Solutions Oct/Nov 13Question 1:

1.1 G, T Public debt management1.2 Theoretical question1.3 To reduce imports by making imports more expensive and to allow local companies

to compete more effectively with the rest of the world. Also generates income for government.

Question 2:

2.1 a. Theoretical question

b. The area of inequality (i.e. the area between the line of perfect equality and the

Lorenz curve) divided by the area of the triangle under the line of perfect equality.

2.2.1

2.2.2.

1

Question 3:

3.1

3.2

3.3

Question 4:

4.4

2

Decrease in i% leads to an increase in the level of Investment spending A higher level of Investment spending will increase AD in the AD/AS model AD shifts to the right The general price level increases The national income level / output increases

4.5.1 Theoretical question

4.5.2 Structural – mismatch between available skills and the skills required in the job market.

4.5.3

X are not dependant on national income It depends inter alia on the income of the foreign nation (importing country) The X – function is illustrated as a horizontal line in the Keynesian model It affects the level of aggregate spending but not the slope of the line.

Multiple Choice Questions

1. 12. 33. 44. 35. 36. 17. 48. 49. 410. 111. 312. 413. 114. 2

15. 316. 317. 118. 319. 420. 421. 222. 123. 224. 125. 326. 227. 228. 2

29. 430. 231. 132. 333. 234. 135. 336. 337. 238. 339. 140. 1

3