Introduction

Measuring South Africa’s economic growth: Activities

1. Which aggregate should be used as the basis to calculate economic growth?

Incorrect.

Nominal aggregate is measured at current prices (includes the impact of price changes) at the time of measurement. Real aggregate is adjusted for inflation by using constant prices. Since economic growth measures the change in actual production, the appropriate measure must be a real aggregate.

Correct.

Nominal aggregate is measured at current prices (includes the impact of price changes) at the time of measurement. Real aggregate is adjusted for inflation by using constant prices. Since economic growth measures the change in actual production, the appropriate measure must be a real aggregate.

2. Real GDP is an appropriate measure if the aim is to …

Correct.

Real GDP is the best indicator for measuring the level of economic activity, and real GNI per capita is the most appropriate measure for economic welfare.

Incorrect.

Real GDP is the best indicator for measuring the level of economic activity, and real GNI per capita is the most appropriate measure for economic welfare.

3. If the aim is to measure the welfare of the residents of a country

Incorrect.

Real GDP per capita is the most appropriate measure for economic activity, and real GNI per capita is the most appropriate measure for economic welfare.

Correct.

Real GNI per capita is the most appropriate measure for economic welfare, and real GDP per capita is the most appropriate measure for economic activity.

4. Real gross domestic product …

Correct.

Real GDP represents the value of goods and services produced within the borders of a country valued at constant prices.   Since exports are produced inside the borders of the country, they are included. Imports are excluded since they are produced outside the borders of the country.

Incorrect.

Real GDP represents the value of goods and services produced within the borders of a country valued at constant prices.   Since exports are produced inside the borders of the country, they are included. Imports are excluded since they are produced outside the borders of the country.

5. If export prices rise relative to import prices, the …

Correct.

The terms of trade refer to the ratio of export prices to import prices. If export prices rise relative to import prices, the terms of trade improve. If, on the other hand, import prices rise relative to export prices, then the terms of trade deteriorate.

Incorrect.

The terms of trade refer to the ratio of export prices to import prices. If export prices rise relative to import prices, the terms of trade improve.  If, on the other hand, import prices rise relative to export prices, then the terms of trade deteriorate.

6. An improvement in the terms of trade implies that

Correct.

An improvement in the terms of trade indicates that export prices have risen relative to import prices, which means that a greater volume of imports can be afforded with the same volume of exports.

Incorrect.

An improvement in the terms of trade indicates that export prices have risen relative to import prices, which means that a greater volume of imports can be afforded with the same volume of exports.

7. An improvement in the terms of trade implies that the economic welfare of the citizens of a country …

Correct.

An improvement in the terms of trade means that a greater volume of imports can be afforded with the same level of exports.  The citizens of the country are better off since they can now consume more.

Incorrect.

An improvement in the terms of trade means that a greater volume of imports can be afforded with the same level of exports.  The citizens of the country are better off since they can now consume more.

8. Real gross domestic product …

Incorrect.

Real GDP does not take the effect of changes in the terms of trade into account since exports are included but imports are excluded.

Correct.

Real GDP does not take the effect of changes in the terms of trade into account. since exports are included but imports are excluded.

9. Real gross national income …

Correct.

To provide a better measurement of economic welfare, real GNI is adjusted for the impact of the terms of trade.

Incorrect.

To provide a better measurement of economic welfare, real GNI is adjusted for the impact of the terms of trade.

10. The calculation of real GDP per capita data requires that …

Correct.

The calculation of real GDP per capita requires that real GDP be divided by the population.

Incorrect.

The calculation of real GDP per capita requires that real GDP be divided by the population.

11. It is always preferable to calculate the rate of economic growth from the peak of one business cycle to the peak of a subsequent cycle (or from the trough of one cycle to the trough of another cycle).

Correct.

If growth is measured from the trough of one cycle to the peak of a later cycle, the result is an overestimation of the long-run trend.

Incorrect.

