Economics 1B (C COEC121 V1.0) Assignment 1 Specification (1)(1)

Assignment 1 specificationQualification Bachelor of CommerceModule code C_COEC121 Module name Economics 1BNQF level 5 Credit value 10Semester 2/2015 Year 1Assessor Nerina Bester Internal verifier Anton BrielCopy-editor Carol FofoEducational advisor Pierre DietrichsenAssignment title Macroeconomics in actionIssue date 13 – 17 July Submission date 24 – 28 August

Note Remember to keep a copy of all submitted assignments. All work must be typed. All work must be submitted to Turnitin* and the full report must be submitted with the

assignment. Each assignment must include a cover page. Use the cover sheet template for the assignment. This is available from your lecturer. Students are not allowed to offer their work for sale or to purchase the work of other

students. This includes the use of professional assignment writers and websites, such as eBay. If this should happen, CTI Education Group reserves the right not to accept future submissions from a student.

Essential embedded knowledge and skills required of students

Report-writing skills Ability to analyse scenarios/case studies Understanding subject field concepts and definitions Ability to apply theoretical knowledge to propose solutions to real-world

problems

Resource requirements

A device with Internet access for research A desktop or PC for typing assignments Access to a library or resource centre

* Refer to the CTI Plagiarism Policy, which is available from your lecturer.

Delivery requirements (evidence to be presented by students)

A 2typed assignment A Turnitin Report

Useful websites

An online book publishing company thatprovides students with free access to e-

Bookboon at: http://bookboon.com/ books in a wide variety of subject fields,including Marketing and Human ResourcesManagement

Business Open Learning Archive (BOLA) at: A database, created by Brunel Universityhttp://business.highbeam.com/137662/arti (Business Division), containing newspaper,cle-1G1-54905587/bola-business-open- magazine and journal articles related tolearning-archive business studiesEBSCOhost online research databases at: A research database containing online

information resources, including 375 full-texthttp://www.ebscohost.com/ and secondary databasesFree Management Library: an online An online library containing information onintegrated library for personal, professional topics related to business, management andand organisational development at: organisational development; each topic hashttp://managementhelp.org/ additional recommended books in the library

A Google service that searches the full textGoogle Books at: of books and magazines that Google hashttp://books.google.co.za/ converted into digital format, stored on its

(digital) databaseA search engine that indexes the full text of

Google Scholar at: scholarly (scientific) literature pertaining toa variety of disciplines and in differenthttp://scholar.google.co.za/ formats, including online journals andscholarly textbooks

2 Refer to the CTI Programme Handbook for more guidance (available on e-active).

C_COEC121 – Assignment specification| V1.0 of 12

A word of caution

Information available on the World Wide Web (WWW) is not necessarily reliable or of a high academic standard. Therefore, it is essential that you verify online information by comparing such to information in reliable information sources, such as accredited (academic) journals and relevant textbooks written by subject experts.

Criteria assessed

This is the only assignment for this module. The following criteria are assessed in this assignment:

LO1 Distinguish the measures available to assess the Question no.performance of an economyAC1.1 Provide an overview of the current state of the economy in South 1AfricaAC1.2 Apply the five macroeconomic objectives in order to evaluate the 2performance of an economyAC1.3 Explain the functioning of each of the five macro-economic 2objectives individuallyAC1.4 Explore the dynamic relationship between the five 2macroeconomic objectives as well as their dependenciesLO2 Illustrate the functioning of macroeconomic tools and Question no.their impact on an economy

Demonstrate the way in which national income figures –AC2.2 particularly gross domestic product (GDP) – can indicate 3economic wellbeing product (GDP) – can indicate economic

wellbeingAppraise the usefulness of aggregate demand (AD) and

AC2.3 aggregate supply (AS) analysis in illustrating the likely impact on 4economic growth and inflationIllustrate the way in which the Keynesian model can be used to

AC2.4 indicate the likely impact of an event on production and, 5therefore, income levels of an economy

AC2.5 Explain the importance of the monetary sector for any economy 4


Question 1

Scenario 1

Study the scenario and answer the question that follows.

20 Year Review: South Africa’s success story ‒ 11 March 2014

Compared with many emerging economies, South Africa “has a good story to tell” based on its achievements over the past 20 years, President Jacob Zuma said at the launch of the government’s 20 Year Review in Pretoria.

This Review reflects on South Africa’s progress in reconstruction and development since 1994, and on the challenges facing the country as it enters its third decade of democracy. President Zuma said South Africa had done well in improving the lives of its people through pro-poor economic interventions, and in building social cohesion, after inheriting the apartheid legacy in 1994.

“The biggest barrier to further increasing social cohesion is the remaining inequality in society, which needs to be attended to further,” President Zuma said and added: “Going forward, we should commit to working together further to implement the National Development Plan (NDP) to deal with the remaining challenges and take our country forward.”

