NATIONAL SENIOR CERTIFICATE EXAMINATION

NOVEMBER 2023

ECONOMICS

MARKING GUIDELINES

Time: 3 hours 300 marks

These marking guidelines are prepared for use by examiners and sub-examiners, all
of whom are required to attend a standardisation meeting to ensure that the
guidelines are consistently interpreted and applied in the marking of candidates'
scripts.

The IEB will not enter into any discussions or correspondence about any marking
guidelines. It is acknowledged that there may be different views about some matters
of emphasis or detail in the guidelines. It is also recognised that, without the benefit
of attendance at a standardisation meeting, there may be different interpretations of
the application of the marking guidelines.

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SECTION A

QUESTION 1

1.1 A
1.2 C
1.3 C
1.4 D
1.5 D
1.6 C
1.7 A
1.8 C
1.9 B
1.10 B

1.11 A
1.12 B
1.13 A
1.14 D
1.15 D
1.16 C
1.17 B
1.18 A
1.19 A
1.20 D

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SECTION B

QUESTION 2 MACROECONOMICS

2.1 2.1.1 (a) Is a systematic record/statement of all economic transactions

between residents of a country with people and institutions in
the rest of the world. Or a set of accounts that give a systematic
record of the flows of money between a country and the rest of
the world.

(b) Records transactions for (imports and exports) the trade in

goods, income/service payments, income/service receipts and
current transfers.

2.1.2 Calculate the Balance of Trade:

Merchandise exports 1 796 750

+ Net Gold exports 108 004
– Merchandise imports 1 348 655
R 556 099 billion

2.1.3 Calculate the balance on the Current Account:

Trade balance 556 099

+ Service receipts 134 926
+ Primary Income receipts 167 431
– Service payments 200 966
– Primary Income payments 286 029
+ Net current transfers 92 360
R 463 821 billion

The Current Account is in a surplus.

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2.1 2.2.1 Draw a fully labelled business cycle:

A: Expansion/upswing/ recovery
B: Peak
C: Contraction/downswing/recession 4 max
D: Trough
E: Depression

Long-term
Tendency
X (LT)

E
Economic
Activity/Real GDP

2.2.2 Leading indicator: tell us where the economy is going and peak
before the peak in the business cycle and reach the trough before the
business cycle reaches its trough OR leading economic indicators are
indicators that change before the economy changes. A leading
indicator is a factor that changes before the economy starts to follow
a particular pattern or trend OR forecast future economic activity.

Lagging indicator: tell us where the economy has been and so it

peaks after the business cycle has peaked OR lagging economic
indicators do not change direction until a few quarters after the
economy does and confirm a pattern.

2.2.3 Exogenous (external) reasons: economic fluctuations to factors/

reasons that originate outside the market system.

For example: Natural disasters, technological developments, financial

crisis, terrorist attacks, political developments, steep rise in oil prices,
changing economic conditions in a major trading partner.

Endogenous (internal) reasons: economic fluctuations to factors/

reasons that originate inside the market system.

For example: Monetary causes, changes in the patterns of the

consumer, changes in the level of investment spending, psychological
reasons, i.e. optimistic or pessimistic outlook of investors/
entrepreneurs, etc.

(Accept any other relevant correct example.)

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2.3 2.3.1 Real flow

Monetary flow / money flow

2.3.2 Households
Firms / Businesses
Government / State / Public sector
Overseas Sector / Foreign Sector / Rest of the world

2.4 2.4.1 (a) Gross Domestic Product (GDP): Total value of all final
goods and services produced within the borders of a
country for a specific period normally one year.

(b) Current prices: Also referred to as Nominal GDP, which

includes the effect of inflation, so a more inaccurate, inflated
reflection of prices at the time so it is difficult to know whether
the value of production increased due to more products being
produced, or simply because their prices increased.

2.4.2 Calculate GDP:

2021: Formula / words can be used

5 450 414 / 108,01 × 100 = 5 046 212,39

2022:
Formula / words can be used
5 751 885 / 106,03 × 100 = 5 424 771,29

2.4.3 Calculate GDP growth rate:

2022:

5 424 771 − 5 046 212 100


5 046 212 1

= 7,5%

2.4.4 "Country X's" economic growth rate is very high compared to that of
South Africa.