If growth is measured from the trough of one cycle to the peak of a later cycle, the result is an overestimation of the long-run trend.

Measuring South Africa’s economic growth: Calculation Activities

1. Use the table on Expenditure on Gross Domestic Product on page S-113 of the South African Reserve Bank Quarterly Bulletin December 2019 to complete the following table and answer the questions that follow:

Table: Expenditure on Gross Domestic Product

Economic growth in South Africa:  2012 to 2018
Year Real GDP (R billions) Economic growth rate (one decimal point) %
2011 [form-input-field] [form-input-field]
2012 [form-input-field] [form-input-field]
2013 [form-input-field] [form-input-field]
2014 [form-input-field] [form-input-field]
2015 [form-input-field] [form-input-field]
2016 [form-input-field] [form-input-field]
2017 [form-input-field] [form-input-field]
2018 [form-input-field] [form-input-field]
Click to Show Answer

The formula to calculate economic growth is:

$$
\Biggl[
\Bigl(
\frac{It}{It-1}
\Bigl) - 1
\Biggl]
\times 100
$$

For  2017 the calculation is as follows:

$$
\Biggl[
\Bigl(
\frac{\text{3 119 985}}{\text{3 076 465}}
\Bigl) - 1
\Biggl]
\times 100
$$

= (1,014146 – 1) X 100
= 0,014146 X 100
= 1,4%

Economic growth in South Africa:  2012 to 2018
Year Real GDP (R billions) Economic growth rate (one decimal point) %
2011 2 838 258
2012 2 901 076 2,2
2013 2 973 175 2,5
2014 3 028 090 1,8
2015 3 064 237 1,2
2016 3 076 465 0,4
2017 3 119 984 1,4
2018 3 144 539 0,8

[Video clip]

a. For which year was the economic growth rate the highest?

Correct.  The economic growth rate was indeed the highest in 2013 at 2,5%.

Economic growth in South Africa:  2012 to 2018
Year Real GDP (R billions) Economic growth rate (one decimal point) %
2011 2 838 258
2012 2 901 076 2,2
2013 2 973 175 2,5
2014 3 028 090 1,8
2015 3 064 237 1,2
2016 3 076 465 0,4
2017 3 119 984 1,4
2018 3 144 539 0,8

Incorrect.  The economic growth rate was indeed the highest in 2013 at 2,5%.

Economic growth in South Africa:  2012 to 2018
Year Real GDP (R billions) Economic growth rate (one decimal point) %
2011 2 838 258
2012 2 901 076 2,2
2013 2 973 175 2,5
2014 3 028 090 1,8
2015 3 064 237 1,2
2016 3 076 465 0,4
2017 3 119 984 1,4
2018 3 144 539 0,8

b. For which year was the economic growth rate the lowest?

Correct.  The lowest economic growth rate was recorded in 2016 at 0,4%.

Economic growth in South Africa:  2012 to 2018
Year Real GDP (R billions) Economic growth rate (one decimal point) %
2011 2 838 258
2012 2 901 076 2,2
2013 2 973 175 2,5
2014 3 028 090 1,8
2015 3 064 237 1,2
2016 3 076 465 0,4
2017 3 119 984 1,4
2018 3 144 539 0,8

Incorrect.  The lowest economic growth rate was recorded in 2016 at 0,4%.

Economic growth in South Africa:  2012 to 2018
Year Real GDP (R billions) Economic growth rate (one decimal point) %
2011 2 838 258
2012 2 901 076 2,2
2013 2 973 175 2,5
2014 3 028 090 1,8
2015 3 064 237 1,2
2016 3 076 465 0,4
2017 3 119 984 1,4
2018 3 144 539 0,8

c. What is the is the average annual economic growth rate for the period 2011 to 2018?

%

Correct.  The average annual economic growth rate for the period 2011 to 2018 is 1,5%.

