NATIONAL

SENIOR CERTIFICATE

GRADE 12

ECONOMICS P1

MARKING GUIDELINES

NOVEMBER 2024

MARKS: 150

These marking guidelines consist of 21 pages.

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Economics/P1 2 DBE/November 2024
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SECTION A (COMPULSORY)

QUESTION 1

1.1 MULTIPLE-CHOICE QUESTIONS

1.1.1 D - money 
1.1.2 C - leading 
1.1.3 B - 3% 
1.1.4 C - terms of trade 
1.1.5 A - protectionism 
1.1.6 D - per capita GDP 
1.1.7 A - good governance 
1.1.8 B - life expectancy  (8 x 2) (16)

1.2 MATCHING ITEMS

1.2.1 F- amount paid to the resources used to produce goods and

services 
1.2.2 G- method used to smooth-out short-term fluctuations in time
series data 
1.2.3 A- a three-year rolling expenditure and revenue projections for
the government 
1.2.4 B- a form of credit granted by the International Monetary Fund
to countries that experience balance of payments deficit 
1.2.5 I- voluntary measures taken not to trade with a certain
country 
1.2.6 C- aims to eliminate poverty and reduce inequality by 2030 
1.2.7 E- attract infrastructure and investments in neglected and
underdeveloped areas 
1.2.8 H- the process of movement of people from rural areas to cities
and towns  (8 x 1) (8)

1.3 GIVE THE TERM

1.3.1 Real flow 

1.3.2 Phillips curve 
1.3.3 Nationalisation 
1.3.4 Direct subsidies 
1.3.5 Labour-intensive 
1.3.6 Consumer price index  (6 x 1) (6)

TOTAL SECTION A: 30

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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 Name any TWO methods used to calculate gross domestic

product (GDP).

• Production / GDP(P) / Gross value added 

• Income / GDP(I) 
• Expenditure / GDP(E)  (2 x 1) (2)

2.1.2 How can competition stimulate aggregate supply in the economy?

• Competition may improve production efficiency resulting in more

goods and services being produced in the economy. 
• Businesses may become more innovative, use new production
techniques with higher productivity, and increase aggregate
supply.
• More businesses may be established which helps to increase the
total output in the economy 
(Accept any other correct relevant response) (1 x 2) (2)

2.2 DATA RESPONSE.

2.2.1 Identify ONE reason for public sector failure from the above
extract

Management failure / lack of skills  (1)

2.2.2 Name the level of the government that is responsible for providing
services such refuse removal.

Local government / Municipalities / Local authorities  (1)

2.2.3 Briefly describe the term accountability

The duty of an individual or organisation to explain their decisions,

actions, expenditure and accept responsibility for their behaviour. 
(Accept any other correct relevant response) (2)

2.2.4 Explain the effect of public sector failure on the allocation of

resources.

• Resources will not be optimally allocated which leads to some

valuable resources being wasted. 
• Allocation of funds to failed projects and inefficient government
departments results in wasteful use of tax-payers' money. 
(Accept any other correct relevant response) (2)

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2.2.5 Why is it necessary for the government to impose taxes on

demerit goods?

• To make demerit goods more expensive in order to discourage

consumers from buying them. 
• To recover the external costs that are caused by demerit goods to
human beings and the environment. 
• To raise revenue that can be used to finance the provision of public
goods 
(Accept any other correct relevant response) (2 x 2) (4)

2.3 DATA RESPONSE

2.3.1 Identify the value of marginal propensity to consume (mpc) from

the graph above.

0,5  (1)

2.3.2 Name any ONE participant in a two-sector economy.

• Households / Consumers 
• Businesses / Producers / Firms  (1)

2.3.3 Briefly describe the term autonomous consumption.

The level of consumer spending that is independent of the level of

income 
(Accept any other correct relevant response) (2)

2.3.4 Explain the relationship between marginal propensity to save

(mps) and the value of the multiplier (K).

