M.gs District Test On The Circular Flow Model-1

BOJANALA DISTRICT ASSESSMENT
GRADE 12
ECONOMICS
BI-WEEKLY TEST NO.1
THE CIRCULAR FLOW MARKING GUIDELINES
29 JANUARY 2024
Marks: 60
These marking guidelines consist of 7 pages.
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Economics test 2 BoJ/Jan 2024
Grade 12
SECTION A 30 MARKS – 20 MINUTES
QUESTION 1: CIRCULAR FLOW
1.1 MULTIPLE CHOICE
1.1.1 A current prices.

1.1.2 B households. 
1.1.3 B capital
1.1.4 A investment.
1.1.5 C 0,4.
1.1.6 D autonomous
1.1.7 D final
1.1.8 C residual (8 x 2) (16)
1.2 MATCHING ITEMS
1.2.1 E leakages are greater than injections

1.2.2 G the proportion of additional income that households choose to spend
on goods and services
1.2.3 A fraction of extra income that households do not consume
1.2.4 B an economy that excludes the foreign sector
1.2.5 F an economy that includes the foreign sector
1.2.6 C where labour, entrepreneurship, land and capital are traded
1.2.7 D adjusted to inflationary changes
1.2.8 I usage-up of value in a fixed asset (8 x 1) (8)
1.3 GIVE ONE TERM
1.3.1 Real flows

1.3.2 Gross Value Added
1.3.3 Foreign exchange market
1.3.4 Transfer payments
1.3.5 Real Gross Domestic Product
1.3.6 Gross Domestic Expenditure (6 x 1) (6)
TOTAL SECTION A: 30

Grade 12
SECTION B
QUESTION 2: THE CIRCULAR FLOW MARKETS
2.1 DATA RESPONSE
2.1.1 Which type of economy is depicted in the diagram above?

A Three-sector economy/closed economy (1)
2.1.2 Identify an example of an injection depicted in the diagram above.

Government spending/government spending (1)
2.1.3 Briefly describe the term leakage.

Money withdrawn from the circular flow/ economy, e.g through savings
(S), taxes (T) and import expenditure (M)  (2)
2.1.4 What is the importance of a resource market in the economy

above?
• To provide the economy with the factors of production that will be
used in the production process. 
• The households own the factors of production and sell the factors on
the input market and receive an income (wages, rent, interest and
profit) in return to use in buying goods and services. 
• Businesses purchase the factors of production from the household in
the factor market to be used in the production of goods and
services
(Accept any other correct relevant response) (2)
2.1.5 Briefly describe the interrelationship that exists between the

households and the government.
• The household sells its factors of production to the government.
• The government provides income to the households.
• The household pays taxes to the government.
• The government provides social, economic services and
infrastructure.

Grade 12
QUESTION 3: THE NATIONAL ACCOUNT AGGREGATES
3.1 DATA RESPONSE
3.1.1 Identify the base year that the South African Reserve Bank uses to
compile national accounts aggregates.
2015 (1)
3.1.2 Give the alternative term used for gross value added in national
accounts.
Gross domestic product / GDP(P)  (1)
3.1.3 Briefly describe the term basic prices.

Basic prices is the cost to the producer adding taxes on production and
subtracting subsidies on production
3.1.4 How are basic prices converted to market prices?

Taxes on products are added to and subsidies on products are
subtracted from gross domestic product at basic prices to get gross
domestic product at market prices / GVA at basic prices PLUS taxes on
products MINUS subsidies on products = GDP @ market prices (2)
3.1.5 Why would economists prefer constant prices to current prices

when measuring economic growth?
• Constant prices are adjusted to exclude the effects of inflation,
whereas current prices are not adjusted
• Constant prices provide a true reflection on actual changes in
production of goods and services, while current prices gives a
distorted reflection
• Current prices give a distorted indication of the actual growth of the
economy
• Measuring economic growth using constant prices provides accurate
data to policy makers to make informed decisions
• Constant prices help to make accurate comparison of economic
performance from year to year
(Accept any other correct relevant response) (2 x 2) (4)

Grade 12
QUESTION 4: MACROECONOMIC MULTIPLIER
4.1 DATA RESPONSE
4.1.1 Name ONE leakage that is related to the foreign sector.

Import/ import spending (1)
4.1.2 Identify the value of the mpc in the graph above?

0,5 (1)
4.1.3 Briefly describe the term multiplier effect.

It occurs when a small increase in spending produces a larger increase
in national income
4.1.4 Why does the value of the multiplier become smaller in a THREE-
sector economy?
The size of the multiplier will be smaller as there will be more leakages
(taxes and imports) in the economy
4.1.5 Use the formula that pertains to changes in income and injections to
calculate the value of the multiplier in the graph above. Show ALL
calculations.
K = ∆Y/∆J
= 20
10
= 2
(A maximum of 3 marks may be allocated for correct calculation without the
formula) (4)
TOTAL SECTION B: 30
GRAND TOTAL: 60

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BOJANALA DISTRICT ASSESSMENT

These marking guidelines consist of 7 pages.

Copyright reserved Please turn over

SECTION A 30 MARKS – 20 MINUTES

QUESTION 1: CIRCULAR FLOW

1.1 MULTIPLE CHOICE

1.1.1 A current prices.

1.2 MATCHING ITEMS

1.2.1 E leakages are greater than injections

1.3 GIVE ONE TERM

1.3.1 Real flows

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QUESTION 2: THE CIRCULAR FLOW MARKETS

2.1 DATA RESPONSE

2.1.1 Which type of economy is depicted in the diagram above?

2.1.2 Identify an example of an injection depicted in the diagram above.

2.1.3 Briefly describe the term leakage.

2.1.4 What is the importance of a resource market in the economy

2.1.5 Briefly describe the interrelationship that exists between the

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QUESTION 3: THE NATIONAL ACCOUNT AGGREGATES

3.1 DATA RESPONSE

3.1.3 Briefly describe the term basic prices.

3.1.4 How are basic prices converted to market prices?

3.1.5 Why would economists prefer constant prices to current prices

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QUESTION 4: MACROECONOMIC MULTIPLIER

4.1 DATA RESPONSE

4.1.1 Name ONE leakage that is related to the foreign sector.

4.1.2 Identify the value of the mpc in the graph above?

4.1.3 Briefly describe the term multiplier effect.

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