Fcsi601 “REVISION COURSE ans Course name: \o 601 Prepared and TAMMY PIKE Presented by: NOTE REGARDING TEXTBOOKS: Whore possible attempts have been made to reference the new textbook as well. Please pay careful attention to the “NOTES RE CHANGES” in the text boxes. While every care has been taken to include all relevant facts, the author cannot be held responsible for any omissions or errors In the notes provided. Students are also reminded that any notes are nota substitute for the prescribed material. sasr Ecseot [REVISION COURSE amis LEARNING UNIT2: Main partisipants in ascdrm, open economy ae: + Houscholts + Fens © Govemmens Foreign Sector ‘Tho two mala markets ae: [MAKE SURE YOU CAN DESCRIBE "Markets for goods and services \_ ALLOF THESE. Be chee on leche 5 & Smcclsn 1A Producto, incomeand Sosnding (Major Fw) Production i ofceavalLapenance to economists. Production doesnot tke place for fhe ake of production alone, ‘The goal of profusion to sat) consumers” sonasds, Te room poss flows: Housthols wa the tore of production mg we facors of production (Scuee rescuces) 10 produce goods and 4+ Housshols use the income to spend on goods end services. 2087gf Factor Markov: The szuce cesourcesrogaed by he fin to proce the soos snd serves are purchased fom the howsetl markets Te comes WH" Garey the ones of te fcr of pra : Fink beween housealds aad Gms © need finds. SAVINGS i a leakage STMENT iran ijeton, Tonle s sordgragee Doe secre oneal Sap, Cr1+G+K-2) ‘This agyeqas experi competed of seesECSI¢OL REVISION COURSE 201s = Consumption Spening uM 3s 36 a7 NOTE RE CHANGES: Sen te New Tatoos Sources ef redunian: te fers of product. This scan dese each ofthe ‘tom of production, This te as cote! you sed In ECSISO Suse fice: she rmntono be tort posta. Tsar ben | covered hove. Source of pending th Sour peg enn, Ts sn de wid he Inwoduetoa ef Goverment, Foreign Svar and Fase tases i ‘connie ekeuler fon. THs has ben covered shove Putin ings ogee: a single ig, Maralingsledependeae: ula fw of pedo income and pending Understanding the cireslar flow model: 1 Complete diagram balaw by avi the eoet labels for A, B, Cand Din the diagram below. (HOAs Ge 7a mney 2. Labeltte flows A, 8, C and D fn the digram below. sofsr of Reber of prthlon csi601 REVISION COURSE, ams hoo sAeg, ‘Tit MONETARY SECTOR LEARNING UNIT2: ‘TEXTBOOK: CHAPTER 1S: [New testhok: Chapter 1 ‘doubt coincie tans ‘Wt one Money aig commonly ep oye ode nd series or hat i aeegtd in settee ualabie moans (an). Jn a money economy al prices are expressed in monetary tems, ein SA in sends and ean ‘xn ale be hold in the fra of ined property, real ates, sacks and shares, oatsEcsteol REVISION COURSE 2015 ‘The benefit of holding eatin oney i tht sam immediate vale iti said 1 be he most liquid form of weal. When can bea esadventage 0 hold moneys a stor of alte? Maney ale act 36 andar of detec paenen Wit ie seans hat it "Yaurst row what feat by: Fin money, eeditmoney, Teal ender EXERCISE: Usethe ol ving ei showing onc epee tan pg. ws r Baad TTF g Degosts (| Rey | (ny __| Gy BOM |421s5eYSIENT YOU IST cae ae esol cnn emo 04 Serevel Seporsd 1 Why tele of thar nd mednmem dopo tte en of 2082 Me ey €._Wataeta a oan rm death en 2082 4. Wile mon of ming ino cloned: wi Rehr oR. seashore. + ws cst a Mie 24_Financal intermedi ‘As money gsew in popular so cea insituons developed which speiaod fnECS1601 REVISION COURSE ms ECSIOOL REVISION COURSE 2015 1+ Weassume tht only banks ae sutborzed hold demand depois 4 Weasoume thatthe fa central bank that exersio conse over othe barks. Iehnsgudtingcuinrany | secucee Aedes pocblfin acetate pre cada, 5 Whatace demand deposi? Wy 4 ealemsacins: Begyeny sera tell Fhavcstimactins [reas hats, AUT, Ri2 and Mi (ascused previously ae weed to determin the quzaly of money. Pleste note hat Ue quamiy of ney fa stock argble ae e posible o mewsire money in an ewonory aa polo is ns Im ordee to examine the quanly of money or supply of mamey she following sesurplons ae made: "Wel we th dtiaidon of money -MI. Thus M « C+D ONLY! wcsuhor® AE we owe . outer toatsrBcsteot REVISION COURSE ams ‘TRANSACTIONS DEMAND [NOTE RE CHANGES: