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MODULE NAME: MODULE CODE:

Introduction to Micro and Macro Economics IMME5112
SLP: Introduction to Micro and Macro Economics SIMME022

ASSESSMENT TYPE: REVISED EXAM‐PAPER ONLY

TOTAL MARK ALLOCATION: 120 MARKS
TOTAL TIME: The time given to students to complete this assessment will be
indicated on your module in Learn
By submitting this assessment, you acknowledge that you have read and understood all the rules
as per the terms in the registration contract, in particular the assignment and assessment rules in
The IIE Assessment Strategy and Policy (IIE009), the intellectual integrity and plagiarism rules in
the Intellectual Integrity Policy (IIE023), as well as any rules and regulations published in the
student portal.

INSTRUCTIONS:
1. Please adhere to all instructions. These instructions are different from what is normally
present, so take time to go through these carefully.
2. Independent work is required. Students are not allowed to work together on this
assessment. Any contraventions of this will be handled as per disciplinary procedures in
The IIE policy.
3. No material may be copied from original sources, even if referenced correctly unless it is
a direct quote indicated with quotation marks.
4. All work must be adequately and correctly referenced.
5. You should paraphrase (use your own words) the concepts that you are referencing, rather
than quoting directly.
6. This is an open‐book assessment.
7. Assessments must be typed unless otherwise specified.
8. Ensure that you save a copy of your responses.
(a) Complete your responses in a Word document
(b) The document name must be your name.student number. Module Code.
(c) Once completed the assessment, upload your document under the submission link in
the correct module in Learn.
Additional instructions:

1. Calculators are allowed

2. For multiple‐choice questions, give only one (1) response per question. The marker will
ignore any question with more than one answer unless otherwise stated. You should,
therefore, be sure of your answer before committing it to paper.
3. Answer All Questions .
4. Show all calculations, where applicable (marks may be awarded for this).
5. Instructions for assessments including drawings:
 Drawings must be done on A4 paper and your name and student number must be
included on all sheets.

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 A 10mm border must be drawn around your drawing sheet and a title block must be
inserted at the right‐hand corner. Supply information as requested.
 Marks will be lost for poor planning and layout.
 Complete each of the questions on a separate page. Make use of various pencils,
erasers and a viewfinder only.
 Draw all the required drawings on drawing paper as required.

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Referencing Rubric
Providing evidence based on valid and referenced academic sources Markers are required to provide feedback to students by indicating
is a fundamental educational principle and the cornerstone of high‐ (circling/underlining) the information that best describes the
quality academic work. Hence, The IIE considers it essential to student’s work.
develop the referencing skills of our students in our commitment to
achieve high academic standards. Part of achieving these high Minor technical referencing errors: 5% deduction from the
standards is referencing in a way that is consistent, technically overall percentage – the student’s work contains five or more
correct and congruent. This is not plagiarism, which is handled errors listed in the minor errors column in the table below.
differently.

