Answer to Question #227138 in Macroeconomics for Natalit

Question

1. List and discuss main reasons that cause aggregate demand (AD) curve to have a negative slope. Indicate the consequent effects that each of these reasons will have on other relevant microeconomics variables.

2.Discuss in detail how actual tender process works in terms of issuing the TBs and repayment agreement.

3. In the initial stages of the ongoing coronavirus pandemic an expansionary economic policy was adopted by government to assist South African economy.Discuss the purpose and objectives of expansionary monetary policy in the economy. Further indicate which instruments are generally used to achieve the purpose of expansionary monetary policy and how they are adjusted.

Answer 1

1. There are basically three basic reasons for the negative downward sloping aggregate demand curve, including wealth effect,interest-rate effect, and exchange-rate effect, or international trade effect or we can say the three reasons for the downward sloping total of consumption, investment, government purchases, and net exports.
2. The actual tender process works in terms of issuing the treasury bills and repayment agreement is that marketable securities can be purchased, sold or transferred after the initial issuance. The U.S. Treasury Department for instance, uses auction procedures to sell these securities and determine their prices or yields. Annual auction activities: will provide different types of securities with different maturities for the 2020 503 public auctions.
3. Expansionary monetary policy is when a central bank uses its tools to stimulate the economy.

It increases the money supply, lowers interest rates, and increases demand.

It boosts economic growth.

It lowers the value of the currency, thereby decreasing the exchange rate.

Therefore, the goals of monetary policy are to promote maximum employment, stable prices and moderate long-term interest rates.