• There is an inverse or a negative relationship between marginal

propensity to save (MPS) and the multiplier 
• The bigger the MPS, the smaller the value of the multiplier / The
smaller the MPS, the bigger the value of the multiplier 
(Accept any other correct relevant response) (2)

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2.3.5 Use the information in the above graph to calculate the change in
national income (ΔY). Show all calculations.

Method 1 Method 2
∆Y = ∆J x K ∆Y = Y1 – Y
= (30 – 20) x (1/1-0,5) = (30/0.5) – (20/0,5) 
= 10  x 2  = 60  – 40 
= 20  = 20 

Method 3 Method 4
K = 1/1-mpc Y=E
= 1/1-0.5 Y = 20 + 0.5Y
=2 Y - 0.5Y = 20
Y (1-0.5) = 20
K = ∆Y/∆J
0.5Y = 20
2 = ∆Y/30-20 
Y = 40 
2 = ∆Y/10 
∆Y = 20  Y=E
Y = 30 + 0.5Y
Y- 0.5Y = 30
Y (1-0.5) = 30
0.5Y = 30
Y1 = 60 
Therefore: ∆Y = Y1 - Y
= 60 – 40 
= 20  (4)

2.4 Discuss the exogenous (monetarists) explanations of business cycle.

• Monetarists believed that markets are inherently stable. 

• Any fluctuations in economic activity are caused by external factors. 
• The growth path of the economy is determined by supply of factors of
production. 
• The market forces of demand and supply will always bring the market back
to equilibrium when imbalances develop. 
• Monetarists suggest that the government should not intervene in market
operations because its intervention leads to deviation from the potential
growth path. 
• Structural changes that affect production, employment, investments,
government expenditure, taxes, imports and exports may lead to the
expansion of business cycles. 
• Random socio-economic shocks, such as sudden increase in fuel prices
may affect business confidence and consumers' confidence. 
• Natural disasters, such as droughts and floods may negatively affect
agriculture, forestry and tourism, reducing the level of economic
activity. 
(Accept any other correct relevant response)
(A maximum of 4 marks may be allocated for mere listing of facts)
(A maximum of 2 marks may be allocated for mere listing of examples
of exogenous factors or a maximum of 4 marks for the explanation of
the examples) (4 x 2) (8)

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2.5 How can the macroeconomic objective of price stability positively

influence the South African economy?

• Price stability ensures that prices remain relatively stable which encourages
consumer spending and stimulates economic growth. 
• Stable prices promote job creation and reduce unemployment rate in the
economy through more foreign direct investments. 
• Savings may be encouraged which ensures availability of loanable funds for
private investments. 
• Interest rates may remain stable and encourage spending on durable
goods, such as taking mortgage bonds to purchase houses. 
• Price stability maintains the purchasing power of money, since the real
incomes of households are better preserved. 
• Stable prices help to maintain demand for South African exports on global
markets, thereby ensuring exchange rate stability. 
• Extreme fluctuations on business cycles may be avoided which promotes
more sustainable economic growth. 
• Price stability helps to keep inflation expectations low which reduces wage
demands by workers and maintain industrial peace. 
• Price stability helps consumers and businesses to plan and make informed
decisions concerning saving, spending and investments. 
• The credit rating of South Africa may improve which could lead to increased
investments in the country. 
(Accept any other correct relevant response)
(A maximum of 2 marks may be allocated for mere listing of
facts/examples) (4 x 2) (8)

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QUESTION 3: ECONOMIC PURSUITS 40 MARKS – 30 MINUTES

3.1 Answer the following questions.
3.1.1 Name any TWO countries that are part of the Southern African
Development Community (SADC).

• Angola 
• Botswana 
• Comoros 
• Democratic Republic of Congo (DRC) 
• Eswatini / Swaziland 
• Lesotho 
• Madagascar 
• Malawi 
• Mauritius 
• Mozambique 
• Namibia 
• Seychelles 
• South Africa 
• United Republic of Tanzania 
• Zambia 
• Zimbabwe  (2 x 1) (2)
3.1.2 How can Broad-Based Black Economic Empowerment (BBBEE)
help to promote industrial development?