Poor quality formatting in your referencing will result in a penalty of Major technical referencing errors: 10% deduction from the
a maximum of ten percent being deducted from the percentage overall percentage – the student’s work contains five or more
awarded, according to the following guidelines. Please note, errors listed in the major errors column in the table below.
however, that evidence of plagiarism in the form of copied or
uncited work (not referenced), absent reference lists, or
exceptionally poor referencing, may result in action being taken in If both minor and major errors are indicated, then 10% only (and
accordance with The IIE’s Intellectual Integrity Policy (0023). not 5% or 15%) is deducted from the overall percentage. The
examples provided below are not exhaustive but are provided to
illustrate the error
Required: Minor errors in technical correctness of Major errors in technical correctness of referencing
Technically correct referencing referencing style style
style Deduct 5% from percentage awarded Deduct 10% from percentage awarded
Consistency Minor inconsistencies. Major inconsistencies.
 The referencing style is generally  Poor and inconsistent referencing style used in‐
 The same referencing format consistent, but there are one or two text and/or in the bibliography/ reference list.
has been used for all in‐text changes in the format of in‐text  Multiple formats for the same type of referencing
references and in the referencing and/or in the bibliography. have been used.
bibliography/reference list.  For example, page numbers for direct  For example, the format for direct quotes (in‐text)
quotes (in‐text) have been provided for and/or book chapters (bibliography/ reference
one source, but not in another instance. list) is different across multiple instances.
Two book chapters (bibliography) have
been referenced in the bibliography in
two different formats.
Technical correctness Generally, technically correct with some Technically incorrect.
minor errors.  The referencing format is incorrect.
 Referencing format is  The correct referencing format has been  Concepts and ideas are typically referenced, but a
technically correct throughout consistently used, but there are one or reference is missing from small sections of the
the submission. two errors. work.
 Concepts and ideas are typically  Position of the references: references are only
 Position of the reference: a referenced, but a reference is missing given at the beginning or end of large sections of
reference is directly associated from one small section of the work. work.
with every concept or idea.  Position of the references: references  For example, incorrect author information is
are only given at the beginning or end of provided, no year of publication is provided,
 For example, quotation marks, every paragraph. quotation marks and/or page numbers for direct
page numbers, years, etc. are  For example, the student has incorrectly quotes missing, page numbers are provided for
applied correctly, sources in presented direct quotes (in‐text) and/or paraphrased material, the incorrect punctuation is
the bibliography/reference list book chapters (bibliography/reference used (in‐text); the bibliography/reference list is
are correctly presented. list). not in alphabetical order, the incorrect format for
a book chapter/journal article is used, information
is missing e.g. no place of publication had been
provided (bibliography); repeated sources on the
reference list.
Congruence between in‐text Generally, congruence between the in‐ A lack of congruence between the in‐text
referencing and bibliography/ text referencing and the bibliography/ referencing and the bibliography.
reference list reference list with one or two errors.  No relationship/several incongruencies between
 There is largely a match between the the in‐text referencing and the
 All sources are accurately sources presented in‐text and the bibliography/reference list.
reflected and are all accurately bibliography.  For example, sources are included in‐text, but not
included in the bibliography/  For example, a source appears in the in the bibliography and vice versa, a link, rather
reference list. text, but not in the bibliography/ than the actual reference is provided in the
reference list or vice versa. bibliography.
In summary: the recording of In summary, at least 80% of the sources In summary, at least 60% of the sources are
references is accurate and are correctly reflected and included in a incorrectly reflected and/or not included in
complete. reference list. reference list.

Overall Feedback about the consistency, technical correctness and congruence between in‐text referencing and bibliography:
....................................................................................................................................................................................................................................................................................................

....................................................................................................................................................................................................................................................................................................

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Question 1 (Marks: 40)

Multiple‐choice questions: Select one correct answer for each of the following. In your answer
booklet, write down only the number of the question and next to it, the letter of the correct
answer.

Q.1.1 The form of economics most relevant to decision‐making within the firm is: (2)
(a) macroeconomics.
(b) welfare economics.
(c) free‐enterprise economics.
(d) microeconomics.

Q.1.2 Which of the following statement correctly defines marginal utility? (2)
(a) Marginal utility measures the consumer's overall level of satisfaction
derived from consumption activities.
(b) Marginal utility measures the added satisfaction derived from a one‐unit
increase in consumption of a particular good or service, holding
consumption of other goods and services constant.
(c) Marginal utility measures the consumer's overall level of satisfaction
derived from consumption activities.
(d) marginal utility states that as an individual increases consumption of a
given product within a set period of time, the marginal utility gained from
consumption eventually declines.

Q.1.3 A technological advance, e.g. the introduction of the automated teller machine (2)
(ATMs), shifts the labour curve to the___________.
(a) Demand, left.
(b) Demand, right.
(c) Supply, left.
(d) Supply, right.

Q.1.4 Which of the following will most likely increase the price of biltong? (2)
(a) There are fewer producers of biltong.
(b) There is a new, cheaper way to produce biltong.
(c) The supply of biltong rises.

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(d) There are many producers of biltong.

