SUBJECT

PROPERTY ECONOMICS & FINANCE 2

SUBJECT CODES
PEF200S

ANNEXURE(S)

PAGES

TIME

1.5 HRS

DATE
23/09/2013

MARKS
75

BUSINESS FACULTY

COURSE: ND: REAL ESTATE

EXAMINER

MODERATOR (INTERNAL)

MODERATOR (EXTERNAL)

L. DA COSTA

SPECIAL INSTRUCTIONS

Answer ALL questions.

Place Answer Sheet inside the Script when handing in.

Calculators are allowed.

REQUIREMENTS

ANSWER BOOKS
CALCULATORS.

DO NOT TURN THE PAGE BEFORE THE STARTING TIME

QUESTION 1

1.1

Fully describe what is meant by intermediate goods as well as double counting. Use appropriate
examples to support your explanation.
[10]
Production in a round about way has been mentioned above. Goods which move from one
production process to another are termed intermediate goods. The value of intermediate goods
must be excluded in the calculation of the G.D.P. in order to avoid a double count. It is called
double counting because if intermediate goods are not excluded, the same product will be
calculated more than once.
A simple example will explain this: A wheat farmer produces wheat to the value of R10 000 and
sells it to the miller. The miller processes the wheat and produces bread flour which he sells to
the bakeries for R15 000. The bakeries make bread and in turn sell it to a retailer for R20 000,
they in turn sell it to the public for R25 000. This example is now summarized in the following
table.
STEPS

YIELD

OF

STEPS

VALUE
ADDED

Wheat farmer

R10 000

R10 000

Miller
Retailer
Consumer
TOTAL

R15 000
R20 000
R25 000
R70 000

R 5 000
R 5 000
R 5 000
R25 000

The first column shows the value of the turnover of each production stage. This totals R70 000
but it is quite clear that what was in fact produced in this process, was no more than R25 000
worth of bread. A precise indication of the value of production for each stage is obtained by
observing the added value, meaning the money yield of each production stage less the value of
the intermediate goods the difference being shown in the last column.
The total of the value added precisely equals R25 000 which equals the value of the final
production.
1.2

Define in full what is meant by GDP.

[5]

The G.D.P. can be defined as the total value of the final production of goods and services
produced within the boundaries of a country in a given period, usually a year, before allowing for
depreciation.
1.3

What are the four sources that represent Gross Domestic Savings?

(a)
(b)
(c)
(d)
1.4

[8]

Personal savings of private individuals.

Company savings.
Current surplus of the general government.
Provision for depreciation in value.

There are two methods of measuring GDP. What are these?

[2]

The G.D.P. can be measured at market prices or factor costs. G.D.P. based on market prices
means that its value is calculated in accordance with the market prices of the final goods and
services. G.D.P. at factor costs means that its value is based on the aggregate of the
remuneration paid for production factors.
[25]

QUESTION 2
2.1

Explain what is meant by the Real Flow as well as the Money Flow in an economic cycle.
Mention two role players in each.
[8]
The real flow is the flow of resources on the one hand and consumer goods and services on the
other. Graphically it can be represented as follows:
Factors of production
Households

Businesses
Consumer goods and services

The consumers buy goods and services from the businesses and sell their factors of production in return.

(a)

The Money Flow

The money flow is the flow of consumer income and consumer expenditure. Graphically it looks like this:
Consumer expenditure
Households

Businesses
Factor payments

Financial institutions
Foreign sector
Households
2.2

(a)
(b)
(c)
(d)
2.3

Government

Businesses

Discuss four determinants of investment

[8]

Business confidence and expectations about the future

Technological change
Government policy and action
The state of demand
What is a business cycle and what four phases occur in business cycles?

[6]

A pattern of upswing and downswing which can be discerned in economic activity over a number
of years.

2.4

4 phases trough, upswing, peak, downswing

duration and intensity differ

Describe three leading economic indicators

No. of cars sold

No. of residential building plans passed
No. of fixed property details
Company profits after tax

[3]

[25]
QUESTION 3
3.1

What is inflation?

[2]

A long term rise in the general price level of goods and services.
3.2

Explain what is meant by Demand Pull Inflation, giving two causes of this.

[5]

Demand pull inflation occurs when the aggregate demand for goods and services increases while
the supply stays the same too much money chasing too few goods.
Demand pull inflation can be caused by any or a combination of the various components of
aggregate demand:

3.3

Increased consumption spending by households (C).

Increased investment spending by firms (I).
Increased government spending (G)
Increased export earnings (X).

Describe the four types of unemployment that exist, with an example of each.

[8]

FRICTIONAL UNEMPLOYMENT
Individuals who leave one job, or who are looking for a first ob, often do not find employment
immediately, although there are vacancies in the economy.
SEASONAL UNEMPLOYMENT
This includes activities such as picking and processing fruit and vegetables which have particular
growing seasons.
CYCLICAL (OR DEMAND DEFICIENCY) UNEMPLOYMENT
This occurs when a slump or recession in the economy (as a result of a temporary lack of
demand) gives rise to unemployment.
STRUCTURAL UNEMPLOYMENT
Whereas cyclical unemployment is related to fluctuations in the general state of the economy,
structural unemployment is usually confined to certain industries, sectors or categories of
workers. Structural unemployment occurs when there is a mismatch between worker
qualifications and job requirements or when jobs disappear because of structural changes in the
economy
3.4

Discuss five aspects that determine the demand for retail merchandise.

[10]

THE SIZE OF THE MARKET

INCOME
DEMOGRAPHIC CHARACTERISTICS
LIFESTYLE
DISTANCE
THE EFFECT OF THE ECONOMY
THE CULTURAL COMPOSITION OF RESIDENTIAL
NEIGHBOURHOODS
[25]

TOTAL MARKS

[75]