Question 1

Explain how an attempt by the government to lower inflation could cause unemployment to increase in the short-run.

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Question 2

Under what conditions might government intervention in a market economy improve the economy's performance?

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Question 3

With the understanding that people respond to incentives, outline the possible outcome for teachers if school holidays are reduced.

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Question 4

Why is a high quality education system important in raising living standards for future generations?

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Question 5

Define opportunity cost. What is the opportunity cost to you of attending university? What was your opportunity cost of coming to class today?

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Question 6

One trade-off society faces is between efficiency and equality. Define each term. If the South African government redistributes income from the rich to the poor, explain how this action affects equality as well as efficiency in the economy.

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Question 7

When are markets not a good way to organise economic activity?

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Question 8

An increase in the price of beef provides

Accepted Answer

An increase in the price of beef is an indication that the demand for beef is higher than its supply. Therefore, producers will understand that they need to produce more beef to meet the demand, which would cause an increase in the supply and eventually lower the price of beef, back to the equilibrium.

Question 9

The business cycle is the

Accepted Answer

The business cycle is the irregular fluctuations in economic activity. These fluctuations include periods of economic growth (expansion), recession, and recovery. It is a natural part of the economic system and is affected by various factors such as changes in consumer confidence, government policies, and global economic conditions.

Question 10

Policymakers can affect inflation and unemployment in the short term by

Accepted Answer

Policymakers can use fiscal policy to influence the economy in the short term by changing the amount the government spends. This can lead to changes in both inflation and unemployment levels. For example, increasing government spending can stimulate economic growth and lead to lower levels of unemployment, but may also lead to higher inflation if the economy is already at or close to full capacity.

Question 11

How does the study of economics depend upon the phenomenon of scarcity?

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Question 12

For which of the following individuals would the opportunity cost of going to university be highest?

Accepted Answer

The opportunity cost of going to university would be highest for a famous, highly-paid actor who is taking time away from show business to finish university and earn a degree. This is because the actor is already earning a high salary and has a successful career, so the opportunity cost of giving up their current income and job prospects is much higher than for the other individuals listed.

Question 13

Which of the following is not part of the opportunity cost of going on holiday? The money you

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Question 14

Outline one example of the principle of 'thinking at the margin.'

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Question 15

Both the production of goods and services and the unemployment rate are used to measure

Accepted Answer

Both the production of goods and services (Gross Domestic Product) and the unemployment rate are key indicators used to track the phases of the business cycle, which is the overall pattern of growth and recession in an economy. Productivity and interest rates may also impact the business cycle, but are not direct measures of it. Inflation may also be measured by these indicators, but it is not their primary purpose.

Question 16

Productivity can be increased by

Accepted Answer

Improving the education of workers can lead to increased productivity as workers will have the necessary skills and knowledge to perform their tasks efficiently and effectively. This can result in higher quality output and improved speed of production. Raising union wages or minimum wages may attract more skilled workers but may also result in increased labor costs for employers, which can decrease productivity. Restricting trade with foreign countries can limit access to resources and markets, which can also decrease productivity in the long run.

Question 17

Explain why there is a short-run trade-off between inflation and unemployment.

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Quiz 1: What Is Economics