Answer to Question #255360 in Macroeconomics for Prisca Mahlalela

Question

Which of the following will lower inflationary expectations?

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

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

C. An increase in consumer and business optimism.

D. An increase in the money supply

Answer 1

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

Raising of the repo rate makes it a costly affair for businesses and industries to borrow. This declines the rate of investment and the level of money supply in yhe market thus, controlling inflation and keeping it low.