• An increase in the number of black people who own businesses

may lead to the expansion of existing industries. 
• Skills development may encourage black people to establish new
businesses. 
• Preferential procurement and enterprise development may promote
the establishment of black-owned businesses which may lead to
expansion of industries. 
(Accept any other correct relevant response) (1 x 2) (2)
3.2 DATA RESPONSE
3.2.1 Identify the industrial development strategy that aims to improve
the competitiveness of the manufacturing sector.

Integrated Manufacturing Strategy (IMS)  (1)

3.2.2 Name the government department that is responsible for

promoting industrial development.

Department of Trade, Industry and Competition (DTIC)  (1)

3.2.3 Briefly describe the term duty-free incentives.

Initiatives taken by the government to allow local businesses to import

production inputs without paying customs duties. 
(Accept any other correct relevant response) (2)

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3.2.4 Explain the importance of corridors in promoting regional

development.

• Allows mining, agriculture and manufacturing industries to have

access from one area to another. 
• Promotes efficient urbanisation through establishment of new towns
in underdeveloped regions. 
• Corridors make regions more attractive to both domestic and foreign
investors, fostering economic growth. 
(Accept any other correct relevant response) (2)

3.2.5 How can South African businesses benefit from the National
Research and Development Strategy (NRDS)?

• Promotes innovation which allows businesses to use new

production techniques that are more efficient and minimise their
average cost of production. 
• New production techniques with higher productivity may help
businesses to produce more output and satisfy higher demand from
customers. 
• Businesses may produce better quality products and gain a
competitive advantage, especially on global markets. 
• Lower cost of production and higher output due to innovation may
increase the profitability of South African businesses. 
(Accept any other correct relevant response) (2 x 2) (4)

3.3 DATA RESPONSE

3.3.1 Identify the percentage change in South Africa's labour

productivity in the fourth quarter of 2022.

-8%  (1)

3.3.2 State ONE other economic indicator that relates to productivity.

Remuneration per worker 

(Accept any other correct relevant response) (1)

3.3.3 Briefly describe the term economic indicator.

Statistical data that is used to measure the performance of the

economy. 
(Accept any other correct relevant response) (2)

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3.3.4 Why is access to healthcare services important to the labour

force?

• Access to healthcare services helps to improve the mental and

physical ability of workers which increases the productivity of the
labour force. 
• Access to affordable health care helps to minimise medical costs
and contain the workers’ cost of living. 
• Access to good health care can make an area more attractive to
potential workers and retain the skilled labour force. 
(Accept any other correct relevant response) (2)

3.3.5 How can a decrease in labour productivity impact on the

economy?

• A decrease in labour productivity may increase the average cost of

production which may lead to an increase in cost-push inflation.
• Production output may decrease which may slow down economic
growth and increase unemployment. 
• Decrease in productivity may result in less export volumes which
leads to Balance of Payments deficit. 
• Workers may lose their jobs which leads to a decrease in demand
for goods and services in the economy 
• As workers lose their jobs due to low productivity, unemployment
may increase in the economy. 
(Accept any other correct relevant response) (4)

3.4 Discuss the advantages of import substitution to the South African

economy.

• Tariffs and quotas encourage local employment as more workers get jobs
in industries that produce previously imported goods. 
• Expansion of domestic industries to meet the demand for goods that were
previously imported may promote economic development. 
• Reduced imports have a positive effect on the balance of payment as it
reduces the current account/trade deficit. 
• A wide variety of goods is produced which expands the industrial base. 
• The increase in tax base for the state will lead to more tax revenue. 
• Tariffs and quotas are easy and effective import control measures which
ensure that domestic production is compromised. 
• The country will be less vulnerable to foreign actions and conditions, such
as price increases, because goods are produced locally. 
• The available foreign exchange can be used to import other goods and
services thereby increasing consumers' choice. 
• It promotes diversification of the economy by producing a wider range of
goods and services locally. 
• Reducing dependence on imports may improve the balance of payments
and this can contribute to a more stable economic environment. 
(Accept any other correct relevant response)
(A maximum of 4 marks may be allocated for mere listing of
facts/examples) (4 x 2) (8)

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3.5 Analyse the challenges faced by South Africa in promoting industrial

development through the various policies.