The calculation is as follows:

$$
\Biggl[
\Bigl(
\frac{
\text{3 144 539}}{\text{2 838 258}
}
\Bigl)^{1/7} - 1
\Biggl]
\times 100
$$

= (1,1079116131/7 – 1) x 100
= (1,014747 – 1) x 100
=  0,014747  x 100
= 1,5%

Incorrect.  The average annual economic growth rate for the period 2011 to 2018 is 1,5%.

The calculation is as follows:

$$
\Biggl[
\Bigl(
\frac{
\text{3 144 539}}{\text{2 838 258}
}
\Bigl)^{1/7}
- 1
\Biggl]
\times 100
$$

= (1,1079116131/7 – 1) x 100
= (1,014747 – 1) x 100
=  0,014747  x 100
= 1,5%

2. Use the table Summary of gross domestic product, expenditure and national disposable income on page S-110 of the South African Reserve Bank Quarterly Bulletin December 2019 to complete the following table and answer the questions that follow:

Table: Summary of gross domestic product, expenditure and national disposable income

Economic growth and economic welfare in South Africa:  2012 to 2018
Year Real GDP (R billions) Real GNI (R billions) % change in GNI (one decimal point) Economic growth rate (one decimal point) %
2011 2 838 258    
2012 2 901 076     2.2
2013 2 973 175     2.5
2014 3 028 090     1.8
2015 3 064 237     1.2
2016 3 076 465     0.4
2017 3 119 984     1.4
Click to Show Answer

The formula to calculate % change in GNI is

$$
\Biggl[
\Bigl(
\frac{It}{It-1}
\Bigl) - 1
\Biggl]
\times 100
$$

For  2017 the calculation is as follows:

$$
\Biggl[
\Bigl(
\frac{\text{3 094 846}}{\text{3 023 570}}
\Bigl) - 1
\Biggl]
\times 100
$$

= (1,023573 – 1)  100
= 0,023573   100
= 2,4%

The data for real GNI is

Real GNI Data

 

Economic growth and economic welfare in South Africa:  2012 to 2018
Year Real GDP (R billions) Real GNI (R billions) % change in GNI (one decimal point) Economic growth rate (one decimal point) %
2011 2 838 258 2 816 169
2012 2 901 076 2 840 759 0,9 2,2
2013 2 973 175 2 905 054 2,3 2,5
2014 3 028 090 2 945 232 1,4 1,8
2015 3 064 237 3 005 047 2,0 1,2
2016 3 076 465 3 023 570 0,6 0,4
2017 3 119 984 3 094 846 2,4 1,4
2018 3 144 539 3 090 168 -0,2 0,8

a. For which year was the growth in real GNI the highest?

Correct.

The growth in real GNI was the highest for 2017 at 2,4%.

Incorrect.

The growth in real GNI was the highest for 2017 at 2,4%.

b. For which year was the growth rate in real GNI the lowest?

Correct.

The growth in GNI was the lowest in 2018 at -0,2%.

Incorrect.

The growth in GNI was the lowest in 2018 at -0,2%.

c. What is the average annual growth rate for real GNI for the period 2011 to 2018?

%

Correct.

The calculation is as follows:

$$
\Biggl[
\Bigl(
\frac{\text{3 090 168}}{\text{2 816 169}}
\Bigl)^{1/7} - 1
\Biggl]
\times 100
$$

= (1,0972951/7 – 1) x 100
= (1,013352 – 1) x 100
=  0,013352  x 100
= 1,3%

Incorrect.

The calculation is as follows:

$$
\Biggl[
\Bigl(
\frac{\text{3 090 168}}{\text{2 816 169}}
\Bigl)^{1/7} - 1
\Biggl]
\times 100
$$

= (1,0972951/7 – 1) x 100
= (1,013352 – 1) x 100
=  0,013352  x 100
= 1,3%

d. In 2017 the terms of trade improved, which caused the growth rate of GNI to be greater than the growth rate of GDP.

Correct. The statement is indeed true.