President Zuma said that the Reconstruction and Development Programme (RDP) that was introduced by the democratic government after 1994 had benefitted millions of South Africans through social security programmes, subsidised housing, and the extension of services such as electricity and water, quality education and health care.

Human rightsSouth Africans now enjoyed basic human rights that restored their dignity after the adoption of the Constitution in 1996. “Thanks to our progressive Constitution, we enjoy freedom of movement and of association; the right to own property; the right not to be detained without trial; freedom of expression and freedom of the press, religious freedom and freedom of sexual orientation,” President Zuma noted.

“Women have equal rights before the law, which did not exist before 1994. Workers have 20 years of enjoying rights, including trade union workplace organising, collective bargaining, equal pay for equal work, health and safety, affirmative action, skills development, minimum wages for workers in vulnerable sectors, the right to strike, and the right to peaceful protest.”

Economic growthOn the economy, President Zuma said that despite having inheriting a bankrupt economy in 1994, South Africa’s growth had averaged 3.2% from 1994 to 2012, “a marked improvement over pre-1994 growth rates”, while the number of people in employment grew by approximately 60%, or 5.6-million people, between 1994 and 2013.

South Africa still faced challenges inherited from apartheid, including the uneven distribution of land; the after-effects of Bantu education, unemployment and poor economic growth. However, partnerships between the government, labour and business,


combined with the integration of the National Development Plan, would go a long way towards carrying the country forward.

Since the mid-2000s, the government had placed an emphasis on investing in economic infrastructure such as ports, rails, dams and power stations. Investment in infrastructure, which has also been identified as a key jobs-driver, had increased ‘dramatically’ over the past five years.

Social stabilityAt the same time, President Zuma said, the country had made progress in providing social services such as health care, education and housing. Over eight-million school children were now beneficiaries of no-fee schools, while nine-million were being fed through the schools feeding scheme.

In addition to free basic healthcare, more than 1 500 healthcare facilities had been built and existing ones revitalised over the past 20 years. “One of the major challenges that confronted the democratic government was the rapid rise in the HIV epidemic,” President Zuma said. “The country’s improved response to HIV and Aids and TB has resulted in dramatic improvements in health outcomes.”

The Reconstruction and Development Programme had resulted in about 2.8-million government-subsidised houses being distributed and over 875 000 serviced sites being delivered, with 56% of housing subsidies being allocated to woman-headed households

This had given more than 12-million South Africans access to accommodation, and increased the proportion of people living in formal housing from 64% in 1996 to 77% in 2011.

“We have succeeded because of the hard work of all our people who contributed in various ways to rebuilding their country,” President Zuma said. “We are honoured to place before the country this 20 Year Review, which provides evidence in this regard. We trust that it will be useful in assessing the path we have travelled thus far, and in moving the country forward.”

Source: SouthAfrica.info. 2015. 20 Year Review: South Africa's success story. [Online] Available at: http://www.southafrica.info/news/20years-review2.htm#.VRj5P_mUfeI

[Accessed: 30 March 2015]

Instructions

1.1 Summarise the article by SouthAfrica.info and identify the ten most important facts from the article. Your summary should not merely list the subheadings. It should highlight the most important aspects. Also note your summary should be presented in a well-written paragraph and not a bulleted list. [AC1.1]

(10 marks)


1.2 The majority of South African macro-economic variables indicate that on an economic front progress has been made after two decades of democracy.

a. Identify two Internet articles that agree with this statement. These external sources should, however, not be based on the same government press release. [AC1.1]

b. Provide the bibliographic entry of the two articles, according to the Harvard referencing method. [AC1.1]

(6 marks)

Question 2

Scenario 2

Study the scenario below and complete the following tasks:

Economic growth alongside reducing poverty

South Africa’s macroeconomic objectives include economic growth, full employment, price stability, and balance of payments stability, alongside the key political and economic objective of reducing inequality in the economy. Achieving these objectives often means trade-offs.

Source: Republic of South Africa: Department of Environmental affairs. 2007. South Africa's macro-economic objectives: Economic growth alongside reducing poverty. [Online]

Available at: http://soer.deat.gov.za/337.html [Accessed: 30 March 2015]

Write a report on the five macroeconomic objectives referred to in the scenario and South Africa’s current performance in each measure [AC1.2, AC1.3 and AC1.4].

(36 marks)

The following guidelines should be adhered to when writing your report:

The report should consist of between 1 500 – 2 000 words. The report should have both an introduction and conclusion. All five the macro-economic objectives should be explained theoretically South Africa’s current performance in relation to the five objectives

should also be critically evaluated. Make use of headings and sub-headings to ensure a logical discussion. All facts that are not common knowledge should be referenced

using the Harvard Method (in-text references used in the report should be included to bibliography of this assignment).

At least five external information sources should be used.


