Directorate: FET Curriculum

ECONOMICS

REVISION BOOKLET

2023 TERM 3 and 4

Grade 11
Notes to the learner

This revision program is designed to assist you in revising the critical content and skills envisaged/ planned to be covered during the 3rd and 4th
terms. The purpose is to prepare you to understand the key concepts and to provide you with an opportunity to establish the required standard
and the application of the knowledge necessary to succeed in the NCS examination.

The revision programme includes the following topics:

TERM 3

• Wealth and income

• Economic Growth

• Economic Development

• Money and banking

TERM 4

• Globalisation

• Environment Deteroiation
1. WEALTH CREATION

1.1 Definition of wealth:

All the accumulated physical and financial assets that enable households, firms, and the government to earn an income.

Examples include shares and investments which are referred to as financial (monetary) wealth and property, furniture and clothing which are
referred to as physical (real) wealth.

Definition of income:
The remuneration that you earn for the work done by the factors of production.

1.2 Difference between income and wealth

Income
● Income is the remuneration that is earned by the factors
of production for participating in economic activities.
● Income can be wages, interest, profit, and rent.
Wealth
● Wealth refers to the value of fixed and monetary assets that are
accumulated over a period.
● Wealth enables people to earn an income.
● Wealth is measured in terms of money, but money on its own is not
wealth.

1.3 Sources of wealth

Wealth is created by:
• Savings: When people save a part of their income in banks, they will earn income in the form of interest.
Savings is used to purchase any form of wealth.
● Inheritance: People receive wealth from someone who passed away.
● Luck: Some people receive wealth when they win competitions or the Lotto.

Methods to create wealth from savings:

● Savings is income that is not spent.
● The function of savings is: Savings (S) = Income (Y) – Consumer expenses (C)
● An increase in your income can lead to an increase of savings or the purchase of physical wealth.
● To increase savings, either your income must increase, or your expenses must decrease. Savings only become wealth when they are
used to buy physical or financial wealth.
1.4 DISTRIBUTION OF INCOME AND WEALTH

INCOME DISTRIBUTION – The way in which income is distributed between households.

WELFARE DISTRIBUTION – The way in which wealth is distributed between households.

HOW MUCH INEQUALITY IS ACCEPTABLE?

There are THREE methods to measure the extent of income-inequality:

1. Quintile relation
2. Lorenz-curve
3. Gini-coefficient

1.4.1 Quintile relation: When the population is divided in five equal groups according to the income they earn. Each group consists of 20 % of the
population (20 % x 5 = 100 %). Quintile 1 will be the 20 %-group that earns the least and Quintile 5 will be the group that earns the most.

Household income Cumulative Cumulative

(%) population (%) income
Quintile 1 Poorest 20 % 5 20 5%
Quintile 2 Second 20% 10 40 15%
Quintile 3 Third 20% 15 60 30%
Quintile 4 Fourth 20% 30 80 60%
Quintile 5 Richest 20% 40 100 100%

The quintile-relation is used to measure inequality amongst different groups. The calculation is as follows:

Quintile relation = % Income earned by the highest 20 % of the population

% income earned by the lowest 20% of the population

= 40% ÷ 5%

= 8
1.4.2 The Lorenz-curve is developed in 1905 by Max Otto Lorenz. The Lorenz-curve is a graphical representation of the quintile relation.

● By plotting the cumulative income and population percentages, it will create a

convex curve along 0, A, B, C, D, which is the Lorenz-curve.
Cu
m ● This indicates that at C the poorest 60 % of the population earns 25 % of the
ula whole country’s income.
tiv
e ● The 45°- line serves as a reference point and represents perfect equal distribution
% of income. This is the line of equal distribution OR perfect equality.
Inc
o ● Along the above curve the first 20 % of the population earns 20 % of the total
income and the first 40 % of the population receives 40 % of the income, the first
60 % earns 60 % of the income etc.

● The larger the distance between the line of equal distribution and the Lorenz-
curve, the larger the inequality in terms of the income distribution.

Cumulative % population ● The area between the line of equal distribution and the Lorenz-curve is called the
area of inequality.