(Accept any correct relevant answer.)

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QUESTION 3 MICROECONOMICS

3.1 Complete Table 6:

Characteristics Perfect market Monopoly

Number of firms Many/several/ A lot One

Nature of the product Homogeneous/the same Unique/ Rare

Availability of market
Perfect knowledge/ Perfect knowledge/
knowledge to the
Complete knowledge Complete knowledge
business

Blocked/barriers to entry/
Barriers to entry No barrier/free entry/ Zero
Restricted/ high

Price taker or price

Price takers Price seekers
seeker?

3.2 3.2.1 Nersa: National Energy Regulator of South Africa

3.2.2 Decrease in supply graph:

Price

Quantity

Graph mark allocation:

Price and quantity label (×1)
Demand and supply label (×1)
Decrease in supply arrow and S1 (×1)
Increase in price arrow (×1)
Decrease in quantity arrow (×1)

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3.2.3 Positives: An increase in electricity prices will contribute to an

increase in revenue for Eskom a parastatal.
Which can lead to an increase in revenue to the government’s fiscus
and government spending.
Eskom can fix infrastructure which can lead to an increase in
productivity and job creation which can increase the standard of living
of workers.
Improved infrastructure can reduce loadshedding and can benefit
businesses who can produce more products without losses due to
production shutdowns.

Negatives: An increase in electricity prices can cause an increase in

prices of goods and services.
Can lead to an increase in input/variable costs to the businesses,
which can lead to cost push inflation.
Consumers of electricity will have to pay more therefore will have less
disposable income to save or spend.

(Accept any other relevant correct answer.)

Candidates must evaluate therefore look at both positives and
negatives.

3.3 3.3.1 Income elasticity of demand indicates the sensitivity/ relationship/

responsiveness of the quantity demanded of a product to a change in
the consumers’ income.

3.3.2 Positive income elasticity of +0.7 making it a normal good or necessity

with inelastic demand. This means that the demand for the product will
increase as income increases and vice versa.

3.3.3 Factors influencing the price elasticity of supply:

• Time of production
in the short-term supply is inelastic, e.g. agricultural products.

• Price expectations
If price is expected to rise/increase, supply will increase/elastic
supply.

• Stock hoarding
if products can be stored, it will be more elastic

• Availability of inputs
if scarce, supply will be inelastic (no matter how price fluctuates,
supply remains the same)

(Accept any other relevant correct answer)

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3.4 (a) Demerit goods:

Demerit goods are goods and services that people consume in greater
quantities than the society believes to be in their best interests, E.g.
alcohol, drugs and guns. Demerit goods are overconsumed in a free
market. When people underestimate, or ignore, the costs of
consuming a demerit good, market failure occurs.
Therefore, market failure occurs as there is an under allocation of
resources to merit goods and an overallocation of resources to demerit
goods.

(Accept any correct relevant answer.)

(b) Income inequality:

Unequal distribution of income is caused by the fact that some people
have access to a good opportunities and resources and others not.
Therefore, people vary in their skill levels and their ability to produce
output.
Markets can generate an 'unacceptable' distribution of income and
consequent social exclusion which leads to market failure.
E.g. People in certain industries doing the same job but receiving
different levels of income and receiving payment in kind like food.

(Accept any other relevant correct example.)

(c) Externalities: An externality is a cost or benefit that is experienced by

a third party, who is not a party to the transaction that produced it. A
negative externality is a cost experienced by someone who is not a
party to the transaction that produced it. A positive externality is a
benefit experienced by someone who is not a party to the transaction
that produced it.
E.g. the building of a new freeway may have a positive influence on
those people in the area because they can now get to work quicker,
but for others it might reduce the value of property because of the
noise and pollution.
Externalities can also be positive, e.g. the effect of good education
and health care services etc.

(Accept any correct relevant answer.)

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QUESTION 4 CONTEMPORARY ECONOMIC ISSUES

4.1 4.1.1 Economic indicators: Are statistics that show general trends in the
economy. They are used to analyse economic performance and to
predict future performance.

4.1.2 ● Government can use economic indicators for budgetary planning

purposes.
• Economic indicators are used in strategic policy and development
planning.
• Indicators can be used to assess current economic conditions or
situations in the country.

