University of South Africa ECS1601 Assignment 1-4 Feedback

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In this tutorial letter we provide you with the answers to the multiple-choice questions in Assignments 01 to 04, with brief explanations where necessary. In most cases, however, we merely refer you t... o the prescribed textbook and/or the study guide. If you have any questions about the answers that are provided, please discuss them with your fellow students and your e-tutor on the e-tutor website. All references, unless otherwise indicated, are to the prescribed textbook: Mohr, P & Associates. 2015. Economics for South African students. 5th edition. Pretoria: Van Schaik. 1 DISCUSSION OF ASSIGNMENT 01/2019 The correct answer is option [1]. Statement a is correct. In section 3.5, under the heading “The government”, the three important flows are discussed. Statement b is incorrect, because households are the sellers of the factors of production and therefore also of labour. The households offer their factors of production to firms and to government. Statement c is also incorrect, because government spending is an injection into the circular flow of spending and income, whereas taxes constitute a leakage out of the circular flow of spending and income. Refer to figure 3.5. The correct answer is option [4]. Refer to figure 3.3, “The circular flow of goods and services”, which shows the relationship between firms and households. Figure 3.4 shows the flow of money when households and firms receive income and spend this income (money) in the goods market, and firms spend it on the factor market. Wages and salaries are paid by the firms to households when households offer labour to the firms. The correct answer is option [2]. Refer to box 3-1, “Examples of flows and variables”. Savings is a stock variable and not a flow variable. The correct answer is option [4]. Statement a is incorrect, because a stock variable has no time dimension. Statements b and c are correct. Stocks can change as a result of flows. Refer to box 3-1. Natural resources are limited, their availability cannot be increased, and they include water and arable land. Refer to section 3.3. The correct answer is option [2]. Only firms can produce goods and services, and sell them in the goods market. Households sell their factors of production to firms in the factor market. Refer to section 3.5. The correct answer is option [4]. Only statement is c is correct. Statement a is incorrect, because a goods market is where goods and services are sold by firms, not households. Statement b is also incorrect, because factors of production are sold by households in the factor market. The correct answer is option [1]. Exports, government spending and transfer payments are injections, and imports are withdrawals in the circular flow of income and spending. [Show More]

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