1.4.3 ● The Gini-coefficient is derived from the Lorenz-curve. The value of the Gini-
coefficient is acquired by dividing the area of inequality by the total are that falls under
the equality line. The Gini coefficient is calculated by using the information from the
Lorenz-curve. Cu
● The Gini-coefficient measures the extent of inequality. m
● It is the relation of the area between the Lorenz-curve and the line of equal distribution ula
(0B, d, c, b, a, 0) and the total area under the line of equal distribution (triangle 0BA0) tiv
● The value of the Gini-coefficient will be between 0 and 1. e
● A Gini-coefficient of ZERO means that there is a perfectly equal distribution of income. %
● A Gini-coefficient of ONE means that there is a perfectly equal distribution of income. Inc
● The higher the value of the the gini, the larger the income distribution inequality. o
● South Africa has a very high Gini-coefficient of 0.63 that refers to a very inequal distribution Cumulative % population
of income.
 Uses of the Gini-coefficient:

• The Gini-coefficient is used to compare the distribution of income of different sectors of the population.
• It is used to indicate the trend of the income distribution over a period. Income distribution does not stay constant – it changes.
• The Gini-coefficient can be used by travellers to determine the conditions of a country. Inequality in terms of the income of poor and
rich groups in a community can be clearly seen.

UNEQUAL DISTRIBUTION of income and wealth means that there is a huge difference between the income level of the richest and poorest
households or between a rich or poor country.

Die Ryk Noorde

Unequal distribution of income and wealth occurs on a global scale. The

imaginary line between the North and the South indicates the divide
between the richer and more developed countries of the North and the
poorer and developing countries of the South. The more industrialised
countries in the North have a more equal distribution of income. The
countries in the South focus more on the primary sector and experience
a more unequal distribution of income.
D
The Poor South

1.5
REDISTRIBUTION METHODS
A. International redistribution methods
1. Tax ● High income earners and rich people are taxed to pay benefits and benefits in kind to lower income earners
in poor areas.
● Progressive personal income tax: earners with a high income are taxed at higher tariffs (percentages)
● Wealth tax includes:
→ Capital gains tax (CGT) is levied on the profit earned when capital goods like property and shares are
sold.
→ Estate duties tax is 20 % payable on the estate of a deceased person whose net estate is more than
R3.5 million.
2. Cash allowances ● Large amounts are paid to poor households as a support – this is called social allowances.
● Examples: pension funds, disability grants, child allowances and unemployment insurance fund.
3. Benefits in ● Poor households receive free health care, education, school meals, municipal services and infrastructure.
kind (free) ● A limited amount of free electricity and water is also provided.
 4. Labour market ● Minimum wage, non-discriminating laws and training subsidies decrease income inequality.
policy

5.Macro-economic ● The Expanded Public Works Programme (EPWP) creates jobs for households with a low income.
policies ● Regional development policies such as SDIs decrease income and wealth inequality.

B. Affirmative action in South Africa

1. Broad based ● The Broad Based Black Economic Empowerment Act of 2003, provides a legal framework for transformation of
black economic the South African economy by increasing the amount of black people in the economy that own, manage, and
empowerment control business activities.
(BBBEE) ● The Department of trade and industry (DTI) published a score card that is used to measure the transformation
and empowerment progress in businesses and industries.
● Elements on the scorecard include the ownership of shares, ownership and management, employment equity,
procurement, business development and social responsibility.
2. Land restitution ● The aim of land restitution is to give back land to those who lost it because of race discriminative laws and
and reformation. practices after 19 June 1913.
● Land reform focuses on land for residential and productive use.
● Although there were some successes from 1994, there is still a lot of land in the hands of only a few people.
3. Property ● Subsidies are used to help low-income earners to own fixed residential property.
subsidies ● The government housing scheme provides fund options to all people who earn less than R3 500 per month.

1.6 CONSOLIDATION QUESTIONS

1.6.1 Give one concept for each one of the following descriptions. No abbreviations or acronyms will be accepted.
(a) Assets that physically exist and that you can touch. (1)
(b) A single value between 0 and 1 that indicate how unequal the income is distributed. (1)

1.6.2 (a) How does wealth differ from income? (2)

(b) Explain how a market system can aggravate inequality. (2)

1.6.3 Explain shortly how wealth can be created by savings. (4 x 2) [8]

 1.6.4 Study the graph below and answer the questions below:

Cu
m
ula
tiv
e
Country A
%
Inc
o
Country B

Cumulative % population

(a) Which economic concept is represented by the above graph? (1)

(b) Provide a name for A. (1)
(c) Which one of the two countries has the lowest inequality rate? Motivate your answer. (2)
(d) Which percentage of the income is earned by 50 % of Country B’s residents? (2)
(e) Explain the relation between the Gini-coefficient and the Lorenz curve. (4)
[10]

2. ECONOMIC GROWTH
2.1
MEANING OF ECONOMIC GROWTH CALCULATION OF ECONOMIC GROWTH
● Economic growth refers to the increase of the production of goods and The formula for the calculation of the economic growth is:
services in a country over a year.
● Economic growth is measured and expressed in terms of real GDP. (real GDP in year 2 – real GDP in year 1) x 100
● Real GDP is the GDP after the increase of the general price (inflation) Real GDP in year 2
has been taken in account.

