Answer to Question #254624 in Macroeconomics for BL4 TUT 9

Question

Which of the following will lower inflationary expectations?

An increase in the money supply.

The SARB announcement that it will steadily raise the repo rate.

The government's announcement that it will increase spending on infrastructure.

An increase in consumer and business optimism.

Answer 1

Correct Answer:

B (The SARB announcement that it will steadily raise the repo rate)

Steadily raising the repo rates, means the interest rate is going to rise slowly. It will discourage consumption and inflation will lower.