• Skills shortages and mismatches hinder the growth of industries which

require specialised knowledge and expertise, affecting their
competitiveness on a global scale. 
• Inadequate and unreliable infrastructure, including transportation, energy,
and water supply leads to increased production costs and supply disruptions
that hinder the expansion of industries. 
• Burdensome regulations, bureaucracy, and uncertainty discourage
investment and limit the establishment of new businesses. 
• Limited access to capital by many Small, Medium and Micro Enterprises
(SMMEs) delays the ability of businesses to invest in new technologies,
upgrade facilities, and compete effectively. 
• Fluctuations in global demand, trade tensions, and economic downturns of
key trading partners negatively affect export-oriented industries and the
overall economic stability. 
• Energy constraints, including load shedding and high energy costs, disrupt
industrial operations, leading to decreased productivity and
competitiveness. 
• Labour-related challenges, such as industrial strikes, wage disputes, and
labour market rigidities, negatively impact on industrial stability. 
• International trade barriers may limit export volumes by South African
industries which limits the expansion of industries. 
(Accept any other correct relevant response)
(A maximum of 2 marks may be allocated for mere listing of
facts/examples) (4 x 2) (8)

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QUESTION 4: MACROECONOMICS AND ECONOMIC PURSUITS

40 MARKS – 30 MINUTES

4.1 Answer the following questions.

4.1.1 Name any TWO economic indicators that relate to employment.

• Economically active population (EAP) 

• Employment rate 
• Unemployment rate 
(Accept any other correct relevant response) (2 x 1) (2)

4.1.2 How can the government achieve the macroeconomic objective of

economic equity in South Africa?

• The government uses a progressive personal income tax system

where higher income earners pay higher tax rates to reduce the
income gap. 
• The government may use redistribution programs, such as social
welfare and unemployment benefits to redistribute income. 
• The government may use redress methods, such as BBBEE and
affirmative action to redress the income inequalities. 
(Accept any other correct relevant response) (1 x 2) (2)

4.2 DATA RESPONSE

4.2.1 Identify the period in which South Africa experienced the longest
downswing.

December 2013 to April 2017  (1)

4.2.2 Name the turning point of a business cycle associated with the
highest level of inflation.

Peak  (1)

4.2.3 Briefly describe the term amplitude.

The vertical difference between a trough and the next peak or a peak
and the next trough of a business cycle. 
(Accept any other correct relevant response) (2)

4.2.4 Explain the importance of the trend line in the forecasting of

business cycles.

• Trend line shows the general direction in which the economy is

heading. 
• A rising trend line indicates that the economy is gradually growing /
A declining trend line indicates that the economy is gradually
contracting. 
(Accept any other correct relevant response) (2)

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4.2.5 How can an economic recession influence households in the

economy?

• During an economic recession households lose their jobs and other

sources of income. 
• Households may be forced to look for alternative ways of generating
income for survival, such as informal businesses. 
• Households buy less goods and services due to low income level
leading to low standard of living. 
• Households may have to import goods and services due to product
shortages on local markets. 
• Some households may be forced to migrate to other countries for
employment opportunities and better standard of living. 
(Accept any other correct relevant response) (2 x 2) (4)

4.3 DATA RESPONSE

4.3.1 Identify a trade restriction that refers to a tax levied on imported

goods.

Tariffs  (1)

4.3.2 Name the international organisation that promotes the removal of

trade restriction between countries

World Trade Organisation (WTO)  (1)

4.3.3 Briefly describe the term embargo.

A ban on the export or import of a product and/or ban on trade with a

particular country. 
(Accept any other correct relevant response) (2)

4.3.4 Explain the importance of protecting infant industries from

foreign competition.