2.2 THE IMPORTANCE OF ECONOMIC GROWTH

● To reach a high economic growth rate is one of the five most important aims of the macro-economic policy in South Africa.
● Economic growth contributes to the general welfare of the community.
2.3 METHODS TO ACHIEVE ECONOMIC GROWTH:

1. Increase in ● Productivity is the efficiency of one factor input.

productivity ● Increase in productivity means that more products can be produced with the same amount or less inputs
than the previous.
● It ceases when the output stays constant while the input is decreasing.
● Also, when the output decrease with less than what the input is decreasing.
2. Availability and ● Economic growth can occur when the working population increases faster than the total population.
usefulness of the ● Land can be used for new uses that generate larger returns for example, to produce canola rather than
resources wheat.
● Capital must be widened and deepened.
3. Technologic change ● As new production methods are developed or more efficient methods are used to operate the business in,
more goods and services can be produced with the same number of inputs because of improved technology.
● E.g., cell phones, internet, computers, etc.
4. Efficient government ● The government must have a policy that strives towards more exports, growth in tourism and the expansion
policies and of the manufacturing industry.
administration. ● Efficient administration means that policies will be executed in such a manner that the waste of time,
inconvenience and costs will be limited to the minimum.
5. Investments ● An increase in capital per worker will increase the production in general.
● In other words, the more suitable the equipment that workers use, the more the production will be.
● An increase in capital requires investment and investment requires savings. (S = I)
● The production in a country depends on the available capital stock (C).

2.4 FACTORS THAT LIMIT ECONOMIC GROWTH

1. Low savings- Savings are needed to finance investments.

and A. Savings
investment ● The savings by the households is too low to achieve an annual growth rate.
levels. ● Household savings are low because the population consist mostly of households with a low income with no
money to save.
B. Investments
● South Africa’s fixed investment rate is too low to create economic growth, mainly because of the low savings
rate.
2. Insufficient Highly skilled workers are demanded in SA, but it are not available because of the following:
qualified A. School education
labour ● The number of candidates that qualify to go to universities is very low.
● School literacy and -numeracy rates are very low.
B. Learnerships
● Too few candidates pass the competency test for learnerships.
● Those who qualify are too few to provide for the needs of the economy.
 3. HIV / AIDS South Africa is one of the countries with the highest HIV-prevalence number in the world.
A. Population of working age
● The economic active population has a very high infection rate.
● When people get infected, they are less productive and when they pass away, their knowledge and skills are
lost. B. Medical expenses
● The government must spend money on health care so that people that are infected by HIV, can be cared for.
Therefore, there is less money to spend on the economic growth policy.
● This has a negative influence on savings, tax and profits.

2.5 SOUTH AFRICA’s recent economic growth experience

● South Africa’s economic growth rate was 0,8 % in 2018 and -2.1 % in 2019. This is too low to achieve a better standard of living for people in
the country.
● A sustained economic growth rate with a minimum of 6 % is required to decrease unemployment in South Africa.

2.6 STANDARD OF LIVING

● Economic growth is good for a country because it enables the society to consume more goods and services which mean that the quality of
their lives improves.

FACTORS THAT DETERMINE THE STANDARD OF LIVING OF THE PEOPLE:

Size of the population:
● If the population growth exceeds the GDP growth, people will be worse off – there are now less goods and services per person
available. ● Economic growth rate per capita also known as per capita real GDP (Real GDP ÷ total population) is used to determine
standard of
living.
● The GDP per capita is used to compare the standard of living from year to year and between countries. It is used to make adjustment
to the welfare of a country and the level of economic development.
Per capita income:
Real income per capita = [(Real GNI ÷ Total population) x 100] is used to determine the standard of living.

2.7 CONSOLIDATION QUESTIONS

2.7.1 Give one word or concept for the following descriptions. No abbreviations or acronyms may be used.
(a) Income per person in a country (1)
(b) The policy to promote black ownership and shareholding in the South African economy. (1)
(c) Tax and government spending to influence the economy.
(1)

2.7.2 Which effect does a low economic growth rate have on an economy? (2)

2.7.3 Which impact does the Expanded Public Work Programme have on the local community? (2)
2.7.4 Why are savings important to improve the quality of life of the residents of a country? (4 X 2) (8)
3. ECONOMIC DEVELOPMENT

3.1 ECONOMIC GROWTH ECONOMIC DEVELOPMENT

● Occurs when there is an increase in real GDP. ● Occurs when there is an increase in real per capital GNI (GDP)
● Implies an increase in the capacity of the economy to produce ● Implies an increase in the capacity of the population to produce
more goods and services. more goods and services.
● Focusses on increased production of the country. ● Focusses on the improvement of the standard of living.

