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Economics entrance exam, 2016 E.C. (2024)

Real questions from the Grade 12 university entrance exam in Economics, as students sat it in 2016 E.C. Every question comes with the correct answer and a worked explanation.

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  • Social science stream

    Who sits it

  • 2016 E.C. (2024)

    Exam year

  • 30 questions with answers

    In this set

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Answer each question yourself before opening the answer. The explanations point to the exact textbook section, so you know which page to reread when you miss one.

Question 1

Which one of the following represents the increase in the quantity supplied of the real GDP due to the increase in the price level?

  1. A.The right wards shifts of the aggregate supply curve
  2. B.The left ward shifts of the aggregate supply curve
  3. C.The down wards movement along the aggregate supply curve.
  4. D.The upwards movement along the aggregate supply curve
Show the answer and explanation

Answer: D The upwards movement along the aggregate supply curve

Why

A change in the price level moves the economy along a fixed aggregate supply curve. Because the short run AS curve slopes upward, a higher price level makes firms willing to sell more real output, so the economy slides up the curve.

A shift of the whole curve (options A and B) comes from something else, such as a change in wages, input prices or technology, and not from the price level itself.

Textbook: Economics Grade 12, Unit 2, section 2.2.2 The Upward Sloping Aggregate Supply Curve: The Short Run (SRAS).

Question 2

When the economy is in the long run which of the following is correct?

  1. A.Sticky wages and workers misperception still holds true
  2. B.What the economy produces is the full employment real GDP
  3. C.The short run and the long run GDP will the same
  4. D.The level of the real GDP the economy produces is less than the natural real GDR
Show the answer and explanation

Answer: B What the economy produces is the full employment real GDP

Why

In the long run wages become flexible and workers no longer misjudge prices. When those two short run conditions disappear, the economy settles at the full employment level of output, also called natural real GDP.

Option A states the short run conditions, so it cannot describe the long run, and option D describes a recession rather than long run equilibrium.

Textbook: Economics Grade 12, Unit 2, section 2.2.3 The Vertical Aggregate Supply Curve: The Long Run (LRAS).

Question 3

What is the pressure on price when the quantity demand of the real GDP is greater than the quantity supplied of real GDP during the short run?

  1. A.The price levels rises
  2. B.The price levels drops
  3. C.No pressure at all
  4. D.Initially downwards
Show the answer and explanation

Answer: A The price levels rises

Why

If buyers want more real GDP than sellers are offering, there is excess demand. Buyers compete for the limited output, and that competition pushes the general price level up until the two quantities match again.

Prices only fall (option B) in the opposite case, when quantity supplied is greater than quantity demanded.

Textbook: Economics Grade 12, Unit 2, section 2.3 Equilibrium of Aggregate Demand and Aggregate Supply.

Question 4

Which one of the following is correct about the economy when it is in long run equilibrium?

  1. A.The economy produces the real GDP which is called the natural real GDP
  2. B.The short run aggregate demand curve intersect the short run aggregate supply curve
  3. C.The long run aggregate demand curve intersect the short run aggregate supply curve
  4. D.Price temporarily deviates from equilibrium even if aggregate demand and aggregate supply remain unchanged.
Show the answer and explanation

Answer: A The economy produces the real GDP which is called the natural real GDP

Why

Long run equilibrium is the point where wages and prices have finished adjusting and workers have no misperceptions. The output produced there is the natural real GDP, the full employment level.

Option B is tempting because AD does cut SRAS, but that alone only describes short run equilibrium. What makes the position a long run one is that output equals natural real GDP.

Textbook: Economics Grade 12, Unit 2, section 2.2.3 The Vertical Aggregate Supply Curve: The Long Run (LRAS).

Question 5

Which one of the following is represent economic situation where there is an inefficient distribution of goods and services in the free markets?

  1. A.Externalities
  2. B.Asymmetric information
  3. C.Market failure
  4. D.Free riding
Show the answer and explanation

Answer: C Market failure

Why

Market failure is the general name for any situation in which a free market allocates resources badly, so goods and services are distributed inefficiently.

Externalities, asymmetric information and free riding are all causes or examples of the problem. The question asks for the situation itself, which is market failure.

Textbook: Economics Grade 12, Unit 3, section 3.1 Market Failure.

Question 6

What impacts on our aggregate demand do you expect if the level of economic activities in other countries increase?

  1. A.Aggregate demand will increase
  2. B.Aggregate demand will decrease
  3. C.Aggregate demand remain unaffected
  4. D.Aggregate demand first declines and then rises
Show the answer and explanation

Answer: A Aggregate demand will increase

Why

The level of economic activity abroad is one of the factors that shift the aggregate demand curve, because it decides how much foreigners buy from us.

When other countries grow, they buy more of our exports. Net exports are part of aggregate demand, so AD shifts to the right and increases at every price level.

Textbook: Economics Grade 12, Unit 2, section 2.1.3 Shifts in the Aggregate Demand Curve.

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Economics papers from other years

2017 E.C. (2025)2012 E.C. (2020)2011 E.C. (2019)

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Are these the real 2016 E.C. Economics entrance exam questions?

Yes. They come from the national university entrance exam in Economics that students sat in 2016 E.C. (2024). Our set holds 30 of its questions, each with its answer and an explanation that points back to the textbook.

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