PMAC5112w MO

IIE Learn Module Outline PMAC5112/d/w; ECMS5112/d
Economics 1B/ Economics B (Macro)

PMAC5112/d/w
ECMS5112/d
MODULE OUTLINE 2023
(First Edition: 2020)
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© The Independent Institute of Education (Pty) Ltd 2023 Page 1 of 36

Table of Contents
Introduction ............................................................................................................................... 3
Using this Module Outline .......................................................................................................... 4
This Module on Learn ................................................................................................................. 5
Icons Used in this Document and on Learn ................................................................................ 6
Module Purpose ......................................................................................................................... 8
Module Outcomes ...................................................................................................................... 8
Module Pacer ........................................................................................................................... 11
Glossary of Key Terms for this Module .................................................................................... 34

Introduction
Economies employ the factors of production such as land, labour, capital, entrepreneurship,
and technology to increase total production and address the problem of scarcity, which is
known as a major economic problem.
To eradicate this problem, the South African Reserve Bank (SARB), which is South Africa’s
primary monetary authority, utilises measurement tools. This way, the SARB can monitor and
regulate the flow of money in the economy. The government participates in the economy to
provide public goods and services. To fulfil its duties, the government will charge taxes and
may have to regulate this and its spending in the economy. International trade also involves
the close monitoring of and regulation of foreign exchange since payments and receipts for
imports and exports might have to be made in other currencies. To monitor import and export
prices, a country may refer to its terms of trade, which is its ratio between export and import
prices and is referred to as an index.
To assess whether an economy is performing well, economists will typically evaluate whether
the five main macroeconomic objectives are met. These are economic growth, full
employment, price stability, balance of payments stability, and equitable income distribution.
To understand these different effects, and explain how national income is determined, the
Keynesian model is used. This model is based on the idea that economic activity is determined
by spending or demand, and the simplest model consists only of households and firms. The
aggregate demand-aggregate supply (AD-AS) model can also be used, which combines the
Keynesian and classical models to form the AD-AS model – this illustrates the national income
and price level in the economy.
All of the above are used to promote consistent economic growth to eliminate poverty and
unemployment and ultimately improve the quality of life and a country’s standard of living.
The COVID-19 pandemic affected the world economy, and many countries experienced a
decrease in economic growth due to the reduction in economic activity.
Economics 1B provides students with knowledge of economics from a macroeconomic

perspective. Students will gain comprehensive knowledge and understanding of markets,
government policy, national economies and the factors influencing national economies. This
module provides students with the wider perspective of economics within a national context.

Using this Module Outline

This module outline has been developed to support your learning. Please note that the content
of this module is on Learn as well as in the prescribed material. You will not succeed in this
module if you focus on this document alone.
• This document does not reflect all the content on Learn, the links to different resources,
nor the specific instructions for the group and individual activities.
• Your lecturer will decide when activities are available/ open for submission and when
these submissions or contributions are due. Ensure that you take note of
announcements made during lectures and/or posted within Learn in this regard.

This Module on Learn

Learn is an online space, designed to support and maximise your learning in an active
manner. Its main purpose is to guide and pace you through the module. In addition to the
information provided in this document, you will find the following when you access Learn:
• A list of prescribed material;

• A variety of additional online resources (articles, videos, audio, interactive graphics, etc.)
in each learning unit that will further help to explain theoretical concepts;
• Critical questions to guide you through the module’s objectives;
• Collaborative and individual activities (all of which are gradable) with time-on-task
estimates to assist you in managing your time around these;
• Revision questions, or references to revision questions, after each learning unit.
Kindly note:
• Unless you are completing this as a distance module, Learn does not replace your
contact time with your lecturers and/or tutors.
• PMAC5112/ECMS5112 is a Learn module, and as such, you are required to engage
extensively with the content on the Learn platform. Effective use of this tool will
provide you with opportunities to discuss, debate, and consolidate your
understanding of the content presented in this module.
• You are expected to work through the learning units on Learn in your own time –
especially before class. Any contact sessions will therefore be used to raise and
address any questions or interesting points with your lecturer, and not to cover every
aspect of this module.
• Your lecturer will communicate submission dates for specific activities in class and/or
on Learn.

Icons Used in this Document and on Learn

The following icons are used in all your modules on Learn:
Icon Description
A list of what you should be able to do after working through the learning
unit.
Specific references to sections in the prescribed work.
Questions to help you recognise or think about theoretical concepts to be

covered.
Sections where you get to grapple with the content/theory. This is mainly
presented in the form of questions which focus your attention and are
aimed at helping you to understand the content better and to achieve the
learning objectives. Ensure that you can answer all these questions in
detail. In these sections, you will also be presented with online resources
to work through (in addition to the prescribed work) that will help you to
understand the work better and to achieve the learning objectives.
Opportunities to make connections between different chunks of theory in

the module or across modules.
Real life or world of work information or examples of application of theory

for self-exploration.
REMEMBER:
You need to log onto Learn to:
• Access the learning material and online resources such as articles, interactive
graphics, explanations, video clips, etc. which will assist you in mastering the content;
• View instructions and submit or post your contributions to individual or group
activities which are managed and tracked on Learn; and
• Submit assessment documents.