• Protection allows newly established infant industries to establish

themselves such that they can take advantage of economies of
scale and become competitive. 
• Protecting infant industries helps to create local employment
opportunities and stimulates economic development in emerging
sectors. 
• Protecting infant industries will help to diversify production in
industries. 
• Protecting infant industries can assist a country to become less
dependent of foreign goods and services. 
(Accept any other correct relevant response) (2)

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4.3.5 How can the economy benefit from specialising in the production
of a specific product?

• Specialisations may lead to lower cost of production which can

increase profit margins for the producers. 
• Consumers may pay lower prices for goods and services which
leads to better standard of living. 
• The economy may develop absolute or comparative advantage,
which helps to minimise wastage of resources. 
• Total output may increase due to higher productivity (mass
production), which promotes economic growth. 
• International trade may increase through the cost advantages. 
(Accept any other correct relevant response) (2 x 2) (4)

4.4 Discuss the social indicators that relate to nutrition.

a) Child malnutrition 
• Malnutrition is expressed in two ways – weight for age (under-weight) and
height for age (dwarfism). 
• The proportion of underweight children is the most important indicator of
malnutrition. 
• In South Africa, malnutrition is one of the leading causes of child deaths,
and the number of affected children is increasing. 
• The main causes of childhood malnutrition are household food insecurity,
inadequate care and unhealthy household environment, and lack of health
care services. 
b) Overweight children/Obesity 
• An overweight child is one who weighs more when compared on an index
to a child of the same age, gender and height. 
• Obesity of children is associated with diseases such as diabetes and
psychological disorder. 
• Disease caused by obesity may impact directly on the productivity of the
individual and place an enormous strain no public health sector. 
• South Africa has a combined overweight and obesity prevalence in children
which is higher than the global average. 
(Accept any other correct relevant response)
(A maximum of 4 marks may be allocated for mere listing of
facts/examples) (4 x 2) (8)

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4.5 How can an increase in injections contribute positively towards the South
African economy?

• A rise in injections, in the form of government expenditure, investment and

export earnings, leads to a proportionately larger increase in national
income through the multiplier process. 
• Increase in investments may create new jobs, which helps to reduce
unemployment in the economy. 
• Households' income level may increase leading to higher demand for goods
and services. 
• More direct investments may increase production of goods and services
which will increase/stimulate economic growth. 
• Establishment of new businesses may help to expand the tax base of the
government resulting in more tax revenue. 
• Increase in foreign investments may create capital inflow which helps to
increase the value of local currency. 
• Increase in export earnings may help to reduce balance of payments
problems in the economy. 
• Increase in exports may increase local production of goods and services
thereby stimulating economic growth. 
• Increase in government expenditure on infrastructure helps to attract more
direct investment across the country. 
• Increase in welfare expenditure such as social grants may help to improve
the standard of living for the people. 
(Accept any other correct relevant response)
(A maximum of 2 marks may be allocated for mere listing of
facts/examples) (4 x 2) (8)
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SECTION C

Answer any ONE of the two questions in this section in the ANSWER BOOK.

QUESTION 5: MACROECONOMICS 40 MARKS – 40 MINUTES

• Discuss in detail the reasons for international trade. (26 marks)

