout the construction industry is being investigated since 2009 by the competition authorities.

4.3 Match the description in COLUMN B to the term in COLUMN A.

COLUMN A COLUMN B 4.3.1 Marginal cost A. Impossible to increase the welfare of one

individual without making another worse off 4.3.2 Industry B. Intersects AC at its minimum point 4.3.3 Pareto efficiency C. The value of the next best alternative 4.3.4 Indigenous knowledge

D. A group of businesses in a particular production sector

4.3.5 Hyperinflation E. Tourists that wanted to understand the unique culture, history and environment of the local people

F. People then loose trust in the economy (5 x 1) (5)


QUESTION 5

5.1 Study the extract below and answer the questions that follow

This included the construction of infrastructure for the 2010 FIFA Soccer World Cup. According to the Commission, companies found guilty of collusion, can be fined up to 10% of their annual turnover

Source: Beeld, May 2013.

5.1.1 Which institution investigates collusion in South Africa? (2)

5.1.2 Define the term collusion. (2)

5.1.3 Name TWO types of collusion. (2 x 1) (2)

5.1.4 In your opinion, is collusion legal in South Africa? Motivate your answer. (4)


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Price / Cost

5.2 Study the graph below and answer the questions that follow:

5.2.1 What does the shaded area represent for the monopolist? (2) 5.2.2 What determines the profitability of the monopolist? (2 x 1) (2) 5.2.3 Determine the total cost of the monopolist.Show all calculations. (4) 5.2.4 What is the golden rule of price formation? (2)

5.3 Argue the influence of pollution on environmental sustainability. (4 x 2) (8) 5.4 How will inflationary expectations as a measure help to combat Inflation? (4 x 2) (8)


SMC

SAC

A

C

0 5

AR

B 7

10

Quantity

MR


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QUESTION 6

STRUCTURE OF ESSAY MARK

ALLOCATION

Introduction Max. 2

Body: Main part: Discuss in detail / In-depth discussion / Examine / Critically discuss / Analyse / Compare / Evaluate / Distinguish / Differentiate / Explain / Assess / Debate Additional part: Give own opinion / Critically discuss / Evaluate / Critically evaluate / Draw a graph and explain / Use the graph given and explain / Complete the given graph / Calculate / Deduce / Compare / Explain / Distinguish / Interpret / Briefly debate

Max. 26

Max. 10

Conclusion Max. 2

TOTAL 40

“Tourism is regarded as the fastest growing sector in the South African economy.”

Discuss the benefits of tourism to the South African economy. (26 marks)

Suggest initiatives which you will implement that will lead to an increase in the number of tourists visiting your community. (10 marks)

[40]



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PART B: MARKING SKILLS

Instructions for completing Questions 7 to 10:

1. Allocate marks for the two learner responses as found in the answer booklet provided.

2. Marks should be allocated in accordance with the: 2.1 “Notes to markers” (ANNEXURE A) provided, as well as 2.2 Marking memorandum for these questions (ANNEXURE B) attached. Note: Indicate the ticks for facts (’s and x’s), and marking of insight, where appropriate, with a red pen in the required manner. (Also refer to Notes to markers)

PRACTICAL MARKING OF LEARNER RESPONSES:

PAPER 1: Question 7

Complete this task in the answer book provided for question 7. Refer to Annexure B: Extract from a previous learner question with memorandum (Learner Question 4) (20) Question 8

Complete this task in the answer book provided for question 8. Refer to Annexure B: Extract from a previous learner question with memorandum (Learner Question 5) (30) PAPER 2: Question 9:

Complete this task in the answer book provided for question 9. Refer to Annexure B: Extract from a previous learner question with memorandum (Learner Question 3) (10) Question 10: Complete this task in the answer book provided for question 10. Refer to Annexure B: Extract from a previous learner question with memorandum (Learner Question 5). (40)

Sub-total Part B: 100 TOTAL: 300


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ANNEXURE A NOTES TO MARKERS: (MANDATORY)

1.