Module Resources
Prescribed Material (PM) for Mohr, P. and Fourie, L. 2020. Economics for South African
this Module Students. 6th edition. Pretoria: Van Schaik.
ISBN: 9780627037054
Recommended Readings, LEARNING UNIT 2:
Digital, and Web Resources
Mohr, P., Fourie, L. and Associates. 2020. Economics for
South African Students. Pretoria: Van Schaik
LEARNING UNIT 3:
Mohr, P., Fourie, L. and Associates. 2020. Economics for

South African Students. Pretoria: Van Schaik. [Appendix 4-
1: Algebraic analysis of demand and supply].
Please note that a number of additional resources and links

to resources are provided throughout this module on the
Learn platform. You are encouraged to engage with these
as they will assist you in mastering the various objectives of
this module. They may also be useful resources for
completing any assignments. You will not, however, be
assessed under examination conditions on any additional
or recommended reading material.
Module Overview You will find an overview of this module on Learn under
the Module Information link in the Course Menu.
Assessments Find more information on this module’s assessments in
this document and on the Student Portal.

Module Purpose
This module provides students with knowledge of economics from a macroeconomic
perspective. Students will gain comprehensive knowledge and understanding of markets,
government policy, national economies and the factors influencing national economies.
This module provides students with the wider perspective of economics as a whole within
a national context.
Module Outcomes
Demonstrate a comprehensive knowledge and understanding of economic
MO1 concepts, theories, trends and developments within the macroeconomic
environment.
Demonstrate knowledge and understanding of various economic policies which
MO2
play a vital role within the macroeconomic environment.
Demonstrate knowledge and understanding of economic growth and the
MO3 factors which influence both economic and productivity growth within the
macroeconomic environment.
Demonstrate knowledge and understanding of the various macroeconomic
MO4
market structures in the macroeconomic environment.
Evaluate problems and policy options in the context of developing countries.
MO5

Assessments
PMAC5112/d; ECMS5112/d
Integrated Curriculum Engagement (ICE)
Minimum number of ICE activities to complete 4
Weighting towards the final module mark 10%
Tests/ Examination Test 1 Test 2 Examination

Weighting 25% 30% 35%
Duration 1 hour 1 hour 2 hours
Total marks 60 60 120
Open/ closed book Closed book Close book Closed book
Learning Units covered 1-3 4-6 All units
PMAC5112w
Integrated Curriculum Engagement (ICE)
Minimum number of ICE activities to complete 4
Weighting towards the final module mark 10%
Assignment / Assignment 1 Assignment 2 Examination

Examination
Weighting 25% 30% 35%
Duration 10 hours 10 hours 2 hours
Total marks 100 100 120
Open/ closed book n/a n/a Closed book
Learning Units covered 1-3 4-7 All units

Assessment Preparation Guidelines

Format of the Assessment Preparation Hints
(The Focus/ Approach/ Objectives) (How to Prepare, Resources to Use,
etc.)
Test 1 Multiple choice questions, Short The test will consist of MCQs and
questions (Sentences), Longer short questions relating to Learning
questions (Paragraphs) Units 1 – 3. Students will be
required to construct and interpret
graphs to answer certain questions.
A non-programmable calculator is
permitted.
Test 2 Multiple choice questions, Short The test will consist of MCQs and
questions (Sentences), Longer short questions relating to Learning
questions (Paragraphs). Units 4 – 6. Students will be
required to construct and interpret
graphs to answer certain questions.
A non-programmable calculator is
permitted.
Examination Multiple choice questions, Short The exam will consist of MCQs,
questions (Sentences), Longer short questions and longer
questions (Paragraphs). questions relating to all learning
units. Students will be required to
construct and interpret graphs to
answer certain questions. A non-
programmable calculator is
permitted.

Module Pacer
Code Programme Contact Sessions Credits
PMAC5112/ECMS5112 BAA1; BAD1; BBM1; BCE1; 60 contact
BCO1; BET1; BLG1; BSS1; BML2; hours
DCO2; DMG2
PMAC5112d/ECMS5112d BAD1d; BBM1d; BLG1d; DCO2d; 36 contact
15
DMG2d hours + 12 learn
hours
PMAC5112w BAD1w; BBM1w; BCO1w; 12
BET1w; BLG1w
Learning Unit 1 Interdependence between Major Sectors, Markets and Flows in
a Mixed Economy
Overview:
Economies employ the factors of production such as land, labour, capital,

entrepreneurship, and technology to increase total production and address the problem of
scarcity, which is known as a major economic problem. Fully employing sources of
production such as labour and increasing output levels can lead to an increase in income
and spending. Thus, total production, income and spending are related and are known as
the three major flows in the economy.
The relationship between these is depicted using the circular flow model. This model can
also be expanded to also include other components such as the government sector, the
foreign sector, and financial institutions. It is, therefore, crucial to understand the way the
economy operates through this model to improve economic growth.
In this learning unit, we will look at identifying and discussing the three major flows in the
economy, which include production, income, and spending after differentiating between
stocks and flow variables. Next, we will discuss the households and firms and show how
their decisions and activities are interrelated. Then, we will introduce the circular flow of
income and spending and discuss the various components included in the model. Finally,
using the same model, we will explain how the government sector interacts with
households and firms and show how the foreign sector interacts with the domestic
economy.
Please work through Themes 1, 2 and 3 on Learn, together with the relevant sections of
your prescribed source/s. To ensure that you are working towards mastering the objectives
for this learning unit, please also ensure that you complete the activities on Learn.
Prescribed figures: 3-1 to 3-5

Prescribed boxes: 3-1; 3-4

Learning Unit 1: Interdependence between Major Sectors, Markets and Flows in a Mixed
Economy
PMAC5112/ECMS5112 Theme 1: Households and firms Prescribed Material (PM)
Sessions:1 – 5 Learning Content: PM: Chapter 3
PMAC5112d/ECMS5112d LO1: Identify the three major flows
Sessions:1 – 4 in the economy;
PMAC5112w: LO2: Distinguish between a stock
variable and a flow variable;
Academic Week 1
LO3: Describe the interdependence
Related Outcomes: between households and firms;
MO001 LO4: Identify the various injections
MO004 into leakages from the circular
flow of income and spending.
Theme 2: Other sectors of a mixed
economy
LO5: Describe the role of the
government in a closed
economy;
LO6: Describe the role of the
foreign sector in an open
economy.
Theme 3: Financial institutions in
the circular flow of income and
spending
LO7: Describe the role of financial
institutions in the circular flow
of income and spending.
25% of ICE Tasks to be completed by this point.