3.2 DEVELOPMENT METHODS

1. New enterprises create more job opportunities which promote diversity and economic growth.
2. Building community ability by developing skills.
3. Expansion of the local markets by promoting local products for exports.
4. Improvement of old facilities to provide in new needs of the local community.
5. The promotion of direct investments to upgrade infrastructure and to build new facilities in order to create more jobs.
6. Natural resources must be used effectively to increase the standard of living of people.

3.3 FEATURES OF A DEVELOPING COUNTRY (Note: Developed countries have the opposite features of developing countries. E.g., developed
countries have a high income per capita)
1. Low standard of living ● The population has a low income per capita.
● There is a low growth in income per capita.
● Larger unequal distribution of income between rich and poor.
● Inequality of income is measured by the Gini-coefficient and the quintile relation.
● More poverty, indicated by a low standard of living.
● Low life expectancy due to malnutrition and diseases.
● Low education levels lead to a limited or no job opportunities.

2. Low levels of productivity ● Output per worker is lower because of lack of management, education, and training as well as malnutrition
in childhood.

3. High population growth ● Birth rates are very high and death rates are also high because of a lack of access to health services.
rate and dependency ● Children younger than 15 years represent almost 29 % of the population and are dependent on adults to
rate. provide for their basic needs.

4. High unemployment ● Under-unemployment: People who work less hours than they can work.
levels ● Unemployment: People that can work, want to work, looking for a job, but cannot find a job.
 5. Dependency on primary ● Primary goods are the most important goods for production and exports.
sector

6. A lack of infrastructure ● A lack of infrastructure such as roads, health care facilities and transport.

3.4 DEVELOPMENT STRATEGIES

Human resources: Capital

-refers to labour force. -When a country increases the capital stock, it is known
-most important asset of a country. as capital formation.
-can be improved in various ways: -Capital formation can be increased by:
Education and training: Improvement of literacy • An increase of voluntary savings.
levels that contribute to economic growth and • An increase in forced savings through tax.
development. • Attracting foreigners to invest.
Health: Healthy people are more energetic and • Negotiating foreign loans from development institutions
productive, and they contribute to economic like the World Bank.
development.
Population planning: A lack of family planning is the
main reason for poverty and unemployment.
Motivation: Human resources need to be motivated

Natural resources Technology

- Land: Land ownership is a strong encouragement
for improving the land.
- Minerals and fuels: The establishment of secondary
industries that can process raw materials and add
value to the labour.
- Technological development makes countries more
competitive.
- The expansion of communications via computers increased
productivity in developing countries.
- Training in sciences must be included in schools to encourage
more engineers and technicians.
3.5 SOUTH AFRICA’S INITIATIVES

3.5.1 MACRO SA is a developing country and since 1994 the government pursued the following economic development policies:
ECONOMIC The reconstruction and development programme (RDP) was the original map for development. It was followed by
POLICIES GEAR (Growth, Employment and Redistribution), strengthened by ASGISA (Accelerated and Shared Growth Initiative of
South Africa)
The New Growth Path plan (NGP) was introduced in 2010 that focused on economic growth and job creation.
The National Development Plan (NDP) was announced in 2011 by the Planning committee of the government. This plan
specifically focuses on decreasing poverty and the income inequality in South Africa.

3.5.2 PROVISION All people have certain basic needs that make life possible. To provide in these basic needs, the SA government:
IN BASIC NEEDS o Builds RDP houses for the poor.
o Pays social allowances each month.
o Sends underprivileged learners to school for free
o Funding of feeding schemes.
o Provides subsidised water, electricity, sanitation, refuse removal, housing, and food.

3.5.3 DEVELOPMENT OF Regional development

THE ECONOMY SDIs (spatial development initiatives) are spatial areas with specific benefits for mining, manufacturing, and other
businesses. The benefits include the existence of current or potential infrastructure as well as options for specialising in
certain products or services.
Businesses in SDIs can qualify for a variety of benefits such as financial support for establishment costs, employment
costs or skills training. SDIs are classified as regional development programs that local and provincial governments are
responsible for.
Export industries
IDZs (Industrial development zones) are industrial areas that are established for a specific objective. These areas are
physically enclosed and directly linked to an international airport or port.
Five IDZs approved in SA: Coega (iron and car parts), East- London (vehicles), Gauteng (advanced technology and other
industries), Richards Bay (coal) and Saldanha Bay (steel).
International competition / Global competitiveness
IMS (Integrated Manufacturing Strategy): This is established in 2001. The aim of this plan is to enable SA’s businesses to
compete on an international level.
 3.5.4 DEVELOPMENT OF Economic development highlights an increase of the capacity of the population to produce more goods and services e.g.,
HUMAN to serve all with equal education.
RESOURCES: SETA's were established to enable profession- and technical training.