2.

The numbering of topics is in accordance with the principle of progression from Grades 10 to 12.

Candidates’ responses must be in full sentences for Sections B and C. This would depend on the nature of the question, e.g. 7.1.2 should be a full sentence, to be awarded 2 marks.

3. A memorandum has been provided but this is by no means exhaustive. Appropriate consideration should be given to alternative answers that are correct but:

uses a different expression from that which appears in the memorandum. comes from another source. is correct and original relates to another applicable main topic.

NB There are no alternative answers for SECTION A

4.

5.

Please take careful note of other relevant answers provided by candidates and allocate marks accordingly. (In the case where the answer is vague or indicates a lack of understanding, part-marks should be allocated, for example one mark instead of the maximum of two marks.)

SECTION B

5.1

5.2

5.3

If for example, FIVE facts are required, mark the candidates FIRST FIVE facts and ignore the rest. Indicate by drawing a line across the unmarked portion or use the word “MAX”.

If two facts are written in one sentence, award the candidate FULL credit.

All questions that require candidates to “explain / discuss / describe” will be marked as follows : Heading 1 or 2 marks or as indicated in the memorandum. Explanation 2 marks or as indicated in the memorandum.

5.4 All questions that require candidates to “name / list / mention” etc. the answers of the candidates can be in phrases and not necessarily in full sentences.


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6. SECTION C

6.1 The breakdown of the mark allocation for essays follows. Question 8 is however only partly done and counts only 30 marks. Included is: the introduction, the aims (main part), an analysis on the success of the fiscal policy(additional part) as well as the conclusion, due to the fact that higher order skills are tested by the additional part and conclusion.

Introduction 2 Content: Discuss … In addition …

(Usually 26, but for this question only 16)

10 Conclusion 2 Total Marks (Usually 40, but for this question only 30)

6.2 NO rubric is used to assess essay questions anymore.

NOTE: No marks will be allocated for content repeated from the introduction and conclusion.

6.3 6.4

6.5

Mark all relevant facts until the MAXIMUM mark in a sub-section has been obtained. Write MAX after maximum marks have been obtained.

When awarding marks for facts, take note of the sub-maxima indicated, especially if candidates do not make use of the same sub-headings. Remember, headings and sub-headings are encouraged and contribute to insight (structuring/logical flow/sequencing) and indicate clarity of thought.

6.6 If a different approach is used by candidates, ensure that the answers are assessed according to the mark allocation/subheadings as indicated in the memorandum.

6.7 Take particular note of the repetition of facts. Indicate with an R.

7.

8.

Subtotals to questions must be written in the right margin. Circle the subtotals as indicated by the allocation of marks. Only the total for each question should appear in the left margin next to the appropriate question.

Allocate TWO marks for complete sentences. Allocate ONE mark for phrases, incomplete sentences and vague answers. Let the memorandum guide you as marker. Please note: some answers count only ONE mark.

9. Learners must respond to each part of the question in order to obtain the 40 marks allocated for essay questions (Question 10).


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ANNEXURE B Question 7 (Extract from Learner Question Paper (Question 4 and Memorandum) 4.1 Answer the following questions. 4.1.1 List TWO methods to calculate national income. (2 x 1) (2) 4.1.2 Why is it important to move towards a system of free

trade rather than protectionism? (1 X 2) (2)

4.2 Study the diagram below and answer the questions that follow. ? g C D B E h F A q r ? 4.2.1 Supply an appropriate heading for the diagram. (2) 4.2.2 Label the two axes. (2 x 1) (2) 4.2.3 Identify the amplitude in the diagram. (2) 4.2.4 What role should government play in an endogenous approach? (2) 4.3 Explain how a combination of fiscal and monetary policies can be used during

a period of recession in order to stimulate economic activity. (4 x 2) (8) [20]


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Learner Question 4 Memorandum QUESTION 4 4.1 Complete the following: 4.1.1 Production method