in the new toutbook this section only deals with ‘Teausction snd Specclave maies,Iignees the precntionsy motiee) Refer w Fig 15-1 (Now teuibook: Figure space below to draw ad label rh passive balaces. ‘Baw paphs~ Derive the demnad carve Far money (one and pave alse oy ip prone 7 Lilyth | RE || beope Aue se [Be << Dero! Be S : E FB Bont ith wie 1 anya ony ond vs Sit ce 12 een 2a awit “There is mo Independent Money Supply Curve: money supply is determined by he inaction of eran for money a he itrest ae Level “Tis is why we refer ‘o te STOCK of money and no longer he SUPPLY of money. nesr ecsiea1 REVISION COURSE she examinations seersEcsteot [REVISION COURSE aos Ecst601 REVISION COURSE aos c SAND compris chess ines fe (op mt) an cena + ‘Teallntve finstion: hol govern cresting at ise and Erowt SAD. onwhich eas ede avahtleto Banks Te msn ol arbi) whereby the avieving amore eff scat a estes By VAS tele he uy one eel we ney Oe et gy ‘reat ego rat) Changin th repo rie eo noe ees re + ‘Thedcioton fation: Be sep goverment kes thieves me | fp si pie . abl or soil pzepableSerbun af ese an at Collke. fie lonon begererese erat Stern cau aly aecepable Gsrbution of income tan at generated by as Open foe Poly ~ SARB con by adel goverment bonds Ti ore ich speci fence on et te oo 4+ Thesabiiation freon: messes uke by goverment 0 proms ‘quantity of money availabe (rmoney suoply/stoes). 3 Pen snteroenvone stabi. MBS ZARB say PoP ae 7 rate Quen” whey bya "iveny mt ot be confsed ih equity (i). Maver noes hat an cpp oy bypuchasne ove ents SLE buy bel Demtene BORERGR Pf pec ettons 3 fp 1) iterate ban 2 Expl SARS aes pen matt petn 1 eet te mons spe esnons. Wthoppeeta be arte ” 2. sea gph w tase i vege lant bene dead fo money sects Look OF Fe 2. SENS LEARNING UNIT 3: 16: THE PUBLIC SECTOR [New textbook: Chapter 15] All economies ean nowadays be classified as med enone ia which the [goverment the private sector and make! force ll psy an impetarto. Pevate {biative ond matt forces are peerlly more ecient tn any ether sytem io finding solos bs esenoie bln of wh wan for whoo ‘Govenment should no et aveved ia tho p be produced much more efficiently by Ye piat eto ian of goods and services hat can ‘©. Regulation can ako be usd by goverment itervene inthe ‘economy, Examples bur ows ay We, 33__Goverment ie ent ‘Governientinvervenion in markets to help solve the problems of mae Siar, are nt gusranted ig be succes. Gaverametis and gotemeat ean be sumed vp 8 flows sin cn alo fil. sausr nerEcsteot REVISION COURSE ois a Nae ater npn stare eptand masegemen: on poods and services. Ia overt pay fer thle ‘spending, they need 10 188 taney aod or engage ts horsowing Govemeats, seater weosrECSIOT REVISION COURSE 2018 "© Polite! and other shocks. South Aftie"s involvement in. wars io SWA, ‘Angola and Monunbigne. Growing docxstis unest Sections. ‘+ Redistibution of income. Goverment cua use sci spending to move the ‘+ Pepulaion growth ar srtanizaion, Goverament ast pend in onder to orpUBOry payment to the government acd Oe age sings eoutbaton ‘ovement sponding. Tot & ker ematvo isu People donot lke i and each porcon Fels a5 though they are pesceally bearng the Grunt of the x bude, ‘Tce base cctv for ensuing at taxes ae “good” Save bee developed. west Besi601 REVISION COURSE os ‘The mala ertera for a good tax: NEUTRALITY: ine mare bss ten te sononie pom sled by de ‘any tax should have a lithe possible effec on relative prices. EQUITY: tax bunen should be spread a8 iy 2¢ possible meng wnxpsyers. Two ‘se pines ar appieg= ‘The ably to pay principle which feuds: (0 verlestequty—rich people should pay more tx then poe people. ‘© hariaonal equity <= people ath ste positon bool py the same ‘+ Tho benefit principe. Aoverding to this princpl beseficlais should make some soto payiant forte bene hey ceive, Suc payrents a called ‘ser charge ADMINISTRATIVE SIMPLICITY: complinee coss ant admission costs ‘at be kept as lw as posible. Different between + Tacaveiance + Texension Morginl Tax aes; 17S te ee KR frogs, ‘Conver tas been exprsted rogating goveraren'sinewasing share of GDP in the ‘ceanomy. ‘The agment hasbeen ros