Grade 12 · CAPS

Grade 12 Circular Flow

Economics practice questions and a worked example

Grade 12 revisits the circular flow at its most complete -- the four-sector model with all its injections and leakages -- and pairs it with real national accounts data, including an actual SARB table used to calculate gross value added. The multiplier and equilibrium concepts that tie the model together are tested here through genuine calculation questions, not just diagram recall.

Worked example

NATIONAL ACCOUNTS FOR SOUTH AFRICA (at current prices)
Item2021 (R billion)
Compensation of employees2 861
Net operating surplus1 795
Consumption of fixed capital797
Gross value added at factor cost5 453
Taxes on production132
Subsidies on production12
Gross value added at basic prices(A)
Taxes on products634
Subsidies on products14
Gross domestic product at market prices6 193

(Adapted from SARB Quarterly Bulletin, December 2022)

2.3.3 Briefly describe the term subsidy on production.

Answer & explanation

Financial assistance or support by the government to reduce cost of production or encourage production of certain products.
A subsidy on production is a form of financial assistance provided by the government to producers. This assistance helps to lower the cost of production, making it cheaper for businesses to produce goods. By reducing these costs, the government encourages the production of certain products, which can lead to increased supply and potentially lower prices for consumers. Subsidies can also be used to support industries that are important for economic or strategic reasons.

Test your understanding

Try a similar Grade 12 Circular Flow question and get a useful next step based on your answer.

No account needed to start.

Circular Flow

Question 1 of 3

1.1.4 If the value of the marginal propensity to consume (MPC) is 0,6, the value of the marginal propensity to save (MPS) will be ...
Choose your answer

Learn from each answer, right or wrong.

Try again before revealing the solution.

More practice questions

Explore additional Grade 12 Circular Flow questions.

  • 2
    2.1.1 Name any TWO factors of production.
  • 3
    NATIONAL ACCOUNTS FOR SOUTH AFRICA (at current prices)
    Item2021 (R billion)
    Compensation of employees2 861
    Net operating surplus1 795
    Consumption of fixed capital797
    Gross value added at factor cost5 453
    Taxes on production132
    Subsidies on production12
    Gross value added at basic prices(A)
    Taxes on products634
    Subsidies on products14
    Gross domestic product at market prices6 193

    (Adapted from SARB Quarterly Bulletin, December 2022)

    2.3.1 Identify in the table above the method used to calculate the gross domestic product (GDP).
  • 4
    NATIONAL ACCOUNTS FOR SOUTH AFRICA (at current prices)
    Item2021 (R billion)
    Compensation of employees2 861
    Net operating surplus1 795
    Consumption of fixed capital797
    Gross value added at factor cost5 453
    Taxes on production132
    Subsidies on production12
    Gross value added at basic prices(A)
    Taxes on products634
    Subsidies on products14
    Gross domestic product at market prices6 193

    (Adapted from SARB Quarterly Bulletin, December 2022)

    2.3.2 Give ONE example of taxes on products.
  • 5
    NATIONAL ACCOUNTS FOR SOUTH AFRICA (at current prices)
    Item2021 (R billion)
    Compensation of employees2 861
    Net operating surplus1 795
    Consumption of fixed capital797
    Gross value added at factor cost5 453
    Taxes on production132
    Subsidies on production12
    Gross value added at basic prices(A)
    Taxes on products634
    Subsidies on products14
    Gross domestic product at market prices6 193

    (Adapted from SARB Quarterly Bulletin, December 2022)

    2.3.4 Why is it important for a country to prepare national account aggregates?

Common mistakes

  • Forgetting that leakages and injections only need to be equal AT equilibrium -- outside of equilibrium they can differ, which is exactly what drives the economy to expand or contract, a distinction the multiplier calculation depends on.

More Grade 12 Economics topics

Aligned to CAPS Grade 12 Economics — Circular Flow. Curriculum source: CAPS for the FET Phase, Department of Basic Education.

Need more help with Grade 12 Economics?

Work through Economics one-on-one with a verified tutor.

Find a tutor

Exam preparation

Know what to work on before your exams.

Practise with questions from past papers, track your progress, and discover which topics need more attention.

Set up my exam

Homework Assist

Stuck on a question?

Work through it with Homework Assist.

Try Homework Assist

How Homework Assist works