Learning Unit 2 The Monetary Sector

Overview:
Money, which can be defined as that which is accepted as a form of payment or a means
to settle debt, serves many functions in the economy. Over the years, money has evolved
from commodities to different forms, such as coins, paper money, deposits, and credit
money. Primarily, we use money to purchase goods and services, because it is accepted
as a means of exchange and is a good measure of the value of goods and services.
Additionally, money can be used to hold wealth. The only controversy around money is
that is it practically difficult to measure the quantity of money in circulation. Thus, the
South African Reserve Bank (SARB), which is South Africa’s primary monetary authority,
utilises measurement tools. This way, the SARB can monitor and regulate the flow of
money in the economy.
In this learning unit, we will look at the definition, functions, and forms of money. Then,
we will discuss the measures of the quantity of money, including M1, M2, and M3 money
aggregates, as well as the factors that include the supply of and demand for money. Next,
we will look at the idea of equilibrium in the money market and explain the causes and
effects of changes in equilibrium in the money market. Finally, we will discuss the role and
functions of the South African Reserve Bank and the instruments of monetary policy.
Please work through Themes 1, 2, 3 and 4 on Learn, together with the relevant sections of
your prescribed source/s. To ensure that you are working towards mastering the
objectives for this learning unit, please complete the activities on Learn.

Prescribed boxes: 14-1, 14-4, 14-5, 14-6 and 14-8
Prescribed tables: 14-1

Learning Unit 2: The monetary sector

PMAC5112/ECMS5112 Theme 1: What is money? Prescribed Material (PM)
Sessions: 6 – 10
PMAC5112w: Learning Content: PM: Chapter 14
Academic Week 2 LO1: Define money;
LO2: Describe the functions of
PMAC5112d/ECMS5112d money;
Sessions:5-8 LO3: Discuss the process of
different forms of money.
Related Outcomes:
MO001 Theme 2: Measures of the
MO002 quantity of money
MO004 LO4: Define the M1, M2 and M3
MO005 money aggregates;
LO5: Discuss the functions of the
South African Reserve Bank.
Theme 3: The supply of and
demand for money
LO6: Discuss the factors which
influence:
o The supply of money
(how money is
created);
o The demand for
money.
LO7: Explain the causes of
changes in equilibrium in the
money market.
Theme 4: Monetary Policy
LO8: Discuss the instruments of
monetary policy.

Learning Unit 3 The Public Sector

Overview:
Government exists in society to create, implement, and enforce rules that ensure that
citizens respect each other and abide by the given laws. This allows everyone to co-live
together happily and peacefully. To do this, the government may intervene to prevent any
form of inequality or injustice to ensure the fair distribution of resources to all people,
especially the poor or disadvantaged. In addition, the government participates in the
economy to provide public goods and services. To fulfil its duties, the government will
charge taxes and may have to regulate this and its spending in the economy.
A large portion of taxation received by the government stems from personal income taxes,
which are direct taxes levied on South Africans’ taxable incomes. This is an example of a
progressive tax, which means that the more an individual earns, the more tax they are
liable for. Alternatively, some countries might choose for these taxes to be charged
proportionally (where tax paid is the same at any level of income) or regressively (the more
income an individual earns, the fewer taxes they need to pay). To calculate personal
income taxes, tax tables, which are available from SARS, may be referred to. These indicate
which levels of income must be charged at which tax rates, and specify the marginal tax
rates – or, the rates of tax applied to each additional rand above certain income brackets.
These can then be used to calculate the average tax rate, which is the ratio of overall tax
paid and taxable income.
In this learning unit, we will look at the government sector, focusing on the components
and functions of the government and exploring how and why the government intervenes in
economic affairs. Then, we will discuss why governments fail and differentiate between
nationalism and privatisation. Next, we will explain fiscal policy and discuss government
spending and how it is financed. Finally, we will look at tax, including its concept, criteria,
types, calculation thereof, and the incidence of tax.
for this learning unit, please complete the activities on Learn.

Learning Unit 3: The Public Sector

PMAC5112/ECMS5112 Theme 1: The role of government in Prescribed Material
Sessions: 11 - 15 the economy (PM)
Academic Week 3 LO1: List the components of the
government sector in South Africa;
PMAC5112d/ECMS5112d LO2: Discuss reasons for government
Sessions:9-12 involvement in the economy;
Related Outcomes: LO3: List the broad functions of
government;
MO001
LO4: Describe how government
MO002 intervenes in the economy;
MO003 LO5: Discuss:
MO004 o Government failure;
MO005 o Nationalisation;
o Privatisation.
Theme 2: Fiscal policy and the budget
LO6: Define and explain the term fiscal
policy;
LO7: Explain:
o The reasons for the
increase in government
spending in South Africa;
o How government spending
is financed;
o The criteria for a good tax;
o The different types of tax.
Theme 3: Taxation
LO8: Demonstrate, through
calculations, the difference
between the marginal tax rate
and the average tax rate
with regard to personal income
tax;
LO9: Distinguish between progressive,
proportional and regressive taxes in
South Africa;
LO10: Explain the incidence of tax.

