Answer to Question #146664 in Macroeconomics for Prince Chauke

Question

Q.3.1 The monetary transmission mechanism can be depicted in the form of a graph
or using symbols.
Explain, with the aid of symbols, the monetary transmission mechanism when
interest rates increase
(Note: Prices and wages are variable.)
(10)

Q.3.2 Explain, using the AD‐AS model, how the South African Government can use
fiscal policy as a tool to recover from the negative effects of this COVID‐19
pandemic.
Your answer must include the following:
 The description of the type of fiscal policy required; (4)
 An explanation of how the implementation of this tool will work their way
through the economy to achieve the desired effect; (6)
 The AD‐AS graph showing the implications of your recommendations. (5)
Marks will be awarded for your ability to integrate theory with the scenario
provided.
(15)

Answer 1

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