3.5.5 PROMOTION OF Actual development requires people to be free e.g., to choose their jobs and careers.
FREEDOM OF The Employment Equity Act (No. 55 of 1998) prohibits unfair discrimination.
CHOICE The Consumer Rights Act (No. 71 of 1988) protects the rights of consumers.

3.5.6 ECONOMIC The South African government intervenes in the economy because of three reasons:
INTERVENTION BY o To strengthen the functioning of the markets.
THE GOVERNMENT o To promote economic growth and development.
o To ensure the redistribution of income and welfare.

3.6 INDIGENOUS KNOWLEDGE SYSTEMS (IKS):

IMPORTANCE OF IKS:

1. Economic development ● Rural communities are dependent on IKS to survive.

2. Development processes
3. Strategies for problem solution for
local communities
4. Local and global communities
● IKS addresses poverty in local communities and is acknowledged as well as appreciated
nationally and internationally.
● Local communities use IKS to solve problems such as pest- and weed control.
● The impact of sustainability can be effective if it is suitable in terms of the local indigenous
practices.

5. Survival of the poor ● The lives of people in the rural areas depend on the skills and knowledge of the area that is
essential for survival.

3.7 CONSOLIDATION QUESTIONS

3.7.1 How can technology increase the development of a country?

(a) (b) (2) What is the main objective of the National Development Plan?
(2)

3.7.2 Why do indigenous knowledge systems play an important role in local communities? (4 X 2) (8)
3.7.3 Differentiate between economic growth and economic development. (8)
4. MONEY AND BANKING

4.1 CENTRAL BANKING

The South African Reserve Bank (SARB) was established in 1920 with the primary function to protect the rand. This is a private
company that exists because of a mandate issued by the Constitution of South Africa.

The FOUR general functions of the SARB are:

1. Bank of issuing • The SARB has the sole right, given by the South African Bank Note Company and the South African Mint, to print
and issue banknotes and coins.

2. Bank of the • Government departments deposit and withdraw their money from the SARB.
government • The SARB provides loans and foreign exchange to the government.
• The SARB provides financial advice to the government.
3. Protects gold and • The country’s gold- and foreign exchange reserves are stored by the SARB.
other foreign
reserves

4. Banker of the banks • Cash reserve balances – A part of the of the deposits that households and businesses have in commercial
banks, may not be given out as loans. This percentage is kept back by the banks and is called the cash reserve
requirement.
• Bank of settlements – Banks owe each other money when there are payments via cheques. These cheques are
settled daily by the SARB.
• Borrower as a last resort – If commercial banks urgently need money, they can borrow from the SARB.
• Supervisor – The Registrar of Banks at the SARB, makes sure that banks are managed in terms of the Bank
Act and that capital- and liquidity requirements are met to maintain good bank management.
4.2 MONETARY POLICY FUNCTION

4.2.1 Monetary policy consists of decisions taken by the SARB to influence the interest rate as well as the supply of money (or credit) in the economy. The
aim is to ensure economic growth, consistency in terms of the value of the rand, price stability and increased employment in the country.

4.2.2 MONETARY POLICY INSTRUMENTS

Interest rate If prices are too high, the repo rate is increased so that commercial banks will also increase their interest rate that they
changes charge on households. This will lead to less loans and spending through which the supply of money in the country will
decrease which will cause prices to decrease.
The opposite occurs when economic growth and employment levels are too low.

Open market When prices are too high, the SARB sells more bonds. The SARB keeps the money that they receive from selling the
transactions bonds and withdraw money from circulation.
The opposite occurs when economic growth and employment levels are too low.

Moral suasion The SARB can appeal to banks through moral suasion to help increase or decrease the amount of money in circulation
(persuasion) by lending out less money when prices are too high and lending out more money when economic growth is low, and
unemployment is high.

Cash reserve Banks are forced to keep a certain percentage of deposits received as reserve in their banks. If this percentage is
requirement increased or decreased, it influences the banks’ ability to create loans.

4.3 BANK FAILURES

Bank failures occur when the bank cannot pay back money owed to their clients or other banks.

