ecs1601-questions-answers.

ECS1601 –SECTION A 1.16 Which of the following statements are correct? a. A flow variable is measured over a specific period. b. Wealth, assets, liabilities and profit are all stock variables. c. Stocks can change as a result of flows. [1] All the statements are correct. [2] a and b [3] a and c (ANSWER 3) [4] b and c [5] a 1.16 The correct alternative is (3). a. Correct. A flow variable is measured over a specific period. b. Incorrect. Profits is a flow variable. c. Correct. The level of water in a dam changes as a result of the inflow of water. The diagram below shows the circular flow of income and spending between households and firms. 1.17 Which one of the following statements is correct? [1] Flows (2) and (3) represent income. [2] Flows (2) and (4) represent spending. [3] Flows (1) and (2) represent spending. [4] Flows (1) and (3) represent spending.(ANSWER 4) Downloaded by THEMBELANI MLOTYA () lOMoARcPSD| 1.17 The correct alternative is (4) Firms spend on the factor market (Flow 1), while households spend on the goods market (flow 3). 1.18 In the circular flow of income and spending [1] investment results in a decrease in the volume of the income flow. [2] taxes result in an increase in the volume of the income flow. [3] imports result in an increase in the volume of the income flow. [4] savings result in a decrease in the volume of the income flow.(ANSWER 4) 1 .18 The correct alternative is (4) Savings, taxes and imports are leakages from the circular flow of income and spending and therefore result in a decrease in the volume of the income. Investment is an injection into the circular flow and results in an increase in the volume of the income flow. Question 1.19 is based on the following diagram. 1.19 Which flows represent taxes? [1] C and D [2] E and F [3] D and E(ANSWER 3) [4] A and B 1.19 The correct alternative is (3) Taxes flow from households and firms to government, that is, flows D and E.