EECF1624

UNIVERSITY OF THE FREE STATE

DEPARTMENT OF ECONOMICS
MINI TEST 5
DATE: 16 OCTOBER 2015
LECTURER: Ms. C. CAMPHER/
Mr. C. MUDZINGIRI (Qwa Qwa)
DURATION: 1 HOUR

MARKS: 25

Instructions:
This paper consists of 2 questions on 3 pages.
Answer all the questions.
Read the questions carefully and please write legibly.
Show all calculations where necessary.
QUESTION 1

(5 x 2 =10 Marks)

Write the letter of your choice next to the question number (e.g. 1.1 A or 1.1 B).
1.1 B

1.2 C

1.3 D

1.4 B

1.5 B

QUESTION 2
2.1

(15 Marks)

The table below shows the GINI coefficients of South Africans by racial group.
Racial group
Black
Colored
Indian/Asian
White
South Africa

GINI Coefficient
0.54
0.52
0.49
0.39
0.64

2.1.1 Make use of one graph to illustrate the Gini coefficients of the white and Indian racial
groups in South Africa. Clearly indicate which line represents the data for whites and
Indians respectively.
(3)

correct labels
Cumulative
percentage
of Income

100
Whites-0.39

Indians-0.49

100
Cumulative Percentage of
population

2.2

The table below shows a summary of the transactions that took place between the
individuals, firms and government units of country called Homeland and those of all
other nations during the year 2013.
Item
Merchandise exports
Merchandise imports
Service receipts
Net direct investment
Net portfolio investment
Other investments
Payments for services
Unrecorded transactions

2.2.1 Calculate the balance on the current account.

Rand (billion)
730
230
100
65
68
309
134
21
(2)

730+100-230-134=R466 billion

2.2.2 Calculate the change in gold and other foreign reserves if Homeland nationals have
invested R200 billion in some SADC countries.
(2)
Financial Account=65+68+309-200=242
change in gold and other foreign reserves=242+21+466=R 729 billion
2.3

Will an inflow of foreign funds lead to the appreciation or depreciation of the Rand?
Substantiate your answer.
(2)
Inflow leads to appreciation of the rand , demand of the rand will increase

2.4

Consider the rand/ USA dollar exchange rate, and focus on the market for dollars.
Using the demand and supply curves, explain whether the dollar would appreciate or
depreciate against the rand, and whether that rand would appreciate or depreciate
against the dollar if the following things happened: Hint: Assume that the world has
only two countries in existence, that is, the USA and South Africa.
2.4.1 South African income falls while USA income remains constant.
(3)
for the arrows

Rands per USA

Dollar

S0

D1

D0
Quantity of USA
Dollars

Rand appreciate/ dollar depreciate, quantity of dollars decrease, and demand for USA
dollar shift to the left
2.4.2 The USA buys an increased quantity of platinum mined at Marikana in South Africa.
(3)
S0
Rands per
dollar

S1

for the arrows

Quantity for USA

dollars

Rand appreciate/dollar depreciate, quantity of USA dollars increase and the supply for the
USA dollar shift to the left