Learning Unit 4 The Foreign Sector
Overview:
The ‘foreign sector’ in economics refers to all the international participants in an economy.
Households, firms, and the government purchase and sell goods and services from other
countries. These are known as imports and exports respectively, both of which are
examples of international trade. Countries may choose to engage in international trade
because other countries may be more efficient or specialised in producing certain goods
than they are – that is, other countries may have a comparative or absolute advantage.
There are various benefits to international trade, such as increased job opportunities,
better relations between countries, and opportunities to specialise, which ultimately can all
lead to the improvement of an economy. However, too many imports may disadvantage
local economies, and thus, governments may choose to control the volume of imports.
International trade also involves the close monitoring of and regulation of foreign exchange
since payments and receipts for imports and exports might have to be made in other
currencies. To monitor import and export prices, a country may refer to its terms of trade,
which is its ratio between export and import prices and is referred to as an index.
In this learning unit, we will look at the concept of international trade and explain why
countries participate in international trade. Then, we will describe the concepts of absolute
and comparative advantage and determine when trade should take place between
countries. Thereafter, we will look at import tariffs and quotas and explain how they are
used to control the volume of imports. Next, we will closely examine concepts relating to
exchange rates. Finally, we will explain the concept of terms of trade and its importance in
an economy.

Prescribed boxes: 16-2 to 16-3
Prescribed tables: 16-1 to 16-2

Learning Unit 4: The foreign sector

PMAC5112/ECMS5112 Theme 1: Why do countries trade? Prescribed Material
Sessions: 16 - 21 (PM)
Academic Week 4 LO1: Explain why countries trade;
LO2: Explain how absolute advantage
PMAC5112d/ECMS5112d and comparative advantage
Sessions:13-17 determine how trade will take place.
Related Outcomes:
MO001 Theme 2: Trade policy
MO002 LO3: Describe measures to control
MO004 the volume of imports.
MO005 Theme 3: Exchange rates
LO4: Discuss exchange rate
determination between the US dollar
and the rand;
LO5: Explain, with the aid of
diagrams, the impact of changes in
demand and supply of dollars on the
exchange rate;
LO6: Briefly explain the three policy
options for floating exchange rate
regimens.
Theme 4: Terms of trade
LO7: Explain the significance of
changes in the terms of trade.

Learning Unit 5 Measuring the Performance of the Economy

Overview:
To assess whether an economy is performing well, economists will typically evaluate

whether the five main macroeconomic objectives are met. These are economic growth, full
employment, price stability, balance of payments stability, and equitable income
distribution. To measure these, a range of economic tools and indicators are used. The
Gross Domestic Product (GDP) is one of the most common means of determining economic
growth and is calculated as the total value of final goods and services produced by a
country over a period. Some of these goods and services might have been exported or sold
to other countries and, thus, will be included in the country’s balance of payments. A
balance of payments summarises all the transactions that a country has engaged in with
the foreign sector, and ideally, more money would have flown into the economy than out.
Meanwhile, inflation, which is used to measure price stability, and employment are both
determined by calculating rates – the unemployment rate (which is a percentage of the
total number of people who are willing and able to work but cannot find work), and the
inflation rate (which is, often, determined by the Consumer Price Index or CPI). CPI is an
index that depicts the overall changes in prices of goods and services that consumers
typically buy. Finally, equitable income distribution is measured by using a range of
instruments, such as the Lorenz curve (which graphically illustrates inequality), the Gini
coefficient (which is informed by the Lorenz curve and numerically expresses inequality),
and a quantile ratio (which expresses the income received by the highest and lowest
percentages of the population as a ratio). Ideally, all five macroeconomic objectives must
be achieved, or have favourable measures for an economy to be considered as performing
well.
In this learning unit, we will explain the five main macroeconomic objectives. Then, we will
define the concept of GDP and distinguish between the nominal GDP and other national
accounting concepts such as Gross national income (GNP) and Gross national income (GNI).
Thereafter, we will look at the concept of unemployment and how it is measured. We will
then proceed to explore the concept of a consumer price index (CPI) before moving on to
the balance of payments. Finally, we will discuss the inequality in income distribution in
South Africa and explain a Lorenz curve and the Gini coefficient as measures of income
inequality.
Please work through Themes 1, 2, 3, 4 and 5 on Learn, together with the relevant sections
of your prescribed source/s. To ensure that you are working towards mastering the
objectives for this learning unit, please complete the activities on Learn.

Prescribed figures: 13-1

Prescribed boxes: 13-1, 13-2 and 13-4
Prescribed table: 13-1; 13-6 and 13-7

Learning Unit 5: Measuring the Performance of the Economy

PMAC5112/ECMS5112 Theme 1: Measuring the level of Prescribed Material
Sessions: 22 - 28 economic activity (PM)
Academic Week 5 LO1: Explain the five main
PMAC5112d/ECMS5112d macroeconomic objectives;
Sessions:18-20 LO2: Define the gross domestic
product (GDP);
Related Outcomes:
LO3: Explain the difference between
MO001 nominal GDP and other national
MO002 accounting concepts.
MO003 Theme 2: Measuring employment
MO004 and unemployment
MO005 LO4: Measure employment and
unemployment.
Theme 3: Measuring prices: the
consumer price index (CPI)
LO5: Measure the consumer price
index.
Theme 4: Measuring links with the
rest of the world: balance of
payments
LO6: Measure the links with the rest
of the world through the balance of
payments.
Theme 5: Measuring inequality: the
distribution of income
LO7: Explain the measures of
inequality in income distribution in
the South African context.

