ECS 1601 EXAM PACK

ECS 1601 OCTOBER/NOVEMBER 2016 SOLUTIONS. SECTION A COMPULSORY ESSAY QUESTIONS QUESTION 1: 1(a) BRIEFLY EXPLAIN DEMAND MANAGEMENT POLICIES AND HOW THEY CAN BE USED IN THE ECONOMY (3) There are two policies that can be used to manage the demand for goods and services (i) The Fiscal policy (Government): The two main instruments that the government can use to manage the demand for goods and services are government spending the taxes  Expansionary/Stimulatory policy: Increase Government spending and/or decrease taxes  Restrictive/contractionary policy: Decrease government spending and/or increase taxes. (ii) The monetary policy (SARB): The main instrument used by the Reserve bank is the interest rate.  Expansionary/Stimulatory policy: Decrease the interest rate.  Restrictive/contractionary policy: Increase the interest rate. 1(b) DISTINGUISH BETWEEN A FLOW VARIABLE AND A STOCK VARIABLE. GIVE ONE EXAMPLE OF EACH (4)  Flow variable: This type of variable is measured over a period. E.g On 25th April 2014 the inflow into Gariep dam was measured at 88cubic meters per second.  Stock variable: This particular variable can only be measured exactly at a particular point in time. At 0.00 on 25th April 2014 the level at the Gariep dam was at 95.8%