• Analyse the impact of a weaker currency (rand) on the South African
economy. (10 marks)
INTRODUCTION
International trade refers to the exchange of goods and services between two countries
or more. 
(Accept any other correct relevant introduction) (Max 2)
BODY: MAIN PART
REASONS FOR INTERNATIONAL TRADE
Demand reasons
1. Size of population 
• If there is an increase in population growth, it causes an increase in demand, as
more people's needs must be satisfied. 
• Local suppliers may not be able to satisfy this demand and consumers will be forced
to import from other countries. 
2. Income levels 
• Changes in income cause a change in the demand for goods and services. 
• An increase in the per capita income of people results in more disposable income
that can be spent on local goods and services, some of which may then have to be
imported. 
• Local supply may be insufficient to satisfy the demand, thereby creating a demand
for imports. 
3. Changes in the wealth of the population 
• An increase in the wealth of the population leads to greater demand for goods. 
• People have access to loans and can spend more on luxury goods, many of which
are produced in other countries. 
• In case where luxury goods and services cannot be produced locally, people will
have to import them from other countries. 
4. Preferences and tastes 
• Preferences and tastes play a part in the determination of prices. 
• Customers in Australia prefer a specific product which they do not produce and need
to import, and it will have a higher value than in other countries. 
• People's taste and preferences evolve and are often influenced by social media and
globalization. 
• Changes in preference create markets for goods and services that are not always
manufactured domestically. 

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5. Difference in consumption patterns 

• The difference in consumption patterns is determined by the level of economic
development in the country. 

• In countries where the level of disposable income is high, demand for luxury goods
is high, which creates a larger market for imports. 
• A poorly developed country will have a high demand for basic goods and services
but a lower demand for luxury goods. 

Supply reasons
1. Natural resources 
• Natural resources are not evenly distributed across all countries of the world. 
• They vary from country to country and can only be exploited in places where these
resources exist. 
• South Africa has large deposits of gold while Nigeria has crude oil. 
• The availability of natural resources creates a platform for specialisation and an
opportunity to earn valuable export revenue. 
2. Climate conditions 
• Every country has a unique climate which allows it to grow specific crops. 
• Specialisation is promoted in production which empowers countries to produce at
lower cost per unit. 
• Climate conditions make it possible for some countries to produce certain goods at
lower price than other countries. 
• Brazil is the biggest producer of coffee in the world because its climate conditions
are favourable for coffee production. 
3. Labour resources 
• Labour resources differ in quality, quantity and cost between countries. 
• Some countries have highly skilled and well-paid workers with high productivity
levels.  such as Switzerland 
• Some countries have bigger or smaller labour force, where minimum wage may be
higher while others have no regulations regarding remuneration. 
• Some countries have specialized labour force in the production of certain goods and
services. 
• Germany has the most skilled labour in the production of BMW, VW, Mercedes Benz
cars, which gives it the capacity to export to other countries. 
4. Technological resources 
• Technological resources are available in some countries that enable them to
produce certain goods and services at a low unit cost. 
• Some countries have access to advanced technological resources such as
machinery and equipment. 
• Japan and Singapore are considered to be technologically advanced which gives
them a competitive advantage on the global markets. 
5. Specialisation 
• Specialisation in the production of certain goods and services allows some countries
to produce them at a lower cost than others (comparative advantage). 
• Japan specializes in the production of electronic goods and sells these at a lower
price. 
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• Specialisation ensures that mechanization, division of labour and economies of

scale are associated with mass production are achieved. 
• Countries therefore earn international reputation for specializing in the production of
certain products. 

6. Capital 
• Capital allows developed countries to enjoy an advantage over underdeveloped
countries. 
• Developed countries are usually highly industrialized and have well-developed
infrastructure which promotes higher levels of productivity. 
• Due to a lack of capital, some countries cannot produce all the goods they require
themselves. 
(Accept any other correct relevant response)
(Allocate a max of 8 marks for headings/subheadings/examples) (Max 26)

ADDITIONAL PART
A weaker currency (rand) may positively impact on the South African economy as
follows: -
• Imports will become relatively more expensive which may discourage importing and
increase demand of local products. 
• Demand for South African exports such as base metals and mineral products will
increase as they become relatively cheaper. 
• Tourism activities will increase as more tourists visit the country due to the weaker
rand. 
• Balance of payments deficit will decrease as less goods are imported while more
goods are exported. 
A weaker currency (rand) may negatively impact on the South African economy
as follows: -
• Importing production inputs such as crude oil, agricultural chemicals and vehicle
parts will become expensive fuelling cost-push inflation. 
• Higher cost of importing production inputs may decrease domestic production which
will slow down economic growth. 
• Foreign investors may withdraw their investments in the economy because a weaker
rand reduces the returns on their investments. 
• Import payments will increase which may reduce welfare as more resources are
used to produce more exports to finance higher cost of import. 
• Export earnings will decrease, resulting in a decrease in trade balance. 
(Accept any other correct relevant response) (Max 10)
(A maximum of 2 marks may be allocated for mere listing of facts/examples)