Learning Unit 6 Income Determination in a Simple Keynesian Model
Overview:
The study of economics heavily centres around the three central flows in an economy:
production, spending, and income. Generally, it is thought that production creates income,
and this income, in turn, is spent to purchase the goods that were produced. However,
spending may not always equal income, and this variation will have different effects on the
economy. To understand these different effects, and explain how national income is
determined, the Keynesian model is used. This model is based on the idea that economic
activity is determined by spending or demand, and the simplest model consists only of
households and firms. To explain the flows of money between these participants, the terms
‘consumption’, which describes spending by households, and ‘investment’, which describes
spending by firms are used. The investment and consumption functions determine the
output levels at different consumption and investment levels. Therefore, this model can
determine the equilibrium level of income in an economy.
In this learning unit, we will look at the equilibrium level of income in an economy that
consists of households and firms only. Then, we will differentiate between production,
income, and spending in national accounts and macroeconomic theory. Next, we will
discuss the Keynesian model, its assumptions, and its implications. Thereafter, we will
examine consumption spending in the Keynesian model, including the features of the
consumption function, non-income determinants, and the relationship between saving and
consumption. Finally, we will describe the role of investment spending in the model and
the impact of the changes in the investment through the multiplier effect.
Please work through Themes 1, 2, 3, 4 and 5 Learn, together with the relevant sections of
Prescribed figures: 17-1 to 17-10 and 17-12

Prescribed boxes: 17-1, 17-2, 17-3, 17-4, 17-6 and 17-7

Learning Unit 6: Income determination in a simple Keynesian model

PMAC5112/ECMS5112 Theme 1: Central macroeconomic flows Prescribed Material
Sessions: 29 - 35 (PM)
Academic Week 6 LO1: Distinguish between production,
income and spending in the national
PMAC5112d/ECMS5112d accounts and macroeconomic theory
Sessions:21-23
Related Outcomes:
MO001 Theme 2: Consumption Spending
MO002 LO2: Explain, with the aid of a diagram,
MO003 the three main characteristics of the
MO005 consumption function;
LO3: List the non-income determinants
of consumption;
LO4: Explain the relationship between
consumption and saving.
Theme 3: Investment Spending
LO5: Explain the role of investment
spending in the Keynesian model.
Theme 4: The simple Keynesian model of
a closed economy
LO6: List the basic assumptions and
implications of the simple Keynesian
model.
Theme 5: The impact of a change in

investment spending
LO7: Explain the role of investment
spending in investment spending.

Learning Unit 7 Keynesian Models Including Government and the Foreign Sector
Overview:
The simple Keynesian model focuses on aggregate demand in the short-run, when the
economy is not operating at its full potential. The elements that make up aggregate
demand include consumption, investments, government expenditure, imports, and
exports. However, when the government and foreign sector are introduced into the
Keynesian model, there will be increased leakages, and total production and income will be
affected.
In this learning unit, we will look at the introduction of the government sector in the
Keynesian model and explain its impact on aggregate spending, the multiplier, and
ultimately the level of production and income. As government spending is dependent on
tax revenue, we will also describe the effects of the proportional tax on these same factors.
Then, we will use the Keynesian model to illustrate the changes in government and tax
rates on the level of income. Next, we will introduce the foreign sector and discuss how
exports and imports affect the level of income in the domestic economy. Finally, we will
use the simple Keynesian model to analyse the effects of fiscal policy and analyse the
effects of changes in interest rates in the open economy.
Please work through Themes 1 and 2 on Learn, together with the relevant sections of your
prescribed source/s. To ensure that you are working towards mastering the objectives for
this learning unit, please complete the activities on Learn.


Learning Unit 7: Keynesian models including government and the foreign sector
PMAC5112/ECMS5112 Theme 1: Simple macroeconomic model Prescribed
Sessions: 36 - 40 with a government sector Material (PM)
Academic Week 7 LO1: Explain the impact of government
spending on aggregate spending, the
PMAC5112d/ECMS5112d multiplier and the equilibrium level of
Sessions:24-26 income;
Related Outcomes: LO2: Explain the impact of proportional
tax on private consumption spending,
MO001
disposable income, autonomous
MO002 spending, the multiplier, and the
MO003 equilibrium level of income;
MO005 LO3: Explain, with the aid of a diagram,
the impact on the equilibrium level of
income of a change in:
o government spending;
o the tax rate;
LO4: Calculate the level of autonomous
spending, the multiplier, the equilibrium
level of income, and the change in
government spending required to reach
full employment.
Theme 2: The simple macroeconomic
model with a foreign sector
LO5: Explain why exports are
autonomous, and imports are linked to
the level of income;
LO6: Calculate net exports;
LO7: Explain the impact of changes in
exports and imports on the equilibrium
level of income.