(Accept any other relevant correct answer.)

4.1.3 ● Positives is to help battle high inflation of 7,5% and get it in

inflation target of 3%–6%.
• Higher interest rates of 7% tend to attract and increase foreign
investment.
• Make stock more attractive to investors as they can generate a
higher return on savings and investments that a fixed income
investment.
• Negatives of raising interest rates to 7% is running the risk of
sending the economy into a recession, because of decreased
demand.
• Increase in unemployment and continuous high inflation.
• From a homebuyer's perspective some negatives of higher interest
rates are that they lower demand for housing and make buying and
selling a home more difficult.

(Accept any other relevant correct answer.)

Candidates must evaluate therefore look at both positives and
negatives.

4.2 4.2.1 Headline Inflation is a sustained increase in the general price level
of all goods and services over an extended period of time increase in
CPI.

Disinflation is an increase in the rate of inflation at a decreasing rate.

4.2.2 (a) Floods:

• Can create a shortage on the market, especially agricultural
products swept away during floods.
• This will lead to agricultural products becoming more
expensive due to the decrease in supply and the prices to
increase.
• Agricultural products used in the production of other goods
create an increase in input cost which leads to cost-push
inflation.
• Infrastructure can be destroyed making it difficult to
transport produce from one point to the next, increasing
prices of products.
(Accept any other relevant correct answer.)
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(b) Loadshedding:
• Contributes to rising inflation by disrupting supply chains,
increasing the cost of production and affecting manufacturing
cost.
• Destroys businesses and compromises the production of
food and provision of social services such as water,
sanitation, community safety all contributing to increasing
costs.
• Businesses lose operating hours, closing shops therefore
decreasing their profits, which they must recover by
increasing prices of goods and services.

(Accept any other relevant correct answer.)

4.2.3 Restrictive monetary policy

• refers to interest rates and money supply and can be controlled by
the South African Reserve Bank (SARB) MPC or Governor of the
SARB.
• To curb inflation the SARB has increased the repo rate on several
occasions.
• This has forced banks to increase their interest rates, thus credit
has become more expensive.
• This has forced consumers to spend less, thus decreasing demand
in the economy, which will lower the inflation rate.
• The SARB could also decrease the money supply using open-
market transactions by selling government bonds.

Restrictive fiscal policy

• refers to taxation and government spending and can be controlled
by National Treasury/Minister of Finance.
• To reduce inflationary pressures the government can increase tax
and/or reduce government spending. This will reduce aggregate
demand.
• If taxes are increased (or government spending decreased) it will
lead to a reduction in real disposable income.
• This will lead to lower demand and output, which will then lead to
lower inflation.

Extent:
• The government has a budget deficit and will increase government
revenue by increasing taxes.
• The South African Reserve Bank might increase the repo and
prime lending rates to also curb inflation and curb the increase in
aggregate demand.
• The SARB might not do anything and keep the repo rate
unchanged, because the inflation is within the targeting bracket
and consumers are already struggling.

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4.3 4.3.1 ● To prevent some employers from exploiting workers.

• To narrow the inequality gap between the rich and the poor.
• Reduce poverty and increase the standard of living of poor people.
• It may provide workers with an incentive to work harder and
increase productivity.
• Opportunities for workers to upskill themselves.

(Accept any other relevant correct answer.)

4.3.2 Minimum wage:

(Candidates are not required to make use of the specific wage
rates on the graph.)

• Graph mark allocation Max 4

• Wage rate/level or Price of labour ×1.
• Quantity of labour/ Number of hours worked ×1.
• Minimum wage indicated above the equilibrium ×1.
• Supply and Demand indicated as ×1.

4.3.3 ● An increase in minimum wage will increase the wage bill/costs to

firms, production costs, as businesses will have to pay their
employees more.
• Firms may have to increase their selling price to ensure profitability
and survival.
• Supply curve will shift to the left as production costs increase and
result in a higher price and lower quantity.
• Many businesses might retrench some of the workers.

(Accept any relevant correct answer.)

(Analysis linking Minimum wage, costs and selling price.)

