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ECS ASSESSMENT 1
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ECS QUZ 1 Accompanied with questions answers, it contains two attempts
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UNISA 2024 ECS2602-24-S1 Welcome to the module ECS2602-24-S1 Assessment 1QUIZ
Started on Thursday, 7 March 2024, 10:57 PM
State Finished
Completed on Friday, 8 March 2024, 2:43 PM
Time taken 15 hours 46 mins
Marks 16.00/30.00
Grade 53.33 out of 100.00
Question 1
Incorrect
Mark 0.00 out of 1.00
Which one of the following statements is INCORRECT?
Select one:
A. An expansionary monetary policy entails a decrease in the interest rate to increase the This statement is
demand for goods in the economy. correct.
B. The result of the implementation of expansionary fiscal policy is that the budget deficit increases.
C. A contractionary monetary policy entails an increase in the interest rate. Therefore, the cost of credit in the economy
decreases, and the demand for goods decreases.
D. The main fiscal policy instrument is the budget, while the main policy variables are government spending and
taxation.
The correct answer is:
A contractionary monetary policy entails an increase in the interest rate. Therefore, the cost of credit in the economy
decreases, and the demand for goods decreases.
,Question 2
Incorrect
Mark 0.00 out of 1.00
This question is based on the following diagram. Assume that G and T increase by R100.
Which one of the following statements is INCORRECT?
Select one:
A. Although there is an increase of R100 in taxes, there will be still an expansionary net effect of R500 on the
equilibrium level of output and income.
B. The above diagram and questions imply the working of the balanced budget multiplier.
C. If government spending increases by R100, the equilibrium level of output and income will This statement is
be R1 500, and the Z curve will shift to Z1. correct.
D. If taxes then increase by R100, cT will be R80, the new equilibrium level of output and income will be R1 100, and it
will be represented by point c in the above diagram.
Calculate the multiplier. The formula for the multiplier is 1/1–c. Given a marginal propensity to consume 0.8, the
value of the multiplier is 1/1-c = 1/1-0.8 = 1/0.2 = 5) or 1 000/200 = 5. If government spending increases by R100, the
autonomous spending will be equal to 300 (200 + 100 = 300). Autonomous spending x multiplier = equilibrium level
of output and income: 300 x 5 = 1 500. The value of the marginal propensity to consume (c) is given as 0.8 in the
diagram; therefore cT = 80 since 0.8(100) = 80. The net effect will be 100 (the difference between 1 100 and 1 000).
See the diagram below:
, Your answer is incorrect.
The correct answer is:
Although there is an increase of R100 in taxes, there will be still an expansionary net effect of R500 on the equilibrium level of
output and income.
Question 3
Incorrect
Mark 0.00 out of 1.00
Which of the following statements is INCORRECT?
Select one:
A. Jobless growth and government budget constraints can prevent a situation of full employment in the goods market
model.
B. Expansionary fiscal policy is a means to increase production, income and employment. However, high imports,
crowding out of private investment and an unsustainable budget deficit are all constraints to the effectiveness of the
expansionary fiscal policy.
C. An increase in This statement is correct. Cyclical unemployment is also known as demand
government spending deficient unemployment due to low demand for goods. The solution for this kind
and/or a decrease in taxes of unemployment is increased demand for goods brought about by increasing
can decrease cyclical government spending and/or decreasing taxation.
unemployment.
D. A decrease in taxes to decrease unemployment will be as effective in a capital-intensive economy as in a labour-
intensive economy.
Your answer is incorrect.
The correct answer is:
A decrease in taxes to decrease unemployment will be as effective in a capital-intensive economy as in a labour-intensive
economy.
, Question 4
Incorrect
Mark 0.00 out of 1.00
This question is based on the following data for a hypothetical country for a particular year.
Marginal propensity to consume = 0.8
Government spending = R360 billion
Government revenue = R241 billion
If an increase in the budget deficit is unacceptable, which one of the following policy actions will increase the level of output
and income without changing the budget deficit?
Select one:
A. An increase in government spending of R20 billion and an increase in taxation of R20 billion.
B. A decrease in government spending of R20 billion and a decrease in taxation of R20 billion.
C. An increase in government spending of R20 billion and a decrease in taxation of R10 billion.
D. An increase in government spending of R10 billion and an increase in taxation of R20 billion.
Your answer is incorrect.
The formula to calculate the multiplier is 1/1–c. 1/1-0.8 = 1/0.2 = 5. The output gap is given as R100 billion; therefore, the
required change in autonomous spending (or increase in government spending) is 100/5 = R20 billion.
To keep the budget deficit unchanged, the increase in government spending must be matched by an equal increase in
taxation (government revenue). This happens when the increase in government spending of R20 billion is matched by an
increase in taxation of R20 billion. Will this action increase the level of output and income? Yes, because of the balanced
budget multiplier, which is equal to 1, therefore the level of output and income will increase by 20 million. An increase in G of
R20 billion increases Y by 20 x 5 = R100 billion and an increase in taxation will decrease Y by 20(0.8) x 5 = 16 x 5 = R80
billion. R100 billion – R80 billion = a net increase in income of R20 billion.
The correct answer is:
An increase in government spending of R20 billion and an increase in taxation of R20 billion.
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