ECS2602 – Macroeconomics II |
ECS2602: MACROECONOMICS II COMPLETE SOLUTION
RECENTLY UPDATED 2026/2027
UNIVERSITY OF SOUTH AFRICA
DEPARTMENT OF ECONOMICS
ECS2602 – MACROECONOMICS II
SAMPLE EXAMINATION PAPER
Duration: 2 Hours
Total Marks: 100 Marks
Examiner: Department of Economics
Module Code: ECS2602
Qualification: Bachelor of Commerce (BCom)
A.
SECTION A: MULTIPLE CHOICE QUESTIONS (20 MARKS)
Choose the ONE BEST answer for each question. Each question is worth 2 marks.
1. The IS curve slopes downward because: (2 marks)
A. Higher interest rates lead to lower investment and reduced aggregate output.
B. An increase in the money supply shifts the LM curve rightward.
C. Government spending always crowds out private investment.
D. The price level is inversely related to real output in the long run.
2. In the Mundell-Fleming model under a fixed exchange rate regime and perfect capital mobility,
fiscal policy is: (2 marks)
University of South Africa | Department of Economics Page 1
, ECS2602 – Macroeconomics II |
A. Completely ineffective because monetary policy must adjust to maintain the peg.
B. Highly effective because it does not crowd out net exports.
C. Partially effective, depending on the degree of capital mobility.
D. More effective than under a flexible exchange rate regime.
3. According to the Quantity Theory of Money, if the money supply grows at 5% and velocity is
constant, real output grows at 2%, then the inflation rate is: (2 marks)
A. 2%
B. 3%
C. 5%
D. 7%
4. The natural rate of unemployment, as described by Friedman and Phelps, is the rate at which:
(2 marks)
A. Cyclical unemployment equals zero and the economy operates at potential output.
B. Inflation is zero and labour markets clear instantly.
C. Structural and frictional unemployment are both eliminated.
D. The government achieves a balanced budget.
5. In an open economy with a floating exchange rate, an expansionary monetary policy leads to: (2
marks)
A. Currency appreciation and a decrease in net exports.
B. Currency depreciation and an increase in net exports.
C. No change in the exchange rate but higher domestic investment.
D. A contractionary effect on aggregate demand via the trade channel.
6. The Lucas Critique argues that: (2 marks)
A. Fiscal multipliers are always greater than one.
B. Traditional macroeconometric models are unreliable for policy analysis because
agents adjust expectations.
C. Monetary policy is ineffective in the long run due to wage rigidity.
D. The Phillips curve is positively sloped in the short run.
7. Which of the following is MOST consistent with the Real Business Cycle (RBC) theory? (2
marks)
A. Business cycles are caused by monetary shocks and sticky prices.
B. Fluctuations in output reflect optimal responses by households to technology shocks.
C. Unemployment is primarily structural and caused by government intervention.
D. The central bank can permanently reduce unemployment by increasing inflation.
University of South Africa | Department of Economics Page 2
ECS2602: MACROECONOMICS II COMPLETE SOLUTION
RECENTLY UPDATED 2026/2027
UNIVERSITY OF SOUTH AFRICA
DEPARTMENT OF ECONOMICS
ECS2602 – MACROECONOMICS II
SAMPLE EXAMINATION PAPER
Duration: 2 Hours
Total Marks: 100 Marks
Examiner: Department of Economics
Module Code: ECS2602
Qualification: Bachelor of Commerce (BCom)
A.
SECTION A: MULTIPLE CHOICE QUESTIONS (20 MARKS)
Choose the ONE BEST answer for each question. Each question is worth 2 marks.
1. The IS curve slopes downward because: (2 marks)
A. Higher interest rates lead to lower investment and reduced aggregate output.
B. An increase in the money supply shifts the LM curve rightward.
C. Government spending always crowds out private investment.
D. The price level is inversely related to real output in the long run.
2. In the Mundell-Fleming model under a fixed exchange rate regime and perfect capital mobility,
fiscal policy is: (2 marks)
University of South Africa | Department of Economics Page 1
, ECS2602 – Macroeconomics II |
A. Completely ineffective because monetary policy must adjust to maintain the peg.
B. Highly effective because it does not crowd out net exports.
C. Partially effective, depending on the degree of capital mobility.
D. More effective than under a flexible exchange rate regime.
3. According to the Quantity Theory of Money, if the money supply grows at 5% and velocity is
constant, real output grows at 2%, then the inflation rate is: (2 marks)
A. 2%
B. 3%
C. 5%
D. 7%
4. The natural rate of unemployment, as described by Friedman and Phelps, is the rate at which:
(2 marks)
A. Cyclical unemployment equals zero and the economy operates at potential output.
B. Inflation is zero and labour markets clear instantly.
C. Structural and frictional unemployment are both eliminated.
D. The government achieves a balanced budget.
5. In an open economy with a floating exchange rate, an expansionary monetary policy leads to: (2
marks)
A. Currency appreciation and a decrease in net exports.
B. Currency depreciation and an increase in net exports.
C. No change in the exchange rate but higher domestic investment.
D. A contractionary effect on aggregate demand via the trade channel.
6. The Lucas Critique argues that: (2 marks)
A. Fiscal multipliers are always greater than one.
B. Traditional macroeconometric models are unreliable for policy analysis because
agents adjust expectations.
C. Monetary policy is ineffective in the long run due to wage rigidity.
D. The Phillips curve is positively sloped in the short run.
7. Which of the following is MOST consistent with the Real Business Cycle (RBC) theory? (2
marks)
A. Business cycles are caused by monetary shocks and sticky prices.
B. Fluctuations in output reflect optimal responses by households to technology shocks.
C. Unemployment is primarily structural and caused by government intervention.
D. The central bank can permanently reduce unemployment by increasing inflation.
University of South Africa | Department of Economics Page 2