Income method Expenditure method (2 x 1) (2)

4.1.2 World output can be increased if countries specialise in

what they are best at producing – gain a comparative advantage and maximise consumption

Free trade allows economies of scale to be maximised and reduce unit costs

Consumers enjoy a bigger choice – consumer welfare is increased – because they can buy from anywhere in the world Any other relevant fact or example (1 x 2) (2)

4.2 Study the graph and answer the questions that follow: 4.2.1 Business cycle (1 x 2) (2)

4.2.2 Index of economic activities (vertical axis) Months/years/time (2 x 1) (2)

4.2.3 g – h (2 x 1) (2)

4.3

4.2.4 The government should intervene in the economic processes in order to smooth the peaks and troughs as far as possible (2) Explain how a combination of fiscal and monetary policies can be used during a period of recession in order to stimulate economic activity.

The strongest effect are obtained during a recession when a government uses its policies in combination with one another and simultaneously manipulate aggregate demand

The government can reduce interest rates decrease the bank’s reserve requirements increase government spending and decrease taxes

This action will trigger a positive money multiplier and a positive income multiplier

Any other relevant fact. (Any 4 x 2) (8)


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QUESTION 8 – Learner QUESTION 5 (extract of learner’s response: 30 marks) Fiscal policy is an instrument used by Government to influence the economy.

• Discuss in detail the effects of fiscal policy. (30 marks) • Draw a well labeled Laffer curve and discuss in detail. (10 marks)

Learner Question 5 MEMORANDUM INTRODUCTION Fiscal policy is the government's policy in respect of the nature, level and composition of government spending, taxation and borrowing. Through fiscal policy government aims to achieve particular economic goals.(Max 2) Any other relevant answer

BODY: MAIN PART

EFFECTS (INCLUDING LAFFER CURVE)

Fiscal policy effects depend on period of business cycle – during upswing policy contracts – during downswing policy expands 1. Income distribution

• Progressive taxes make income more evenly distributed and regressive taxes make income less evenly distributed – proportional taxes leave distribution unchanged

• Spending on social goods, security and welfare payments supplement income of poor more than the rich

• E.g. 20 % of SA population enjoyed cash income from welfare and social security in 2005

2. Consumption • Direct and indirect taxes will affect total and pattern of consumer spending • Direct taxes reduce disposable income – effect on consumption

depend on propensity to consume and level of saving - direct taxes will reduce consumption with little savings

• Income multiplier kicks in when government spending increases due to higher levels of employment, higher income, and consumer spending

3. Price level • Direct taxes reduce inflationary pressure – lower aggregate demand • Result in cost-push inflation – stimulate workers - claim higher wages • Rise in indirect taxes raise general price level • Inflationary and deflationary spending depends on availability of production • factors


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4. Incentives • Taxation direct taxes (income and company tax) reduce incentive to

work, save, invest and take risks High and progressive rates keep people from entering job market

5. Discretion • Minister of Finance uses discretion e.g. how much to reduce income

tax or spend on new infrastructure • Discretion limits: deficit rule (3 % of GDP); borrowing rule (only for capital

expenditure); debt rule (not exceed 60 % of nominal G Tax income R

R1

0% t1 t t2 Tax rate 100%

• The Laffer curve shows the relationship between tax rates and tax revenue collected by the government

• The curve shows that as tax increase government revenue increases up to a certain point (e.g. t1)

• If the tax rate rises beyond 't', (e.g. at t2 there will be a decline in government revenue

• When the tax rate is high people are less likely to work hard • If tax is 100% then nobody will work because all income would go

to the government • Too high tax rates may lead to tax evasion and avoidance • Reduction in tax rates will lead to a decrease in tax evasion and

increase the incentive to work, save and invest • If tax rate is zero, no government revenue will be raised • Economists use this to justify a reduction in the level of income tax


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PERFECT MARKETS Price AR P1 MR 0 q1 Quantity

• The apex of the curve shows the tax rate where government revenue can be maximised

• This point can vary from country to country – the Laffer curve may not always be symmetrical – it can peak at 40% or even at a 90% rate

• Evidence suggests that tax rates in most countries are below t. (Max 6)

CONCLUSION In South Africa individual and company income tax rates were reduced over the last decade, stimulating consumer spending and investment overall. The progressive nature of income tax might lead to (Max 2) QUESTION 9: Learner QUESTION 2 (extract of learner’s response: 10 marks) 2.2 Study the graph below and answer the questions that follow.