4.3.1 REASONS FOR BANK FAILURES:

Credit risk:
Banks lend money to households and businesses. When the borrowers cannot pay their loans back to the bank, banks cannot meet their own
financial obligations.
Liquidity risk:
If a large depositor withdraws his/her money from the bank, other depositors can also become worried and withdraw their money which leads to
everyone withdrawing their money at the same time.
Interest rate risk:
If banks are not prepared for a cut in the interest rates, it can lead to a bank failure because banks now receive less interest income and
depositors can withdraw their savings because they do not receive enough interest on them.
 Investment risk:
Some banks invest their funds. Sometimes these investments are not successful, and banks lose these funds.
Capital risk:
Banks must maintain a specific amount of capital. If this is not the case, shareholders can sell their shares. If depositors become aware of this,
they become worried and withdraw their deposits.

4.3.2 CONSEQUENCES OF BANK FAILURES

● Depositors can lose some of or all their deposits at the bank.

● Shareholders can lose the value of their investment or all their shares at the bank.
● Unemployment will occur because bank employees lose their jobs.
● It causes uncertainty in the economy which leads to lower spending and investment that leads to a recession.

4.4 CONSOLIDATION QUESTIONS

4.4.1 Give one word for the following descriptions. Abbreviations and acronyms are not accepted.
(a) The policy of the Reserve Bank uses to influence the interest rate and the supply of money. (1)
(b) The interest rate offered to the best clients of the commercial banks. (1)
(c) The total value of all goods and services produced inside the borders of the country in a specific period.
(1)

4.4.2 Briefly describe THREE monetary policy instruments. (3 X 2) (6)

4.4.3 Discuss money as a medium of exchange as well as a value carrier. (2 X 4) (8)

4.4.4 The South African Reserve Bank has functions and responsibilities that are not executed by other financial institutions.
Discuss the following functions of the South African Reserve Bank.
• Bank of the government (8)
• Bank of issuing (8)
• Banks’ bank.
(10)

How will the governor of the Reserve Bank use monetary policy to influence the amount of money in the country? (10)

Important: Your answers must meet ALL the requirements of an essay type question prescribed in Section C of an Economics paper.
IMPORTANT: FIRST STUDY THE TIPS BELOW BEFORE YOU START QUSTION 4.4.
4.5 TIPS TO ANSWER AN ESSAY TYPE QUESTION:

-Introduction:
-Define / Describe / Explain the key concept that is used in the statement in the question as an introduction and expand on it.
-Do not say what you are going to discuss in the essay in your introduction.
-DO NOT USE ANY PART OF THE QUESTION IN YOUR INTRODUCTION
-Body / Main part:
-To achieve full marks (26 marks) for this part of the question, the candidate must:
-Suitable sub-headings (if it is applicable) is used. (ONE mark per sub-heading)
-Each sub-heading must be explained / expanded in full sentences.
-Provide suitable statistics or examples under each sub-heading (if applicable)
-Be careful of repetition.
-If you have any doubt, add as much information of the topic as possible.
-You can achieve a maximum of 8 marks for lower order facts such as headings and examples.

The additional part requires higher order answers:

- The additional question can consist of knowledge outside the official curriculum that indicates if candidates are aware of actual economic events.
- Here learners need to express their own opinion and do a critical evaluation of economic situations in general. Candidates must also be able to
explain certain economic phenomena by using a graph.
- Candidates can achieve a maximum of 10 marks.

Conclusion (Must be answered as a higher order question)

- Candidates must be aware of closing their answer with a repetition of the question or any information that is already referred to in the
other introduction, main part or additional part.
- The conclusion MUST refer to the body/main part of the answer and NOT the additional part of the question.
- Your own opinion, a solution, more statistics, or a critical summary can give the candidate 2 marks.

Something to remember:
- Do not try to guess which question will be asked as a long question.
- Make sure that you study ALL the essay type questions of each section. (Macro-economics or Economic issues)
- If you know all the chapters of Macro-Economics better, it will be easier to answer questions 2, 4 and 5.
- If you know all the chapters of Economic Pursuits better, it will be easier to answer questions 3,4 and 6.
MARK ALLOCATION FOR ESSAY TYPE OF QUESTION: 2 + 26 + 10 + 2 = 40 MARKS
 TERM 4

5. GLOBALISATION

5.1 Definition: The breakdown of trade barriers that cause free movement of goods, services labour, and capital between countries to form a world
economy.

Characteristics:
● Trade: Increased by improved transport and communication.
● Internationalisation: To establish foreign offices as trade representatives as well as multinational enterprises.
● Regionalisation: Regions work together. E.g., European Union (EU), BRICS etc.
● Most important infrastructure: Communication-infrastructure: radio, satellite, computers. Transport infrastructure: airplanes, trains, and
ships.