The following rubric will be used to assess the report:

Marking rubric for report on macro-economic objectives0 1 2 3 4 Mark

out of 4No reference Topic and Topic and Topic and

No is made to purpose is purpose is purpose isIntroduction the topic or stated but stated and stated andintroduction purpose of inappropria appropriate excellently

the report te describedProvided an Provided an Provided anexplanation explanation of explanation ofof the the objective, the objective,

Provided a objective including includingOmitted this including measurement measurementbasicmacro- how to and andEconomic explanationeconomic measure importance, importance,growth or definitionthe the as well as current dataof theobjective objective SA’s current and own viewobjective and why data for that or opinion

this the measureobjective isimportantProvided an Provided an Provided anexplanation explanation of explanation ofof the the objective, the objective,objective including including

Omitted this Provided a including measurement measurementbasic how to and andFull macro- explanation measure importance, importance,employment economic or definition the as well as current dataobjective of objective objective SA’s current and own view

and why data for that or opinionthis measureobjective isimportantProvided an Provided an Provided anexplanation explanation of explanation ofof the the objective, the objective,objective including including

Omitted this Provided a including measurement measurementbasic how to and andPrice macro- explanation measure importance, importance,stability economic or definition the as well as current dataobjective of objective objective SA’s current and own view

and why data for that or opinionthis measureobjective isimportant


Provided an Provided an Provided anexplanation explanation of explanation ofof the the objective, the objective,objective including including

Omitted this Provided a including measurement measurementBalance of basic how to and andmacro-payments explanation measure importance, importance,economicstability or definition the as well as current dataobjective of objective objective SA’s current and own view

and why data for that or opinionthis measureobjective isimportantProvided an Provided an Provided anexplanation explanation of explanation ofof the the objective, the objective,objective including including

Omitted this Provided a including measurement measurementbasic how to and andReducing macro- explanation measure importance, importance,inequality economic or definition the as well as current dataobjective of objective objective SA’s current and own view

and why data for that or opinionthis measureobjective isimportantUsed five Used five Used moreexternal external than five

Use and in- information information externalUsed less sources sources which informationtext Used 5than 5 which are are correctly sources whichreference of externalexternal correctly in- in-text are correctlyexternal informationinformation text referenced in-textinformation sourcessources referenced and can be referencedsources found in and can be

Bibliography found inBibliography

No link to Either Both coherentincoherent Both coherent and linked toNo introductionConclusion or not and linked to introductionconclusion and linked to introduction with clear ownincoherent introduction opinion

Technicalquality ofreport:length, use Poor Fair Average Good Excellentofsubsections,coherenceand flow

Total mark for Question 2 36


Question 3

Case study

Read the case study and complete the questions that follow:

Not by bread alone: Growth in national income is a poor predictor of welfare –16 March 2013

If you look at countries’ social and economic progress since 1990, you will find that, in most cases, the economic progress is in line with their historic performance ‒ with some important exceptions. According to the United Nations Development Programme (UNDP), over 40 countries have done much better than their recent history alone would have suggested. This large group, says the UNDP, really represents “the rise of the South”, not the BRICS, “Chindia” or some more exclusive club.

The distinctive feature of the calculations is that they are based on the UNDP’s “human development index”, (HDI) which includes social indicators, e.g. health and education. It is a broader measure of welfare than gross domestic product (GDP), which is based on income. As measured by the HDI, some countries with a good, but not outstanding, record of GDP growth perform exceptionally well. Mexico, Algeria and Brazil, for example, saw their incomes per person rise at modest annual rates of 1‒1.7% in 1990‒2012. But measured by the rise in the HDI they were among the top 15 performers. Bangladesh did as well as India on HDI, even though its economic growth lagged behind that of its giant neighbour.

Booming economies (in the GDP-derived sense) still did well. China, where income per head rose by 9% a year from 1990 to 2012, came third by the HDI measure. But South Korea, where income per head rose less than half as quickly, came first. Four of the top ten HDI performers had annual income growth of less than 3% a head.

The lesson, says the UNDP, is that whereas GDP growth matters, countries cannot rely on it alone for broad-based development. The best performers by the HDI measure also have the most energetic social policies. Turkey, for example, ‒ number nine in the HDI top ten ‒ almost trebled spending on anti-poverty programmes in 2002‒10, introduced a conditional cash-transfer scheme in 2003 and cut the share of the population living below the official breadline from 30% in 2002 to 4% in 2010.

Perhaps the most telling lesson is that countries that did best according to the broad-based measure also integrated more into the world economy. All but five of the 45 countries that most improved their HDI scores also increased the share of trade in their economies, often dramatically. Cutting yourself off and spending lots of money on social protection (as Venezuela did) produces poor results.