An improvement in the terms of trade is reflected in GNI and not in GDP since GDP excludes imports.

Incorrect. The statement is true.

An improvement in the terms of trade is reflected in GNI and not in GDP since GDP excludes imports.

e. In 2018 the terms of trade deteriorated, which caused the growth rate of GNI to be greater than the growth rate of GDP.

Incorrect. The statement is false.

The terms of trade declined by 2,6% (see table 3-2 in the textbook) which would negatively impact on GNI and not GDP.

Correct. The statement is indeed false.

The terms of trade declined by 2,6% (see table 3-2 in the textbook) which would negatively impact on GNI and not GDP.

3. Complete the following tables by filling in the missing values and answer the questions:

Real GDP per capita for  South Africa:  2013 to 2018

Year

Real GDP (R billions)

Mid-year population (millions)

Real GDP per capita  (R)

% growth in real GDP per capita

2013

2 973 175

52.98

56 119

2014

3 028 090

54

56 076

2015

3 064 237

54.96

-0.6

2016

3 076 465

55.91

55 025

-1.3

2017

3 119 984

56.52

0.3

2018

3 144 539

57.73

54 470

Real GNI per capita for South Africa:  2013 to 2018

Year

Real GNI (R billions)

Mid-year population (millions)

Real GNI per capita (R)

% growth in real GNI per capita

2013

2 905 054

52.98

54 833

2014

2 945 232

54

2015

3 005 047

54.96

54 677

0.2

2016

3 023 570

55.91

-1.1

2017

3 094 846

56.52

54 757

2018

3 090 168

57.73

53 528

-2.2
Click to Show Answer

Real GDP per capita for  South Africa:  2013 to 2018

Year

Real GDP (R billions)

Mid-year population (millions)

Real GDP per capita  (R)

% growth in real GDP per capita

2013

2 973 175

52,98

56 119

2014

3 028 090

54

56 076

-0,1

2015

3 064 237

54,96

55 754

-0.6

2016

3 076 465

55,91

55 025

-1.3

2017

3 119 984

56,52

55 201

0.3

2018

3 144 539

57,73

54 470

-1,3

The calculation for real GDP per capita = Real GDP/Population.

For 2015 it is 3 064 237/54,06 = 55 754.

Real GNI per capita for South Africa:  2013 to 2018

Year

Real GNI (R billions)

Mid-year population (millions)

Real GNI per capita (R)

% growth in real GNI per capita

2013

2 905 054

52,98

54 833

2014

2 945 232

54

54 541

-0,5

2015

3 005 047

54,96

54 677

0.2

2016

3 023 570

55,91

54 079

-1.1

2017

3 094 846

56,52

54 757

1,3

2018

3 090 168

57,73

53 528

-2.2

The calculation for real GNI per capita = Real GNI/Population.

For 2014 it is 2 945 232/54 = 54 541.

a. In which year was the real GDP per capita the highest?

Correct.

In 2013 real GDP per capita was R56 119, which is the highest.

Incorrect.

In 2013 real GDP per capita was R56 119, which is the highest.

b. In which year was real GNI per capita the highest?

Correct.

In 2013 real GNI per capita was R54 833, which is the highest.

Incorrect.

In 2013 real GNI per capita was R54 833, which is the highest.

c. Do you agree or disagree with the following statement?

For the period 2013 to 2018 the increase in real GDP and real GNI were insufficient to ensure an increase in real GDP per capita and an increase in GNI per capita.

Correct.

You should agree since it is clear from the % growth in real GDP per capita and % growth in real GNI per capita that for most of the years they were negative.  This indicates that the increase in real GDP and real GNI were not sufficient to ensure an increase in real GDP per capita and real GNI per capita.

Incorrect.

You should agree since it is clear from the % growth in real GDP per capita and % growth in real GNI per capita that for most of the years they were negative.  This indicates that the increase in real GDP and real GNI were not sufficient to ensure an increase in real GDP per capita and real GNI per capita.