hat hs nernies goverment spending ‘rondlngout privat invesiment spending. {atsrction has Been moved from the lubes] weetsrECsLeOL REVISION COURSE mms LEARNING UNIT 4: TEXTBOOK: CHAPTER17: THE FOREIGN SECTOR New textbook: Chapter 16] "The places of plbslnven: wade is expanding, exp! markets have developed; sooto7 ifthe opportunity casts of prosaction difer in exh cosa. Equal Advantage + Differnses in tases or demaod, Note the commentary in the preseibad textbook. ATPLICATION EXERCISE: ‘Use he tbl showing te umber of his an eckess hat Country A and Country B ste able to produce per dy, to answer the question below: Shirt per day) [sacha (per aay) Eoanteya [20 0 CounteyB [eo 2 ‘Eaphin whether tae wil take pace betwen thes two counties. ‘Country Blagan ABSOLUTE ADVANTAGE in bot peed, aoetsrA tr tas levied aga ofthe value of he mported tem. Revenue serif: aro nomully imposcd on good that ae not manutd in te domestic (cal) maket Thu there can ben argament tat the tras ben levied forseasons of proteton! Protective trifs are narally imposed 10 protect loci industry fFom competion from free counties tnerntasurs ts ha any of tho ther ensues we have discussed se. NOTE RE CHANGES: ‘Tae OP i an occount vcard De économie aasatons tween he ide ‘of on country andthe rst ofthe word, The BOP eles to» exrain period and is ‘made up of tho following: cueat accu, capa wane account, financial account, cp unscorod transitions and the net change in tbe goK! aid eat foreign exchange atatsr amis table must be tebedoe Set Matcold oy CQ) tre umocorded transtton se terest eon on he BOP. Sine te dbl any ‘ater wed ecrdtamctnson te BOP, the ne wn ol rend debt Stes, shold oa ta change scouts mt gold un oe Greig sees, In vei ts coe so pp, All makes and ensos are reored ia Ge ‘Tho folowing are the reasons why the golt sod forsin reserves ant the mest important tase he South Arian balnes of payments noePre $e ECsIe0t REVISION COURSE aos ‘+ Tey show de overall position ofthe BOP. consis grow without roming ito BOP acute, 44 Bichanee Rates “The ate at which currencies are exchanged is mows a the rate of exchange rate. ‘orelgn Exchange Market ora exchange (Forex) weed on the foreign onchange mache ‘Demand fr Foreign Exchange (Dollars) hat mansactions are tkly to led to an\jncrease th serene et a Te Sopay fore xchange (ste) tuscan arly o ek a increta the sap of fog cartons a EOM oe Maen 5 EE, Boece Zee pot s CSIC REVISION COURSE aos ‘iter espe ign ey che Sous Ai flan chap wat Irs wy rd Is Age 20 oi et si Stroy. Wig? Show, by mesos ofa grap, how an increase inthe demand for USSS on tke South Ain forex market wl lead tom depreciation ofthe rand against he USS: “in crea The demand er the USS on the BA forex mar: ‘COMPLETE THE TABLE BELOW AND LEARN [F aatsrecsteot REVISION COURSE aos [GhanpstnmSeatange| Expert Inpart a pEees ham, aco Exchange Rate Policy Exchange tales canbe one of the mos. important prices in an economy. Wht can be done ifthe rte are paticalriy vous? Tf you bave a lating exchange rate (open to afuences from changes in demand and soply in the forex marke, hen Ue 6 2sotsr Eqope, Her puchts send bean extra R5000 te help he. LEARNING UNITS: ‘TEXTBOOK: CHAPTERS Ise om textbooks: Chapter 13] /EASURING THE PERFORMANCE OF THE ECONOMY ‘NOTE RE CHANGES: ‘The content his chapter has rained ihe sme inthe new textbook excep forte nchsion ofthe Batnoe of Payme's. 5a 1 Maseossosomls Obictives ‘The flloning macroceonomlc objectives aroused to assess the pefommance ‘ofthe esonamy: asotsrPesi6ot REVISION COURSE 2s cst6ot REVISION COURSE 2018 ‘These three methods essen mensue te une thing, jus a difxent pots in be lular How, Phase eat Gt iad real world, caution of de ve of GDP i Snftely mare empl ban we have ust rads Oo bs, ios. Thro avo te sts of pies that ay be tipo caeuting GDP according tothe expondince + Bikes use. whe oeuing GOP acuta abe poducon or ahs sisted “aes el Reb ine Oi eone ‘What happens fou reverse the process shown above: starting nth CDP a factor cost mening GDP a Base pices and then ending with GDP of market prices? Dee gebubatgee nene Dra foneaened ae achor : iat eR ce + Production