Q.1.5 Income inequality in an economy is traditionally measured by: (2)

(a) calculating the bell curve of ability, effort and chance that exists in an
economy.
(b) calculating the percentage of families that fall into broad income
classifications.
(c) referring to standard international distribution tables.
(d) using something like the normal distribution.

Q.1.6 In economics, the cost of something is: (2)

(a) the out‐of‐pocket expense of obtaining it.
(b) what you give up to get it.
(c) always measured in units of time.
(d) always higher than people think.

Q.1.7 Suppose that a decrease in the price of X results in more of good Y sold. This (2)
would mean that X and Y are:
(a) complementary goods.
(b) substitutes goods.
(c) unrelated goods.
(d) normal goods.

Q.1.8 Which of the following would NOT shift the demand curve for shoes? (2)
(a) an increase in the income of shoe customers.
(b) a decrease in the price of shoelaces.
(c) a change in expectations about the price of shoes.
(d) an increase in the price of shoes.

Q.1.9 If the Central Bank sells bonds in an open market operation, which of the (2)
following is most likely to occur?
(a) Reduced banks’ cash reserves (liquidity shortage).
(b) the money supply increases.
(c) the interest rate falls.

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(d) the aggregate demand curve shifts to the right.

Q.1.10 When a profit‐maximising firm makes a decision to employ a worker, that (2)
decision is based on:
(a) the familial relationship between the employer and the employee.
(b) how much output the worker can produce.
(c) the individual contribution that the worker makes to the profit of the firm.
(d) the total output produced by the firm.

Q.1.11 If an increase in the number of workers leads to all workers becoming less (2)
productive, this situation is called:
(a) diminishing profitability.
(b) diminishing marginal product.
(c) increasing marginal product.
(d) lessening production.

Q.1.12 A firm’s demand for labour is derived out of: (2)

(a) profit maximisation.
(b) cost minimisation.
(c) revenue maximisation.
(d) the price of a good.

Q.1.13 Nominal GDP measures the value of goods and services in prices, while real GDP (2)
measures the value of goods and services in ___________prices.
(a) Foreign, domestic.
(b) Domestic, foreign.
(c) Current, constant.
(d) Constant, current.

Q.1.14 The total income of the economy adjusted for the level of prices is called: (2)
(a) A recession.
(b) Real GDP.
(c) Inflation.
(d) A business fluctuation.

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Q.1.15 Which is the most accurate statement about the CPI? (2)
(a) When the CPI increases, the average family has to spend less to maintain
its standard of living.
(b) When the CPI increases, the average family has to spend more to maintain
its standard of living.
(c) When the CPI increases, the standard of living of the average family
increases.
(d) The CPI has nothing to do with the average family’s standard of living.

Q.1.16 The most important form of direct taxation in South Africa is: (2)
(a) Personal income tax.
(b) Capital gains tax.
(c) Company tax.
(d) Value‐added tax (VAT).

Q.1.17 The term tax incidence refers to the: (2)

(a) division of income tax between high‐income and low‐income earners.
(b) level of tax levied on a buyer of a good.
(c) division of the tax burden between buyers and sellers.
(d) division of tax between federal and local government.

Q.1.18 For the government, ____ is a source of revenue, while ____ is a use of funds. (2)
(a) transfer payments; issuing new money.
(b) issuing new money, issuing new bonds.
(c) taxes; purchases of government consumption goods.
(d) interest payments on the public debt, transfer payments.

Q.1.19 What are the major flows in a simple economy? (2)

(a) Production, Income and Spending.
(b) Spending, Production and Saving.
(c) Income, Saving and Production.
(d) Income, Spending; and Saving.

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Q.1.20 The money demand curve is: (2)

(a) downward‐sloping because the opportunity cost of holding money is
inversely related to the interest rate.
(b) downward‐sloping because the opportunity cost of holding money rises as
the interest rate rises.
(c) downward‐sloping because the opportunity cost of holding money rises as
the interest rate falls.
(d) upward‐sloping because the opportunity cost of holding money rises with
the interest rate.