Source: The Economist. 2013. Not by bread alone: Growth in national income is a poor predictor of welfare. [Online] Available at:

http://www.economist.com/news/international/21573613-growth-national-income-poor-predictor-welfare-not-bread-alone [Accessed: 30 March 2015]


Instructions

It is evident from the scenario that the United Nations Development Programme (UNDP) is of the opinion that national income figures are not a good indicator of economic wellbeing.

Suppose you applied for a position as a junior economist at the UNDP. As an interview question, you were asked to explain and support the statement:“The lesson, says the UNDP, is that whereas GDP growth matters, countries cannot rely on it alone for broad-based development.”

Refer to both theory and the arguments made in the article in your explanation. [AC2.2]

(10 marks)

Question 4

Case study 4

Study the scenario and complete the following tasks:

Big chance for May rate hike, warns economist

27 March 2015

Cape Town ‒ “There is a 35% probability of an interest rate hike in May ‒ from around 15% before the South African Reserve Bank’s Monetary Policy Committee meeting ‒ and a 75% chance of a hike in July, according to Peter Attard Montalto, emerging markets expert at Nomura.

“We do not change our July hike baseline yet, however, and will watch the data. We attach a 35% probability to a May rate hike ‒ from around 15% before the meeting ‒ and maintain 75% for July,” said Montalto in reaction to the South African Reserve Bank’s (Sarb’s) decision on Thursday to keep the repo rate unchanged at 5.75%. Nomura expects no increase this time round.

“The growth story remains the same for the Sarb, while its inflation view has turned a corner and is now shifting higher. The path is still for a hike in July and we retain the view of terminal rates at 7.5% mid-2016,” said Montalto.

“However, some of the rhetoric at the press conference does suggest that there may be a much higher probability of a rate increase in May, but we await data and Fed expectations before shifting our baseline. The market is under-pricing the timing and extent of the cycle.” The MPC growth forecasts and growth narrative are broadly unchanged, even with a continuation of load shedding.

“The MPC is much more publicly making the case that it can hike because there is no help from weak growth for core inflation. On inflation the MPC has shifted its view on food price


inflation remaining low to be quite a bit higher as local prices have jumped and reached towards import parity,” said Montalto.

“The Sarb now expects headline CPI inflation to average 4.8% in 2015, compared with 3.8% previously, and to average 5.9% in 2016 compared with 5.4% previously. Equally, it has pencilled in the currently weaker Rand, but kept oil prices unchanged.”

Source: Smith, C. 2015. Big chance for May rate hike, warns economist. [Online] Available at: http://www.fin24.com/Economy/Rate-hike-more-likely-in-May-economist-20150326

[Accessed: 30 March 2015]

Instructions

The article reports the view of emerging markets expert, Peter Montalto, that an interest rate hike might take place in either May or June this year.

Analyse the article carefully. Illustrate and explain the effect of such an interest rate hike on the real and monetary sectors of the economy, using both AD/AS analysis and an Md/Ms graph. [AC2.3 and AC2.5]

(10 marks)

Question 5

Study the graph below and complete the question that follows:

Source: Roos, A. (editor), Mahadea, D., Mangondo, K., Snowball, J., & Viljoen, K. 2008.Economics an introduction. Sandton: Heinemann.

Instructions

5.1 Explain why the slope of the aggregate expenditure line decreases in a multi-sector economy as shown by the graph above. [AC2.4]

(8 marks)

Assignment total [80 marks]


Negative marking for insufficient or incorrect referencing

Encircle one option per category and add up the total penalty to be applied.

Category A: Minimum Reference Requirements (5 resources)

a. No additional readings have been used or referenced. Deduct 5% of finalmark

b. Only 1 additional reading has been used and referenced. Deduct 4% of finalmark

c. Only 2 additional readings have been used and Deduct 3% of finalreferenced. mark

d. Only 3 additional readings have been used and Deduct 2% of finalreferenced. mark

e. Only 4 additional readings have been used and Deduct 1% of finalreferenced. mark

Note: A further deduction of 1% may be made in addition tothe penalty indicated, if the referencing method has beenincorrectly applied.

Total deduction Category A %

Category B: Plagiarism sliding scale

Overall % of plagiarism Penaltya. Less than 25% of the body of assessment No penaltyb. *More than 25% of the body of assessment (first Re-submissionoffence):

i. If after re-submission less than 25% of the body of No penaltyassessmentii. If after re-submission still more than 25% of the Award 0%body of assessment

c. *More than 70% of the body of assessment (first offence): i. If after re-submission less than 25% of the body of No penaltyassessmentii. If after re-submission more than 25% of the body of Award 0%assessmentiii. If after re-submission more than 70% of the body of Award 0% and

assessment disciplinary hearing

Total deduction Category B %

TOTAL DEDUCTION (CATEGORY A & B) %


Economics 1B (C COEC121 V1.0) Assignment 1 Specification (1)(1)

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