Copy the above graph in your answer book and show the following: 2.2.1 The marginal cost curve. (2) 2.2.2 The average cost curve indicating a loss. (2) 2.2.3 The average variable cost. (2) 2.2.4 Indicating the economic loss by shading it. (2) 2.2.5 The optimum production point (e). (2) (10)


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Learner Question 2 MEMORANDUM MC Price AC

C AVC P1 e MR AR 0 Q1 Quantity

(10)

QUESTION 10: Learner QUESTION 5 (extract of learner’s response: 40 marks) Markets are at the centre of economic activities.

• With the aid of graphs analyse the different equilibrium positions (normal profit, economic profit and loss) of the individual firm under perfect competition. (26 marks)

• Distinguish between the long term profit of the perfect market and the long term profit of a monopoly by using well labeled graphs. Conclude with your findings on the difference between the two market structures.

(10 marks) QUESTION 5 Learner response MEMORANDUM INTRODUCTION

A perfect market is a market structure which has a large number of buyers and sellers. The market price is determined by the industry (demand and supply curves) / This means that individual businesses are price takers, i.e. they are not able to influence prices. Accept any relevant definition of perfect markets. (Max 2 marks)

BODY: MAIN PART ECONOMIC PROFIT

NOTE: The above response should be marked in relation to the explanation to graphs. Do not credit twice if it is repeated in the explanation for each equilibrium position.


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Cost / revenue Economic profit

MC

AC

E1 P1 MR / AR Mark allocation for graph: Position/shape of MC curve = 1 mark

S R MR curve = 1mark Position of AC curve = 2 marks Equilibrium = 1 mark Indication of price/quantity = 1 mark Suitable heading = 1 mark Labelling (shading) of profit = 2 marks

MAXIMUM MARKS = 6

0 Q1 Quantity

• Equilibrium is at E1 i.e. The firm will produce where MC = MR • At this point Q1 goods are produced at a price of P1 • The averages cost for Q1 units is point R on the AC curve • Price /AR is greater than AC (TR > TC) • Therefore economic profit is represented by the area P1SRE1 NORMAL PROFIT

Cost/Revenue MC AC e P1 Mark allocation for graph: • MC curve = 1 mark • MR curve = 1 mark • Position of AC curve =1 mark • Equilibrium = 1 mark • Indication of price /quantity= 1mark • Suitable heading = 1 mark MAX = 6 MARKS0 Q1 Quantity


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• Equilibrium is at E1 i.e. The firm will produce where MC = MR • At this point Q1 goods are produced at a price of P1 • At equilibrium ( point E1 ) average cost is equal to price / the AC

curve is tangent to the demand curve which means that P/AR = AC (TR = TC)

• The business makes normal profit which is the minimum earnings required to prevent the entrepreneur from leaving and using his factors of production elsewhere

BODY: ADDITIONAL PART LONG RUN ECONOMIC PROFIT OF A MONOPOLY: Price LMC P1 A LAC B LAR C e LMR LONG RUN NORMAL PROFIT OF THE PERFECT MARKET: Price LMC LAC e MR P1 AR 0 Q1 Quantity

(Max 10 marks)


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CONCLUSION

It is clear from the graphic representations that only a normal profit is made on the perfect market over the long term, in comparison with the economic profit of the monopoly. This is mainly due to a total lack of competition (monopoly) compared to increased competition in the perfect market. (Max 2)

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QUESTION PAPER ENGLISH MAY 2014