Public Sector & Fiscal Policy is one of 9 topics in the Grade 12 Economics CAPS syllabus, covered across 3 lessons on Study Vault. Below are real practice questions from this topic with full worked answers.
Sample practice questions
Easy
1. A public good, such as national defence, is best described as:
Non-excludable and non-rivalrous, so private firms have little incentive to supply it
Excludable and rivalrous, ideal for private firms to supply
A good that only the government is legally allowed to purchase
A good with no benefit to society at all
Answer: Non-excludable and non-rivalrous, so private firms have little incentive to supply it — Public goods cannot practically exclude non-payers and one person's use does not reduce availability to others, so private firms cannot profitably charge for them, meaning the market tends to under-provide them without government involvement.
Easy
2. Government taxing or regulating a factory that pollutes a river is an example of intervention to correct:
A negative externality
A positive externality
A public good shortage
A progressive tax problem
Answer: A negative externality — Pollution imposes costs on third parties who did not consent to them; this is a negative externality, which government commonly addresses through taxation, regulation, or emission limits.
Medium
3. What term describes government using progressive taxation and social grants to reduce inequality between rich and poor?
Answer: Redistribution of income (and wealth) — Redistribution of income and wealth is the public sector function of using tools like progressive taxes and social grants to reduce the inequality an unregulated market would not address on its own.