CONCLUSION
As a developing country, South Africa should encourage international trade to achieve
higher economic growth. 
(Accept any other higher-order conclusion) (Max. 2) [40]

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Economics/P1 18 DBE/November 2024
NSC – Marking Guidelines

QUESTION 6: ECONOMIC PURSUITS 40 MARKS – 40 MINUTES

• Discuss in detail the demand-side approach in promoting economic growth

and development in South Africa. (26 marks)
• Analyse the importance of promoting small businesses to the South African
economy. (10 marks)

INTRODUCTION
The demand-side approach involves discretionary changes in monetary and fiscal
policies with the aim of changing the level of aggregate demand and therefore
output. 
(Accept any other correct relevant introduction) (Max 2)
BODY: MAIN PART
THE SOUTH AFRICAN DEMAND-SIDE APPROACH
• The South African government uses both monetary and fiscal policies for stabilisation
purposes. 
• It uses monetary policies, through the SARB, mainly to stabilise prices during the
long upswings of the business cycles. 
• The government uses fiscal policy to meet social development and economic
growth.
Monetary policy 
• The SARB, as the central bank, is responsible for formulating South Africa's
monetary policy and is largely responsible for implementing this policy. 
• Its primary goal, as defined in the Constitution, is to protect the value of the currency,
by stabilising prices in terms of inflation targets.
It uses mainly the following monetary policy instruments: -
1. Interest rate changes 
• In South Africa interest rates are used to influence credit creation by making credit
more expensive or cheaper. 
• To stimulate economic growth, the SARB may reduce interest rates to make
borrowing cheaper which will encourage consumer spending and encourage
production. 
• Interest rates are used to stabilise the exchange rate by encouraging capital inflows
or outflows in order to take care of a deficit or a surplus on the current account of the
balance of payments. 
2. Open market transactions 
• To restrict bank credit, the SARB may sell securities on open markets which results
in money flowing from the banks to the SARB and cannot extend credit. 
• To encourage credit creation, the SARB buys securities on open markets leading to
money flowing into the banking system and used to extend credit. 
3. Moral suasion 
• The SARB consults with banks and persuades them to act in a manner that is
desirable in terms of the economic conditions that prevail at the time. 
• The persuasion is often linked to transactions of the SARB in the money market, for
example buying and selling paper such as bills and bonds. 