5.2 The causes of globalisation:

● Transport: An increase in the amount of transport systems. The movement of goods and people improve. The distance between countries
decreases.
● Communication: The arrival of computers and the internet (the fastest communication method)
● Trade liberalisation: The abolishment of trade barriers between countries.
● Multinational Enterprises (MNE): International companies that are not bound by borders e.g., BMW, Vodafone, KFC etc.
● International capital market: Able to invest in any place in the world without government intervention.
● Foreign direct investment (FDI): When one country establishes a business in another country. Globalisation led to an increase in FDI.
● Trade agreements: General Agreement on Tariffs and Trade (GATT), World Trade Organisation (WTO), Millennium Development Goals
(MDG), Free trade areas (FTA)

5.3 The consequences of globalisation

Positive:
● Economic growth: faster growth because of access to international markets.
● Employment: the need to produce more goods and services create a larger demand for labour.
● Foreign direct investment: establishes businesses in other countries.
● Balance of Payments: improvement because of an increase in exports.
● Poverty alleviation: decrease the levels of poverty because of a larger availability of jobs.
 Negative:
● Economic cost: the brain drain – new qualified graduates migrate to more developed countries for higher paid jobs. Smaller countries
cannot afford the reconstruction and reformation of their economies.
● Social cost: increase in drug sales, kidnapping and internet crimes.
● Health issues: make countries more vulnerable for diseases such as bird flu, AIDS, COVID-19
● Environmental costs: exhaustion of minerals, damage to flora and fauna and land-, water- as well as air pollution.
● Indigenous knowledge systems: community values and Ubuntu are lost because of globalisation.

5.4 North/South divide:

5.4.1 Causes:
● Capitalism: Developed countries collect wealth by expropriation at the expense of developing countries.
● Globalisation: This increases social and economic gaps between countries if wealthy countries exploit poor countries.
● Immigration: People in the South are eager to move to the North for better opportunities and a better standard of living.
● Rate of development: Countries that are industrialised, have higher rates of development than countries that base their economies on
agriculture.
● Rise of economic powers: Developed countries with access to capital acquire economic power.
● International infrastructure: Most of the transport systems and telecommunication networks of the world are in developed countries.
● New technology: The research, development and production of new technology are in the hands of the businesses in the North.
● Financial support and debt: Many countries in the South have a lot of foreign debt than wealthy countries and have huge challenges to pay
back the loans.

5.4.2 Characteristics
North South

Economic growth High economic growth rates Low economic growth rates

Population 25% of the world population reside in these countries 75% of the world population reside in these countries

Standard of living The standard of living is high The standard of living is low

Education Most of the residents is highly skilled Most of the residents is illiterate

World economy The North overpowers the world economy The South is a much smaller role player in the world economy

Technology Advanced technology Very limited technology

Life expectancy The life expectancy is round about 70 years. The life expectancy is round about 50 years

Political power These countries play important roles in the UN. These countries play less important roles in the UN
5.4.3 A comparison between developed and developing countries
Developed countries (North)
Income per capita – about 87 % of the world’s total income is
Inequal standard of living
produced by only 15 % of the total population and lives in the
most economically developed regions of the world.
Life expectancy of developed countries = 75 years
Literacy rate is high. Everyone is literate.
Trade: Wealthy countries subsidise the production of
Globalisation
agricultural products.
This makes it very difficult for developing countries to compete.
Mass consumption – burns mass amounts of oil and coal.
Environment
This leads to the destruction of the ozone layer.
5.5 CONSOLIDATION QUESTIONS
Globalisation is a worldwide phenomenon that influences all countries.
Write an essay about the causes and benefits of globalisation in detail.
Addition to your answer, explain the negative effects of globalisation.
Developing countries (South)
85% of the world population lives only on one fifth of the world’s
income.
The life expectancy in developing countries is low because of
malnutrition, diseases, and a lack of health services.
The life expectancy = 50 years
Literacy levels are low. It relates to low standard of living. Only 46 %
of adults are literate.
Trade: it is insisted upon that developing countries must improve on
manufactured goods. Africa feels marginalised by subsidies.
Focus on agriculture: Land quality, sufficient rainfall and good
harvests are critical for an economy.
Land erosion and a lack of water are the biggest environmental
problems.
These countries do not have the ability to produce enough food which
is the main cause of hunger and malnutrition.
(26)
(10)
6. ENVIRONMENT DETERIORATION

6.1 Definition of environment: The physical environment and all the physical conditions that influence lives.
Components:
● Physical resources: water, land, animals, minerals etc.
● Space: where buildings and communication facilities can be established.
● Natural aspects e.g., fresh water, animal- and plant species etc.