Learning Unit 8 The AD-AS Model
Overview:
The aggregate demand-aggregate supply (AD-AS) model combines the Keynesian and
classical models to form the AD-AS model – this illustrates the national income and price
level in the economy. In this model, factors such as wages, prices, and interest rates are
variable, and the money stock can change. In addition, certain economic variables such as
government spending, consumption, exports, and imports affect the AD and AS curves as
well as the total production and price level. This AD-AS model can also be used to illustrate
the monetary policy transmission mechanism, which explains how changes in monetary
policy are transferred to the rest of the economy. Some of these policies, which could be
monetary or fiscal, are implemented to stimulate the economy and is known as
expansionary. Meanwhile, policies that are implemented to reduce economic activity and
growth are known as contractionary. In addition to the AD-AS model, which is largely
informed by demand-side influences, supply-side economics offers an alternate
perspective, and stresses that the supply of goods and services should increase.
In this learning unit, we will look at the concept of the AS-AD model and use AD and AS
curves to analyse changes in aggregate demand and supply, including the impact of
monetary and fiscal policy. Then, we will explain the monetary transmission mechanism by
describing how interest rates can affect important macroeconomic variables such as total
production and the price level. Next, we will discuss using the AD-AS model to illustrate the
policy dilemma in the open economy. Finally, we will look the features of monetarism and
supply-side economics.

Prescribed tables: 19-1 to 19-3

Learning Unit 8: The AD-AS model

PMAC5112/ECMS5112 Theme 1: The aggregate demand - aggregate Prescribed
Sessions: 41 - 45 supply model Material (PM)
Academic Week 8 LO1: Use the AD-AS model to analyse the
PMAC5112d/ECMS5112d impact of a change in economic variables on
Sessions:27-29 the achievement of macroeconomic
objectives.
Related Outcomes:
MO001 Theme 2: The monetary transmission
MO002 mechanism
MO003 LO2: Explain the monetary transmission
MO004 mechanism.
MO005 Theme 3: Monetary And Fiscal Policy In The
AD-AS Framework
LO3: Explain monetary and fiscal policy in
the AD-AS framework;
LO4: Briefly explain “supply-side”
economics.

Learning Unit 9 Inflation

Overview:
Inflation can be described as the consistent increase in the general level of prices of goods
and services of a country. This can either be caused by cost-push or demand-pull factors.
Cost-push inflation stems from increased production costs, such as an increase in the cost
of fuel or rising wages. Meanwhile, demand-pull inflation is triggered by an increased
demand that leads to increased spending in an economy. Inflation affects the standard of
living, as people must spend more money to buy the same essential goods and services
that they always have. Therefore, the government must implement policies to manage
inflation and might even set inflation targets. This involves determining an acceptable
range for the country’s inflation rate. To manage and monitor inflation, and to ensure the
rate is within the target, the government must measure inflation. The most common way
to do so is by using the consumer price index (CPI), which compares the prices of a
representative basket of goods and services that consumers might typically purchase from
one period to the next. Meanwhile, the producer price index (PPI) measures the prices of
goods at the level of the first significant commercial transaction, including capital and
intermediate goods. Alternatively, the implicit GDP deflator measures all the goods and
services in the economy in a year by examining how much inflation has affected GDP.
Unfortunately, it is often thought that there is an inverse relationship between inflation
and unemployment – this is depicted on the Phillips curve, which can be used to examine
the trade-off between inflation and unemployment.
In this learning unit, we will define inflation and how it is measured. This includes
differentiating between the Consumer Price Index (CPI), the Producer Price Index (PPI), and
the GDP deflator. Then, we will discuss the causes, focusing mainly on demand-pull and
cost-pull, as well as the effects of inflation. Finally, we will discuss the features of inflation
targeting and explain the trade-off between inflation and unemployment.
Prescribed figures: 20-1; 20-2; 20-4 and 20-5

Prescribed tables: 20-2 and 20-5

Learning Unit 9: Inflation

PMAC5112/ECMS5112 Theme 1: What is inflation? Prescribed
Sessions: 46 - 50 Material (PM)
Academic Week 9 LO1: Define inflation.
PMAC5112d/ECMS5112d
Sessions:30-32
Related Outcomes:
MO001 Theme 2: Measuring Inflation
MO002 LO2: Use the consumer price index (CPI)
MO003 to calculate inflation rates;
MO004 LO3: Explain why the core inflation rate is
MO005 used;
LO4: Distinguish between the CPI, the PPI,
and the implicit GDP deflator.
Theme 3: Effects of inflation
LO5: Discuss the effects of inflation.
Theme 4: Causes of inflation
LO6: Explain demand-pull and cost-push
inflation;
LO7: Discuss the five key features of
inflation targeting.
Theme 5: Unemployment and inflation:
the Phillips curve
LO8: Explain the trade-off between
inflation and unemployment, with the aid
of the Phillips curve.

Learning Unit 10 Unemployment

Overview:
South Africa (SA) has a relatively high unemployment level. Unemployment can be defined
in one of two ways, but both definitions describe unemployed individuals as those who are
aged 15 years old and above but are neither self-employed nor with a paid job. Even
before pre-Covid-19, many people, including graduates and qualified individuals, struggled
to find jobs in SA. This high level of unemployment, which is a combination of the four
different types of unemployment, often widens the inequality gap. Thus, the government
and authorities must develop and implement policies that target the unemployment
problem.
In this learning unit, we will look at the concept of unemployment and how it is measured.
Then, we will discuss some policies which can be implemented to reduce unemployment.
Next, we will explain the costs of unemployment on individuals and society at large. Finally,
we will describe the different types of unemployment that exist.
Prescribed boxes: 21-1

Learning Unit 10: Unemployment

PMAC5112/ECMS5112 Theme 1: Unemployment-what is it? Prescribed Material
Sessions: 51 – 55 (PM)
Academic Week 10 LO1: Explain how unemployment is
PMAC5112d/ECMS5112d measured;
LO2: Discuss policies to reduce
Sessions:33-34
unemployment.
Related Outcomes:
MO001 Theme 2: The costs of unemployment
MO002 LO3: Discuss the costs of unemployment.
MO005 Theme 3: Types of unemployment
LO4: Identify the different types of
unemployment.