Question 2 (Marks: 25)

Q.2.1 What will happen to supply or quantity supplied under each of the following
situations?
Marks will be awarded for your ability to integrate the theory to each
scenario provided below.
Q.2.1.1 the price of the product falls (2)
Q.2.1.2 technology improves (2)
Q.2.1.3 input prices rise (2)
Q.2.1.4 expectations change – you expect the price of your product to rise (2)
next month.
Q.2.1.5 In a crocodile market, the number of crocodile farms and ranches (2)
closes, ceteris paribus.

Q.2.2 Are the following statements true or false? It is not enough to just guess one or
the other. You need to provide an argument for or against, and only then will
full credit be awarded.
Marks will be awarded for your ability to integrate the theory to each
scenario provided below.
Q.2.2.1 Economics is the study of the circulation of money between banks, (2)
taxpayers and the government.
Q.2.2.2 The opportunity cost of something refers to the price you pay to get (2)
it.

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Q.2.2.3 The efficient production points for the production possibilities curve, (2)
all lie outside and to the right of the actual curve itself.

Q.2.3 With the aid of your own examples, distinguish between a flow variable and a (5)
stock variable.
You will receive more marks for your original examples than for examples in
your textbook, from your lecturer, or on Learn.

Q.2.4 Mention any two advantages and any two disadvantages of a market economic (4)
system

Question 3 (Marks: 20)

Q.3.1 Suppose the government imposes a tax of 10% on the first R20 000 of income,
20% on income from R20 000 to 50 000, and 30% on income from R50 000 or
more. Mpho has an income of R32 000 and Tsepiso has an income of R60 000.
Q.3.1.1 What are the tax liabilities for Mpho and Tsepiso? (4)
Q.3.1.2 Find the marginal tax rate for Mpho and Tsepiso? (2)
Q.3.1.3 Find the average tax rate for Mpho and Tsepiso (4)

Q.3.2 The table below shows Helen’s utility from a weekly consumption of (10)
chocolates and yoghurt. Re‐draw the table and replace the letters with the
correct amounts.

Goods
Chocolates (Pc=R1.00) Yoghurt (Py=R3.00)
Units MUc TUc MUy TUy
1 A 30 39 D
2 20 B 30 69
3 14 64 E 93
4 C 74 18 111

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Question 4 (Marks: 25)

Q.4.1 Advise an economics student on any four problems that are associated with (4)
GDP in determining economic growth.

Q.4.2 Explain the business cycle, with the aid of a clearly labelled diagram, showing (6)
all elements of a complete cycle.

(Note: four marks for the diagram and two marks for the explanation)

Q.4.3 The table below describes the production possibilities for Siya and Bonolo in a
four‐hour shift.

Coffee Croissants
Siya 20 15
Bonolo 8 16

Q.4.3.1 What is the opportunity cost of one coffee for each person? (3)
Q.4.3.2 What is the opportunity cost of one croissant? (3)
Q.4.3.3 Who has a comparative advantage in coffees? Who has a (3)
comparative advantage in croissants?
Q.4.3.4 Who has an absolute advantage in coffees? Who has an absolute (3)
advantage in croissants?
Q.4.3.5 Who should produce coffees? Who should produce croissants? (3)

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Question 5 (Marks: 10)

Q.5.1 Suppose people consume only two goods, apple pies and meat pies:

2010 price 2010 quantity 2011 price 2011 quantity

(Base year) (R)
(R)
Apple pies 8 40 10 50
Meat pies 10 80 12 100

Q.5.1.1 Calculate the nominal and real Gross Domestic Product (GDP) for (4)
2011.
Q.5.1.2 Calculate the real growth rate in 2011. (4)

Q.5.2 In a country with a population of 50 million people, there are 20 million children
under the age of 15 years, 16 million employed, 9 million pensioners, 4 million
unemployed and 1 million people who are physically unable to work.
Q.5.2.1 Calculate the unemployment rate for this economy (2)

END OF PAPER

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