Photo AI
Answer the following questions - NSC Economics - Question 2 - 2023 - Paper 1
Question 2
Answer the following questions. 2.1.1 Name the TWO turning points of a business cycle. 2.1.2 Why would a decrease in South African exports lead to the depreciation... show full transcript
Worked Solution & Example Answer:Answer the following questions - NSC Economics - Question 2 - 2023 - Paper 1
Step 1
Step 2
2.1.2 Why would a decrease in South African exports lead to the depreciation of the rand?
Answer
A decrease in South African exports results in a lower demand for the rand as foreign buyers need less of the currency to purchase South African goods. Consequently, the supply of rand in the foreign exchange market increases, leading to its depreciation. Moreover, reduced export levels can negatively impact foreign direct investment, further weakening the currency.
Step 3
Step 4
Step 5
2.2.3 Briefly describe the term progressive tax.
Answer
A progressive tax is a taxation system where the tax rate increases as the taxpayer's income increases. This means that higher income earners pay a larger percentage of their income in taxes compared to lower income earners, contributing to income redistribution.
Step 6
2.2.4 Explain the effect of a regressive tax system on income distribution.
Answer
A regressive tax system disproportionately affects lower-income earners as they pay a larger percentage of their income in tax compared to higher-income earners. This exacerbates income inequality, as the tax burden shifts towards low-income households while allowing wealthier individuals to retain a larger portion of their income.
Step 7
2.2.5 Why will tax revenue decrease if the government imposes very high tax rates?
Answer
High tax rates can lead to tax evasion, as businesses and individuals might seek ways to avoid taxes, resulting in a lower tax revenue for the government. Additionally, high rates can deter investment and reduce production, further shrinking the tax base and leading to decreased overall tax revenue.