Learning Unit 11 Economic Growth and Development

Overview:
Economic growth refers to an increase in a country’s total output of goods and services
during a specific period. Gross Domestic Product, or GDP, is commonly used to measure
economic growth annually, although there are a few problems associated with using this
measure – for example, it often excludes unrecorded economic activity. Consistent
economic growth eliminates poverty and unemployment and ultimately improves the
quality of life and a country’s standard of living. The COVID-19 pandemic affected the
world economy, and many countries experienced a decrease in economic growth due to
the reduction in economic activity.
In this learning unit, we will look at the concept, sources, and measurement of economic
growth and demonstrate how it can be calculated using data. Then, we will identify the
problems associated with GDP. Finally, we will discuss the concept, causes, views, and
measurement of business cycles and show how business cycles can be graphically
represented.
Please work through Themes 1 and 2 on Learn, together with the relevant sections of your
prescribed source/s. To ensure that you are working towards mastering the objectives for
this learning unit, please complete the activities on Learn.
Prescribed figures:
22-1

Learning Unit 11: Economic growth and development

PMAC5112/ECMS5112 Theme 1: Economic growth Prescribed
Sessions: 56 – 60 Material (PM)
Academic Week 11 – 12
PMAC5112d/ECMS5112d LO1: Define economic growth;
LO2: Explain how economic growth is
Sessions:35-36
measured;
Related Outcomes: LO3: Calculate the rate of economic growth
MO001 from given data;
MO002 LO4: List the problems associated with GDP
MO003 in determining economic growth.
MO005 Theme 2: The business cycle
LO5: Explain the business cycle with the aid
of a diagram;
LO6: Discuss the sources of economic
growth.

Glossary of Key Terms for this Module

Term Definition
Accommodation Accommodation policy is an instrument of monetary policy. It
policy operates through adjustment of the repo rate and the quantity of
money lent by the SARB to other banks, in order to control the
amount of money that is available to the economy.
Balance of The balance of payments is a systematic statistical account of all
payments transactions between the economic subjects of one country with the
rest of the world during a specific period.
Budget deficit A government has a budget deficit if its expenditure is greater than
its revenue.
Business cycle The business cycle is the pattern of increases and decreases in the
level of economic activity over time.
Central bank A central bank acts as a banker for the government and all the other
banks in the country and regulates monetary policy in an economy.
Consumer price This is an index of the prices of a representative basket of goods and
index (CPI) services bought by consumers.
Contractionary When the government decreases government spending and
fiscal policy increases taxes, it is implementing a contractionary fiscal policy.
Current account This is one of the accounts in the balance of payments. Payments and
receipts relating to the flows of goods and services, and other flows
of income are recorded in this section of the balance of payments.
Demand deposits Demand deposits are deposits at financial institutions that can be
withdrawn immediately by means of a cheque.
Demand-pull This is inflation that is caused by excess demand; it occurs when
inflation there is an increase in aggregate demand (rightward shift of the AD
curve).
Direct taxation Direct taxation is taxes that are levied directly on the income of
individuals and businesses.
Dumping Dumping takes place when established industries sell their products
on a foreign market at prices lower than those on the exporting
country’s domestic market.
Economically The economically active population of a country consists of everyone
active population who is willing and able to work, that is, both employed and
unemployed people.
Exchange rate The exchange rate represents the price of one currency in terms of
another currency.
Expansionary fiscal Expansionary fiscal policy entails increases in government spending
policy and/or decreases in taxation during times of low economic activity

Term Definition
and low economic growth, so as to increase expenditure, production
and employment in the economy.
Financial account The financial account on the balance of payments records
international transactions in assets and liabilities, notably the flow of
investment and trade credit.
GDP per capita GDP per capita means GDP per person. It is the average amount
produced by each member of the population and is calculated by
dividing the total production (GDP) by the total population.
Gross domestic GDP is the total value of all final goods and services produced within
product the boundaries of a country in a particular period (usually one year).
Gross national GNP is the total value of final goods and services produced during a
product (GNP) specific period by the permanent residents (citizens) of a country,
whether in the country or abroad, before the consumption of capital
is subtracted.
Import quota When there is an import quota only a certain quantity of a product
may be imported during a specific period.
Import substitution Import substitution refers to efforts to reduce imports, in other
words to persuade consumers to buy local rather than imported
products.
Import tariff An import tariff is a duty or tax that an importer has to pay when he
or she imports products into a country.
Index A figure (such as a price level) that can be used to compare variables
with each other or with a base number.
Indirect taxation This is a form of tax that is levied on products and transactions,
rather than on people. Examples of indirect tax include VAT, customs
duty and excise duty.
Inflation An economy is experiencing inflation when there is a continuous and
considerable rise in prices in general.
Informal sector A sector of the economy in which activities take place that are not
recorded in the country’s official statistics.
Marginal Marginal propensity to consume is the change that takes place in
propensity to consumption due to a change in income. The MPC indicates the
consume (MPC) proportion of an increase in income that will be used for
consumption.
Monetary policy Monetary policy can be defined as decisions made or actions taken
by the monetary authorities to influence the quantity of money or
the interest rate, with the aim of achieving the macroeconomic
objectives of stable prices, full employment and economic growth.

