Macro

Circular flow

In a two-sector circular flow, households supply factors to firms, firms pay incomes, and households spend those incomes on the firms' goods and services.

CAPS

Grade 10 · Economics · Macro

Economics wants the concept, then the diagram or the data, then the consequence.

  • The papers

    Paper 1 is macroeconomics and economic pursuits. Paper 2 is microeconomics and contemporary economic issues. Each paper is 150 marks.

  • How to write it

    Define the term as CAPS uses it. If a graph is asked for, label both axes, the curves, and the equilibrium or the shift. Then say what happens to price, quantity, growth, inflation or unemployment. A curve with no labels does not explain.

  • How a marker reads it

    A common mix-up is drawing tax or imports on a two-sector diagram, when those appear only after government and the foreign sector are added.

Essays are marked on the introduction, a body that applies the theory, and a conclusion that answers the question. A list of definitions is not an argument.

Worked theory

Worked theory. Naledi, a textile worker in Cape Town, works a month in a jeans factory and earns R6 000 in wages. That payment is income flowing from the firm to the household, in return for her labour. On payday she buys two pairs of jeans at R400 each from a shop supplied by factories like hers. That R800 is spending flowing back to firms, and the jeans are goods flowing to the household. In a two-sector picture the rest of the wage is also spent on goods, with no tax and no imports drawn on the diagram.

More worked examples

  • Mangaung bread loop

    A baker in Mangaung pays a neighbour R3 000 to work in the bakery. The neighbour spends about R300 of that wage on the bakery's own bread and the rest at other local shops. Those shops also pay households. In the two-sector model, factor income and consumer spending keep chasing each other. The loaf is the real flow and the rand is the money flow.

  • Dobsonville Saturday wash

    Teenagers in Dobsonville wash cars on a Saturday and drivers pay R80 a wash. The drivers are households spending income they earned in their own jobs. The wash team supplies labour to a tiny firm, even a street firm, and the R80 is consumer spending. When the team then buys cold drink at a spaza, the spending flows on. No tax office and no import are required to see this simple circle.

In ordinary words

The real flow is factors one way and goods the other way, and the money flow is income one way and spending the other way. Households own labour, land, capital and entrepreneurship, and firms pay wages, rent, interest and profit for them. In this simple picture there is no government, no financial sector and no foreign trade, so nothing is drawn leaking out. One person's wage becomes another firm's sales.

In South Africa

A Cape Town factory gate on payday, and a clothing rail where part of that wage comes back as a purchase.

Part 1 / 4

What it is

In a two-sector circular flow, households supply factors to firms, firms pay incomes, and households spend those incomes on the firms' goods and services.

More worked examples

Board walkthroughs on this topic. Open one, copy the working, then try the next.

Example 1 / 20

In an open economy: consumption (C) R2 400 bn, investment (I) R600 bn, government spending (G) R800 bn, exports (X) R900 bn and imports (M) R1 000 bn. Calculate GDP using the expenditure method.

4. Step-by-step working

  1. 01

    Write the formula

    GDP=C+I+G+(X − M).

    C+I+G+(X − M)
  2. 02

    Substitute

    2 400 + 600 + 800 + (900 − 1 000).

    3 800+(−100)
  3. 03

    Calculate

    GDP=R3 700 bn.

    =3 700

How we got there

Read this like a teacher at the board. We go slowly, name every number, and say why we take each step.

Explain in another language · 11

1. What is the question asking?

Read the question twice. Circle the unknown. Underline every number and unit. The paper is asking: In an open economy: consumption (C) R2 400 bn, investment (I) R600 bn, government spending (G) R800 bn, exports (X) R900 bn and imports (M) R1 000 bn. Calculate GDP using the expenditure method.

Before any working — hunt first

Given

Numbers and units already in the sentence: R2 · 400 bn · R600 bn · R800 bn · R900 bn · R1 · 000 bn. Copy each one into a column. A name without a number is not given.

Missing

After you copy the given, the letter that still has no number is missing. The paper is pointing at: GDP using the expenditure method. Circle that word — that is the missing variable.

Find

We are required to find: GDP using the expenditure method. Write that as a symbol on the left, with a question mark, before you touch a formula.

Calculate

Write C + I + G + (X − M) with empty letters. Cross out every letter that already has a number. Calculate the letter that is still standing — that gives GDP using the expenditure method.

In other words — as if you have never seen this before

If you have never seen this before: GDP(E) = C + I + G + (X − M). We will name a method in words, write the formula with no numbers, then substitute one line at a time.

2. What do we already know?

C 2 400, I 600, G 800, X 900, M 1 000 (R billion).

3. Which method — and why this one?

GDP(E)=C+I+G+(X − M).

4. Step-by-step working

  1. 01 / 06

    Write the formula

    GDP=C+I+G+(X − M).

    C+I+G+(X − M)

    Why this step: We only do one job per line so a marker can follow the marks — and so you can find a slip without starting over.

  2. 02 / 06

    Substitute

    2 400 + 600 + 800 + (900 − 1 000).

    3 800+(−100)

    Why this step: We only do one job per line so a marker can follow the marks — and so you can find a slip without starting over.

  3. 03 / 06

    Calculate

    GDP=R3 700 bn.

    =3 700

    Why this step: We only do one job per line so a marker can follow the marks — and so you can find a slip without starting over.

  4. 04 / 06

    Step G — Sense-check the size

    Ask: is this the kind of number a Grade 10–12 paper would want? A speed of 3 000 ms for a learner walking, or a probability bigger than 1, means a unit or algebra slip. Estimate first: round the numbers and do the sum in your head.

    Why this step: Markers write ‘unrealistic’ in the margin when the method is right but the size is wild. A 10-second head check often finds a missing 10² or a unit that never changed.

  5. 05 / 06

    Step F — Box the answer with its unit

    GDP=R3 700 billion.

    Why this step: A number without a unit is half a mark on a Physics paper, and a marker can miss a Maths answer that is buried in working.

  6. 06 / 06

    Step H — What the marker is looking for

    On an NSC memo you usually earn: (1) a method mark for naming the right formula or idea in words, (2) an accuracy mark for substituting the given numbers with units, (3) an accuracy mark for the boxed answer with its unit. Write those three lines even if you are unsure of the arithmetic — blank pages score zero.

    Why this step: First-timers chase the final number and leave the method blank. The memo still pays out for the idea and the substitution even when the last line is wrong.

5. The answer

GDP=R3 700 billion.

Copy onto your answer sheet — in this order

Formula: C + I + G + (X − M)

Answer: GDP = R3 700 billion.

6. Check it like a marker

Imports are subtracted because that spending goes to producers in other countries.

7. A trap first-timers fall into

First-timers often grab the first formula they remember, mix units (cm with m, minutes with seconds), or drop a minus sign. Write the formula in words first: “this equals that, because…”

Ntsako · fx-991ZA PLUS. Tap to calculate.