method (vale added}, Bigy < poses nas GVA is Gens Value Led meterC8160) REVISION COURSE ams REVISION COURSE 2015 EXAMPLES OF difcrent susie nd ini “Texes on produets inelud vt and duties, “Taxes on prodcton ice pyrl es, busines and profssona Heenss ‘Subsidies on products include per unit expnt eubstis, ‘Subsidies on prodacton fhe subsite on prodution or ras. Fico capa formation refers tothe purchase of capi god e. beilings), while ‘changes im eventos vllet goods produced doing the pried tat have nt been ‘08, o goods produced nen etlr period but onl sold in Ue curt peo, [Bote thatthe shove is what is commonly refered toa T (Investment) inthe GDP identity above] wot). ‘rages a salaries coed by foreiga workers engaged i domestic podztio, thats Unemployment Rate = Number of wcemployed peop asa preelage ofthe otal ‘ony, within South Aion. snus of people who are willing and able to werk. pects soersrmeasurement of basket of poods sd srsicg (used bythe average South Aiea fail. “The Consumer Price Incex (CPI) Collet pices cack month fe the gods ad services ia the baget. ‘Whats a Price index: a namrical vale obtained by dividing the cost ‘of ahasht of godlerices in he cuneat prod bythe cox of Ue ‘asks lah base ped 6 Mearutinethelnks with the zest of te wort: the BOP In onder t achive the macreceonomte objective of balance of payments tality, ‘The curent aecoat dels with tbe impor aed export of goed and services (oad), at wel ag the primary Income eecols and payments The espa or facial account ‘sks the Rind owing in, and out of the coun forthe purchase of asst, such ss bonds and shares, sroter ECsteot REVISION COURSE 2015 json the erent aunt mens tht Ue vale of exports wae gene than he inpons, A fit ideas tte valu of pons exceeded the vale of ‘You mist bo ablete draw wd explain igue 1 (eow naboak: (333) inthe tenbook. + Toe Locenz Curve ~ The Lorenz Curve highlights the diference between te Sie of perietequaly 2nd tho acral ltt ia he econo. ‘The Gia Cooticiot— Usas ie Lorez cave and cals the sto of te arcu ered by the Lorenz curve snd th tne of perc quay reine toe isi angie ingle Divide he AREA of INEQUALITY ty the ares ofthe RIGHT ANGIE, TRIANGLE formed by the ates andthe LINE OF EQUALITY LEARNING UNIT 6 TER 18: INCOME DETERMINATION INA SIMPLE [Note he following: ‘+ Natio] azeounis re concomed with the measiement of ttl production, coo and spending in dhe economy, Tua income = Total production = Fra Tecoms, “+ Mcrocconom th se pot alas equal + There are dee cere withthe explenaion ofthese ows ad they come eared Kam proection mend not be spentEcsteo1 REVISION COURSE 201s ‘Tee symbols used in macroeconomics! “ioe 1 denote tl come total rodeton and output "ais used denote tal or ageregale spending Intervention elder to danper oto amulats the ceonamy fem net ie Says iw on he cher hand, does nt need any goverment inervetion 62. BASIC ASSUMPTIONS OF THE MODEL (Keynesian) TSSURIPTIONS: IMPLICATION “The economy consis ofhousebols and ess on “There sno yovemment “The tn Fraga setae cst601 REVISION COURSE Pasa Wages are given ‘The money supply and interes rates ate sven Spending (mandi th ving force ther determine he fave of econo { tacome ~ part of the exta income is ved = CONSUMPTION. INDUCEDEcs1601 REVISION COURSE 201s + Induced consumption spending ~ sprang Un is induced or eacouraget based on your level of income, “The slope of the consumption ats the marginal propensity to -Bxpltn the poston of the consumption funtion, using a graph. rodacon tn fy ivesten ihe proces of eaptl formation Ivesurent does not respond 10 ehenges in income, wherefore in fs elit ‘AUTONOMOUS. Note: Investasrn speding is deueminan of income, but income is not a DRAW graphs shoming (th inverse lationship betveen investment spending en ‘he mesa nd (the onsmous relationship Betecn investment an he eve otineome, asorer esisot REVISION COURSE aats Tee erences ~, 65 SIMPLE KEYNESIAN MODEL vA CLOSED ECONOMY WrtHIOUT GOVERNMENT _Aggroate sponding or eguregat doruaed rust be considered ia waion oie of auliriun. ‘The Degree Line The AScdegte tine Equiv is wise: ‘SHOW WAERE AN ECONOMY IS IN EQUILIBRIUM sewer