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QUESTION 5 MIXED QUESTIONS

5.1 5.1.1 Currency appreciation is the increase in the value of one currency
in terms of another OR when a currency becomes worth more in
terms of another currency.
For example, R1 = $0,17 to R1 = $0,27.

Currency depreciation is the decrease in the value of one currency

in terms of another OR when a currency becomes worth less in terms
of another currency.
For example, R1 = $0,20 to R1 = $0,14.

5.1.2 Free floating exchange rate system:

• The forces of supply and demand determine the exchange rate.
• Central banks do not intervene in the foreign exchange market on
behalf of the government.
• The exchange rate fluctuates as market conditions change.
• Disequilibria is automatically corrected.

Managed floating exchange rate system:

• The exchange rate can fluctuate between certain limits as set by
the central bank.
• Central banks intervene if the exchange rate moves outside the set
limits.
• They buy and sell foreign exchange to smooth out short-term
fluctuations in the exchange rate.
• Huge forex supplies (reserves) are required for such interventions.

5.1.3 Levels of income differ from country to country:

Higher income results in a change in needs, especially of luxury
goods.

Consumer preferences and tastes change:

People are exposed to more and more products every day.

Religious, cultural and social lifestyles differ from one country to

another:
This influences the demand for certain products.

Development of communications and transport:

Countries and products are within easy reach of one another.

Different levels of economic development:

Poor countries will have a demand for basic food and wealthy
countries for luxuries.

Natural resources and products differ from one country to

another:
Countries import what they don't have and export what they do have.

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Increase in population and their income:

Demand and needs change – countries cannot meet the need.

Natural resources are not evenly distributed:

E.g., S.A.'s mineral riches enable us to produce more cheaply to
export.

Climatic conditions differ from one country to another:

Some products can be produced cheaper than in other countries, e.g.,
coffee in Brazil.

Labour resources/ Labour skills:

Quality, quantity and cost differ between countries, e.g., labour supply
in Malaysia is high and cost is low. Other countries have high levels of
sophistication of labour – more productive.

Technology & Specialisation:

Some countries have access to technological resources to produce at
low cost. Japan specialises in electronic equipment, produces in mass
and sells at lower prices.

Access to capital differs:

Some countries have more capital and can produce better and
cheaper products.

(Accept any other relevant correct answer.)

5.2 5.2.1 6

5.2.2 Normal profit is the profit a firm makes when the total cost of
production (implicit plus explicit) is equal to the total revenue from the
sale of its output (breakeven) or zero.

Economic profit occurs when a firm makes more than a normal profit,
that is the level of output at which total revenue is greater than total
cost (implicit plus explicit costs)

5.2.3 A: 20
B: 2
C: 4
D: 39
E: 76

5.3 5.3.1 Government budget deficit occurs when government expenditure/

spending is greater than tax revenue/government revenue.

5.3.2 Political developments/less government spending/more taxes.

(Accept any relevant correct answer.)

5.3.3 Government should spend less, no salary increases.

(Accept any relevant correct answer.)
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5.3.4 Direct taxes:

• Personal Income Tax/ PAYE
• Capital Gains Tax
• Company Tax

Indirect taxes:
• Value Added Tax (VAT)
• Customs Duty
• Excise duty (Sin Tax)

5.3.5 Direct taxes:

Higher personal income taxes
The taxpayers will have to spend more of their income on tax. As a
result, government's tax revenue should increase and therefore
reducing the budget deficit.
On the other hand, this may create disincentives to work, tax
avoidance or even emigration.
This could further reduce the aggregate demand which will increase
the budget deficit.
If aggregate demand decreases, it could lead to increase in
unemployment, and therefore an increase in government social grant/
benefit payments. Impact more on the higher income group.

(Accept discussion of the Laffer curve to analyse the effect of

increased taxes.)

Higher company taxes

Companies will have to pay a higher proportion of their profits to the
government and therefore raising tax revenue and reducing the
budget deficit.
On the other hand, this might scare away foreign direct investment,
resulting in lower tax receipts in the long term which may increase the
budget deficit.

Indirect taxes:
Value Added Tax (VAT)
An increase in VAT will generate more revenue for the government
and reduce the budget deficit.
On the other hand, higher VAT is likely to cause higher inflation and
reduce GDP growth which will lead to higher unemployment and
increase in the budget deficit.