6.2 The problems of environmental deterioration

● Pollution: waste from factories and mines pollute rivers, the air, and the ocean.
● Over-utilisation of natural resources: The large demand for resources can lead to a shortage of supply and the exhaustion of a resource.
● Loss of diversity: habitat decreases that lead to the extinction of plants and animals.
● Waste management: The amount of waste that is produced increases as economic activity expands.
● Land deterioration: Waste, deforestation and land erosion leads to the deterioration of land.
● Climate change: Increased earth temperature leads to melting ice caps, increases sea levels and many destructive storms.
● Overpopulation: As the world population increases, the pressure rises for the economies to produce more.

6.3 Approaches for sustainability:

● Maintaining ecological balance.
● The improvement of the quality of people’s lives.
● To reach higher economic welfare, better quality of the environment and social equality.
● Enables generations to live easier in a clean and healthy environment.

6.4 The protection of the environment:

● Technological innovations: Focuses on economic growth while fighting pollution.
● Price policy: Increase the price of non-renewable resources for people that use it inefficiently.
● Public opinion: Worried residents support environmental protection.
● Government action: World summits, laws, international agreements / protocols about pollution and climate change.
● Vehicle exhaust emissions: Tax on emissions is levied to encourage people to make use of more environment friendly vehicles.
● Industrial waste: The Waste Act, 59 of 2008, ensures a decline in any form of waste that has an impact on the environment.

6.5 Ideas for sustainability:

● Environment management approach: Includes freshwater systems, oceans, land, and atmosphere.
● Private property right: If people had property rights on fauna and flora, they would have cared for it and prevent extinction.
● Focus on externalities: Negative externalities can be taxed.
● Control and command system: Law, prescribed regulation and very strict policy in terms of the compliance will sort out environment
challenges.
 ● Voluntary environmental agreements: Companies must agree to meet the requirements of environment laws and regulations on a voluntary
basis.
● Environment levies, tax, and subsidies: Local authorities in South Africa can levy environmental cost for consumers, businesses and other
organisations for the removal of sewerage water and refuse.
● Eco system approach: Look at the complete ecosystem in all decision making.
● Education: People must learn about the consequences of their behaviour and the destruction caused by environmental deterioration.
● Management of human consumption approach: Teach people to make individual promises to change their lifestyles and consumption
patterns.

6.6 Global impact on South Africa

Global:
Brown issues:
Water pollution and water scarcity: More than two million deaths and billions of diseases are caused by water pollution annually. Health problems
are caused by water scarcity.
Air pollution: Creates chronic health problems e.g., lung diseases, irritation of eyes, nose, mouth, and throat as well as asthma
Fixed and dangerous waste: Waste influences productivity by polluting land water resources and endangers plant- and animal life.
Land degradation: It influences world security and the quality of the environment.
Green issues:
Deforestation: Leads to loss of economic opportunities, land erosion and greenhouse effect.
Loss of biodiversity: Leads to an estimated worldwide loss of 27 000 plant and animal species per year.
Atmospheric- and climate changes: Leads to extreme weather conditions e.g., heat and rain.

Local:
Brown issues:
Increased air pollution: Decreased quality of air disadvantage the health of people.
Increased land erosion: The annual loss of land in South Africa is estimated to be 300 – 400 million tons
Increased use of natural capital: South Africa uses its natural capital because of overconsumption.
Green issues:
Larger loss of biodiversity: In South Africa, 15 % of all plant species, 37 % of all mammal species, 14 % of all bird species, 8 % of all amphibian
species and 4 % of all reptile species are in danger of extinction.
Climate change: The change of rainfall and temperature is very general in South Africa.
Decline of fresh water sources: According to the Water Research Commission, it is expected that South Africa will be without water between 2020
and 2030 because of the huge amount of expected demand.
6.7 International measures to ensure sustainability:

● The largest worldwide problem is the loss of biodiversity, poisonous and dangerous waste as well as climate change.
● South Africa signed a variety of international agreements that cover many environmental challenges as well as promoting environmental
sustainability.
● The World Bank, IMF and United Nations strive towards getting countries’ support and cooperation in terms of the fight against environmental
deterioration.
● Examples of international cooperation are the Rio-summit of 1992, the Johannesburg summit of 2002, and the Kyoto-protocol in terms of global
climate change (1997 and 2005)

6.8 CONSOLIDATION QUESTION

Concerns exist in terms of the ability of the environment to be able to handle the increasing pressure of the world economy.

- Discuss government intervention as a measure to ensure environment sustainability. (26)

- Addition to your answer, explain how a decrease of pollution will influence the condition of the environment. (10)

Make sure that your answer meets all the requirements of a well-structured essay type question.

END OF WORKBOOK