Term Definition
Multiplier The ratio between the eventual change in income and the initial
change in autonomous spending is called the multiplier.
Open-market Open-market policy, ad an instrument of monetary policy, refers to
policy the purchase and sale of government securities by the SARB on the
open market, for the purpose of regulating the quantity of money
and/or interest rates.
Price index A price index shows the ratio of the price of a basket of products to
the price of the same basket of products at another time.
Privatisation Privatisation means the transfer of ownership (selling) of assets from
the public sector (government) to the private sector.
Public debt Public debt is the debt of the government of a country. Budget
deficits which are financed through borrowing cause the level of
public debt to increase.
Public goods Goods that are consumed by the community or society; no one can
be excluded from using them. An example is a public road.
Recession A recession is a downturn in real GNP for two (2) or more successive
quarters.
Trade balance The trade balance is the difference between the visible imports and
the visible exports of the country for a given year. In South Africa it is
the difference between Merchandise exports plus Net gold exports,
minus Merchandise imports.
Transfer payments Transfer payments are made when the government pays out money
without receiving anything in return for such payment. Examples of
transfer payments are old-age pensions, disability pensions and
subsidies.
Treasury bill A treasury bill is a bill issued by the government, usually for a term of
91 days. It is a simple type of security that is similar to an ordinary
banknote, except that it is not paid out immediately, but only at a
later date.
Unemployment There is unemployment in an economy if there are people who are
able and available to work but cannot find work.
Wealth The total possessions (both tangible and intangible) of an individual,
household, producer or country that have an exchange value.

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IIE Learn Module Outline PMAC5112/d/w; ECMS5112/d

Economics 1B/ Economics B (Macro)

The Independent Institute of Education (Pty) Ltd is registered with

© The Independent Institute of Education (Pty) Ltd 2023 Page 1 of 36

© The Independent Institute of Education (Pty) Ltd 2023 Page 2 of 36

Economics 1B provides students with knowledge of economics from a macroeconomic

© The Independent Institute of Education (Pty) Ltd 2023 Page 3 of 36

Using this Module Outline

© The Independent Institute of Education (Pty) Ltd 2023 Page 4 of 36

This Module on Learn

• A list of prescribed material;

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Icons Used in this Document and on Learn

Specific references to sections in the prescribed work.

Questions to help you recognise or think about theoretical concepts to be

Opportunities to make connections between different chunks of theory in

Real life or world of work information or examples of application of theory

© The Independent Institute of Education (Pty) Ltd 2023 Page 6 of 36

Mohr, P., Fourie, L. and Associates. 2020. Economics for

Please note that a number of additional resources and links

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© The Independent Institute of Education (Pty) Ltd 2023 Page 8 of 36

Tests/ Examination Test 1 Test 2 Examination

Assignment / Assignment 1 Assignment 2 Examination

© The Independent Institute of Education (Pty) Ltd 2023 Page 9 of 36

Assessment Preparation Guidelines

© The Independent Institute of Education (Pty) Ltd 2023 Page 10 of 36

Economies employ the factors of production such as land, labour, capital,

Prescribed figures: 3-1 to 3-5

© The Independent Institute of Education (Pty) Ltd 2023 Page 11 of 36

© The Independent Institute of Education (Pty) Ltd 2023 Page 12 of 36

Learning Unit 2 The Monetary Sector

Prescribed figures: 14-1 to 14-2

© The Independent Institute of Education (Pty) Ltd 2023 Page 13 of 36

Learning Unit 2: The monetary sector

© The Independent Institute of Education (Pty) Ltd 2023 Page 14 of 36

Learning Unit 3 The Public Sector

Prescribed figures: 15-3 to 15-4

© The Independent Institute of Education (Pty) Ltd 2023 Page 15 of 36

Learning Unit 3: The Public Sector

© The Independent Institute of Education (Pty) Ltd 2023 Page 16 of 36

Learning Unit 4 The Foreign Sector

Prescribed figures: 16-2 to 16-4

© The Independent Institute of Education (Pty) Ltd 2023 Page 17 of 36

Learning Unit 4: The foreign sector

© The Independent Institute of Education (Pty) Ltd 2023 Page 18 of 36

Learning Unit 5 Measuring the Performance of the Economy

To assess whether an economy is performing well, economists will typically evaluate

© The Independent Institute of Education (Pty) Ltd 2023 Page 19 of 36

Prescribed figures: 13-1

© The Independent Institute of Education (Pty) Ltd 2023 Page 20 of 36

Learning Unit 5: Measuring the Performance of the Economy

© The Independent Institute of Education (Pty) Ltd 2023 Page 21 of 36

Learning Unit 6 Income Determination in a Simple Keynesian Model

Prescribed figures: 17-1 to 17-10 and 17-12

© The Independent Institute of Education (Pty) Ltd 2023 Page 22 of 36

Learning Unit 6: Income determination in a simple Keynesian model

Theme 5: The impact of a change in

© The Independent Institute of Education (Pty) Ltd 2023 Page 23 of 36

Prescribed figures: 18-1 to 18-10

© The Independent Institute of Education (Pty) Ltd 2023 Page 24 of 36

© The Independent Institute of Education (Pty) Ltd 2023 Page 25 of 36

Learning Unit 8 The AD-AS Model