Excise duties
An increase in excise duties will increase government revenue and
reduce the budget deficit.
But can lead to cost-push inflation and decrease GDP growth in the
country causing unemployment to rise and foreign direct investments
to decrease, which can lead to the budget deficit to increase.

Candidates must have ONE Direct and ONE Indirect example and
look at both positives and negatives in each example. (Accept
any other relevant correct answer.)

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SECTION C

QUESTION 6 DATA RESPONSE

6.1 6.1.1 recession
6.1.2 (a) Economic growth:
Is the capacity of the economy to produce more goods and
services, measured in real GDP or increase in the productive
capacity.
(b) Economic development:
Is about improving the standard of living, it is shown by an
increase in the UN HDI and increase in the real GDP per capita.
6.1.3 Increase in Aggregate Supply:

Graph mark allocation Max 4

AS rightward shift and arrow = x2 marks
Correctly labelled horizontal (Output/ Real GDP) and vertical axes 2
marks (1 each)
6.1.4 Positives: a positive growth rate in Quarter 3 2022 of 4.1% can
reduce unemployment and generate more income for households
which can increase the multiplier on the economy.
Economic growth generates job opportunities and hence stronger
demand for labour.
With more jobs the average households have an income and can
increase their standard of living by providing for basic needs.
Negatives: there is no guarantee that economic growth will ultimately
lead to economic development.
In order for economic development to take place, the 4,1% economic
growth in Quarter 3 of 2022 must lead to an improvement in the living
standards of the majority of people.

Candidates must evaluate therefore look at both positives and

negatives. (Accept any correct relevant answer.)
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6.2 6.2.1 Arc elasticity of demand measures the responsiveness of quantity

demanded to a price and last between two points on a curve. It takes
the elasticity of demand at a particular point on the demand curve, or
between two points on the curve. In the concept of arc elasticity,
elasticity is measured over the arc of the demand curve.

6.2.2 arc elasticity:

60 − 40 20
Price elasticity of demand: Q =
50 50
3−5 −2
P =
4 4
= (2 / 5) / (2 / 4)

= 4 / 5 OR 0,8

(Credit candidates for formula/application of formula max 2 marks)

6.2.3 Price elasticity is inelastic. (Since elasticity is below 1)

(Mark with Question 6.2.2)

6.2.4 ● Substitutes
• Compliments
• Period of time under consideration
• Proportion of income spent on goods and services
• Definition of a product
• Habit-forming/life-saving substances
• Durability of a good
• Branding/marketing

6.3 6.3.1 ● China

• Germany
• United States
• India

6.3.2 ● South Africa can advance its national interest and trade relations
with China.
• To promote its regional integrated programme and related
continental infrastructure projects.
• South Africa's world class internationally competitive construction
companies can supply services to the Chinese market.
• China can supply South Africa with top class technology.

(Accept any other relevant correct answer.)

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6.3.3 Methods to promote exports:

Export subsidies:
• The government can pay the local businesses which export goods
a certain amount to compensate for some of their expenses.

Tax concessions:
• South African businesses can get a reduction in taxes on profits
and volumes exported and also refunds of the taxes exporters
have to pay on their goods in the foreign country.

Tax-free grants:
• These grants can compensate the exporters for the extra costs
they incur in exporting.

Identifying markets:
• The state can supply the businesses with information about
possible markets, setting up trade shows, and making trade
agreements with other countries.

(Candidates not to discuss measures to discourage imports.)

6.3.4 Impact of a policy of export promotion on SA economy:

• The size of the foreign market is much bigger than our domestic
markets. This enables our local motor industry to produce larger
quantities of output.
• More jobs are created in the country, and also more secure
employment can be offered with increased opportunities in training
in the industry.
• Economic growth is promoted, as the GDP increases as motor
industry producers increase their output.
• Exports earn the country foreign currency; this is an injection into
the circular flow that adds to the national income.

Assess:
• If currency is too strong, then South Africa is non-competitive and
export promotion has no impact on the economy.
• If South Africa's quality of products is low, that will also have no
impact if you apply export promotions.

(Max 4 for impact of export promotion policies and max 2 for

assessing the impact that it will have on the SA economy.)

Total: 300 marks

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