Answer the following questions - NSC Economics - Question 2 - 2023 - Paper 1

During the prosperity phase, demand for goods and services tends to be very high, which drives prices up. Additionally, the circulation of money increases as businesses invest and expand, increasing the money supply and further fueling inflation. This results in consumers facing higher prices for goods, as demand exceeds supply.

The year in which South Africa recorded the highest value of exports is 2021.

The account in the balance of payments (BOP) that records portfolio investments is the Financial account.

The trade balance is the difference between a country's exports and imports of goods and services over a specific period. It indicates whether a country has a trade surplus (exports exceed imports) or a trade deficit (imports exceed exports).

Electricity shortages can lead to a decrease in production capacity for businesses, impacting their ability to meet export demands. Power cuts disrupt production processes, leading to lower output, and some businesses may choose to reduce operations or halt production entirely. Consequently, this can diminish South Africa's competitiveness in international markets, leading to a decline in export volumes.

The SARB can implement several policies to reduce the balance of payment deficit:

1. Increasing repo rates: By raising interest rates, the SARB can discourage consumer spending and reduce imports, thereby balancing the current account.
2. Managing foreign reserves: I can help maintain a favorable exchange rate, promoting exports.
3. Encouraging foreign investment: This can improve the financial account of the BOP.
4. Controlling inflation: This can stabilize currency value, making exports more competitive.

The method used to calculate the gross domestic product (GDP) is the Production approach, which measures the output of every enterprise and sums it up to determine the total economic output.

An example of a tax on products is Value Added Tax (VAT), which is levied on the sale of goods and services.

A subsidy on production refers to a financial support mechanism provided by the government to lower production costs for producers. This can help increase supply, stabilize prices, or promote certain industries by making it financially easier for producers to operate.

Preparing national account aggregates is essential for several reasons:

1. Economic Planning: It helps in formulating economic policies and strategies for growth.
2. Economic Performance Assessment: National accounts provide crucial data needed to assess a nation's economic performance and living standards.
3. Budgetary Decision-Making: They inform government budgets and fiscal policies.

To calculate the gross value added (GVA) at basic prices, we need to subtract subsidies on production from the gross value added at factor cost:

GVA at basic prices = Gross value added at factor cost - Subsidies on production

Using the values from the table:

• Gross value added at factor cost = R 5,453 billion
• Subsidies on production = R 132 billion

Therefore,

GVA at basic prices = R 5,453 billion - R 132 billion = R 5,321 billion.

Specialisation

Specialisation allows countries to focus on producing goods in which they have a comparative advantage, thereby enhancing efficiency and productivity. This often leads to an increase in trade volume as countries exchange their specialized products.

Mass Production

Mass production involves the production of goods in large quantities using standardized processes. This method reduces costs per unit due to economies of scale and facilitates easier trade as countries can export surplus production to meet international demand.