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Economics/P1 19 DBE/November 2024
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• For instance, if banks are too generous in extending credit, the SARB can call on
them to be stricter. 
• To encourage credit extension, the SARB may persuade commercial banks to be
more lenient when granting credit to their clients. 
4. Cash reserves requirement 
• To restrict bank credit, the SARB may increase the cash reserve requirement which
reduces credit extension by banks. 
• To encourage credit creation, the SARB decreases the cash reserve requirement to
allow banks to extend more credit to the public. 
• Access to more credit will increase consumer spending and investments which will
stimulate economic growth. 
Fiscal policy 
• South Africa's fiscal policy is put into practice by means of the budgetary process.
• The main purpose of fiscal policy in South Africa is to stimulate macroeconomic
growth and employment, and to ensure a desirable redistribution of income
(economic equity). 
• The price stability and exchange rates stability objectives are left for the most part to
monetary policy. 
• The government compiles its expenditure and taxation in a way that enhances its
chances of achieving its macroeconomic objectives. 
In South Africa, fiscal policy includes the following elements: -
1. Progressive personal income tax 
• Higher-income earners are taxed at higher rates than lower-income earners. 
• The taxes are used to finance social development. 
• Tax revenue will benefit the poor through social grants and social allowances such
as pensions. 
2. Wealth taxes 
• Properties such as houses, offices and factory buildings in urban areas are taxed
annually (Property tax). 
• Transfer duties are paid when properties are bought. 
• Securities (shares and bonds) are taxed when they are traded. 
• Capital gains tax (CGT) is levied on gains earned on the sale of capital goods, such
as properties and shares. 
• Estate duties are levied on the estates of deceased persons with a value of more
than R3,5 million. 
• Taxes are used to finance development expenditures which benefit the poor more
than those who are not poor. 
3. Cash benefits 
• The government provides social security payments such as old-age pensions,
disability grants, child support grants, foster child grant, unemployment insurance
and the social relief of distress (SRD) grant. 
4. Benefits in kind/Natural/Natura benefits 
• Benefits in kind include the provision of healthcare, education and school meals,
protection, municipal services and infrastructure. 
• Where user-fees are charged, poor people and low-income earners benefit more
than others because they pay nothing or less than higher-income earners. 

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Economics/P1 20 DBE/November 2024
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• For instance, Free basic electricity (FBE) of 50kWh per household per month and
Free basic water (FBW) of 6 kl (6 000 litres) of water per month per household are
provided. 
5. Other redistribution methods 
• Some macroeconomic policies have advantages that favour poor and low-income
earners. 
• Public works programmes provide employment and strategic integrated projects
(SIPs), provide employment subsidies and a number of other cash and financial
benefits to SMMEs. 
• Previously disadvantaged persons receive first preference to redress the imbalance
of the past. 
6. Land restitution and land redistribution 
• The purpose of land restitution is to return land (or pay cash compensation) to those
who lost their land because of discriminatory laws of the past. 
• Land redistribution focuses on land for residential (town) and productive (farm)
use.
• The aim is to redistribute 30% of the country's agricultural land to previously
disadvantaged persons. 
• The funds for land restitution and land redistribution programmes are provided for in
the main budget. 
7. Property subsidies 
• Subsidies help beneficiaries to acquire ownership of fixed residential property.
• The government's housing subsidy scheme provides funding options to all eligible
persons earning a specified range of monthly income.
• A housing subsidy is not a cash pay-out but it is paid directly to the financial
institution providing the housing bond or to the seller.
• The subsidy depends on a person's income but the lower the income, the higher the
subsidy.
• The housing subsidy scheme is financed from the main budget.
(Accept any other correct relevant response)
(Allocate a max of 8 marks for headings/subheadings/examples) (Max 26)

ADDITIONAL PART
• Small businesses can help to create employment for those who are structurally
unemployed in the economy thereby reducing the unemployment rate. 
• Small businesses may compete with larger businesses which improves economic
efficiency and promotes innovation. 
• Output produced by small businesses contributes to the GDP of the country thereby
stimulating economic growth. 
• Small businesses may create a source of income for the households which helps to
alleviate poverty in South Africa. 
• The establishment of small businesses may expand the tax base which increases
tax revenue for the government. 
• Output produced by small businesses may contribute to an increase in exports which
helps to reduce balance of payments (BOP) problems. 
• Promotion of small businesses may help to encourage skills development amongst
the South African population. 

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Economics/P1 21 DBE/November 2024
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• The population percentage that depends on social grants may decrease thereby
reduce the welfare expenditure for the government. 
• Tax revenue collected from small business may increase the financial capacity of
the government to develop infrastructure. 
(Accept any other correct relevant response)
(A maximum of 2 marks may be allocated for mere listing of facts/examples)
(Max 10)

CONCLUSION
The government should complement demand-side policies with supply-side policies to
achieve higher economic growth. 
(Accept any other relevant higher order conclusion.) (Max. 2) [40]

TOTAL SECTION C: 40
GRAND TOTAL: 150

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