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2.3 Study the extract below and answer the questions that follow. SOUTH AFRICA OPENS DOORS FOR CHICKEN IMPORTS FROM THE UNITED STATES The Minister of Trade and Industry said South Africa will end punishing duties on US chicken and renew imports. South Africa imposed 100% duties on the dumping of certain chicken portions. Removing those import barriers opened a market that had been closed for the past 15 years. This decision was within the tolerance of the South African poultry industry. The products to be imported will be mainly the cuts that are not favoured by the US consumer. South Africans consume more chicken than people in any other African country and local producers have struggled to keep up with the rising demand. The agreement, which would see the US emerge as one of the top poultry exporters to South Africa, should help smooth the passage of the (American) African Growth and Opportunity Act (AGOA). AGOA is a trade initiative providing duty-free treatment of US imports of certain products. [Adapted from Mail & Guardian, February 2016] 2.3.1 Identify the reason in the extract why South Africa agreed to import chicken from the US. 2.3.2 Name the trade initiative mentioned above. 2.3.3 Briefly describe the term dumping. 2.3.4 What will be the effect of population growth in South Africa on chicken imports from the US? 2.3.5 What negative impact could this deal have on the local poultry industry? (2 x 2) 2.4 Distinguish between exogenous approaches and endogenous approaches to business cycles. (2 x 4) 2.5 How can imports be targeted to reduce the deficit on the balance of trade in South Africa?2.3 Study the table below and answer the questions that follow. CURRENT COMPOSITION OF THE SOUTH AFRICAN BALANCE OF PAYMENTS (BOP) - 2016 1 . Current Account (R millions) Merchandise exports 276 349 + Net gold exports 13 777 + Services receipts 49 728 + Income receipts 21 176 Less merchandise imports 270 258 Less payment for services 54 905 Less income payments 48 420 Current transfers (net receipts) -6 555 Balance on Current Account -19 108 Memo item: Trade Balance (A) 2. Capital Transfer Account 57 Net lending to (+) or borrowing from (-) rest of the world -19 051 3. Financial Account Net direct investments 2 184 Net portfolio investments 30 601 Net financial derivatives -9 022 Net other investments -19 830 Reserve assets 1 191 Balance on Financial Account 5 124 Memo item: Balance on financial account excluding reserve assets 3 933 Unrecorded transactions 13 927 [Source: SARB - Quarterly Bulletin, September 2016] 2.3.1 Which subaccount in the balance of payments above includes reserve assets? (1) 2.3.2 Which institution is responsible for the publishing of the balance of payments? (1) 2.3.3 How can South Africa ensure a net inflow of capital? (2 x 2) (4) 2.3.4 Use figures in the table above to calculate the trade balance (A). Show ALL calculations. (2 x 2) (4) 2.4 Differentiate between money flows and real flows in the circular-flow model. (2 x 4) (8) 2.5 Explain, by means of a neatly labelled graph, the effect on the value of the rand if there is a sharp increase in the number of South African tourists visiting the USA. (8) [40]SECTION B Answer any TWO of the three questions in this section in the ANSWER BOOK. QUESTION 2: MACROECONOMICS 40 MARKS - 30 MINUTES 2.1 Answer the following questions. 2.1.1 Give any TWO examples of indirect taxes. (2 x 1) 2.1.2 What impact will a decrease in commercial banks' cash reserve requirements have on the aggregate money supply? (1 x2) 2.2 Study the information below and answer the questions that follow. SOUTH AFRICA ALREADY IN A RECESSION - ECONOMISTS It is the view of many economists that South Africa is GROWTH IN GDP already in a recession because the South African economic growth rate is lower than the population growth rate. 20 The economic downturn emerges from a sharp drop 0.3 Growth Rate % in global demand for South African commodities in the mining and quarrying 2.0 1.2 industries. 14/1 14/2 14/3 1414 15/1 15/2 15/3 15/4 16/1 South Africa is battling with rising unemployment and low Quarters 2014-2016 skills. [Source: Stats SA revised GDP data 2016] [Adapted from City Press, June 2016] 2.2.1 In the information above, identify the reason why the economy is already in a recession. 2.2.2 What was the GDP growth rate in the first quarter of 2016? 2.2.3 Briefly describe open market transactions as a monetary policy instrument. (2 x 2) 2.2.4 How can the South African government use fiscal policy to stimulate the economy? (2 x 2)2.3 Study the table below and answer the questions that follow. NATIONAL ACCOUNT AGGREGATES - SOUTH AFRICA SUMMARY OF GROSS DOMESTIC PRODUCT R million (AT CURRENT PRICES) 2016 Compensation of employees 2 051 326 Net operating surplus 1 130 210 Consumption of fixed capital 613 605 Gross value added at factor cost 3 795 141 Other taxes on production 86 008 Other subsidies on production 9 935 Gross value added at basic prices 3 871 214 Taxes on products 484 059 Subsidies on products 16 415 Gross domestic product at market prices (A)? (Source: Quarterly Bulletin SARB, June 2017] 2.3.1 Identify the factor of production in the table above that receives the biggest portion of the national income. (1) 2.3.2 Which method was used to calculate the figures above? (1) 2.3.3 Briefly describe the term basic prices. (2) 2.3.4 Briefly explain how subsidies can influence production. (2) 2.3.5 Calculate the gross domestic product at market prices (A). Show ALL calculations. (4) 2.4 Briefly discuss pricing policy and parastatals as problems of public sector provisioning. (2 x 4) (8) 2.5 Calculate the change in aggregate income if there is an injection of R20 billion into the economy with a marginal propensity to save of 0,3. Show how the multiplier effect could influence the government to create more jobs. Show ALL calculations. (8) 40Answer any TWO of the three questions in this section in the ANSWER BOOK. QUESTION 2: MACROECONOMICS 2.1 Answer the following questions. 2.1.1 Name the TWO financial markets in the circular-flow model. (2 x 1) 2.1.2 What effect will a decrease in income levels have on international trade? (1 x 2) 2.2 Study the graph below and answer the questions that follow. EXCHANGE RATES - THE RAND IS AT THE MERCY OF THE MARKET D1 D R14 Price of US dollar in rand R13 D1 Q1 Q2 Quantity of US dollars 2.2.1 Identify the exchange rate system in the graph above. 2.2.2 What was the original rand/dollar exchange rate before the demand for US dollars increased? 2.2.3 Briefly describe the term exchange rate. 2.2.4 How has the increased demand for US dollars affected the value of the rand? 2.2.5 What could the South African Reserve bank do to strengthen the value of the rand against the dollar? (2 x 2)