Macroeconomics Answers

Which of the following statements describes the effect of the South African Reserve Bank selling government bonds?

1. The money supply decreases and the interest rate increases.
2. The money supply increases and the interest rate decreases.
3. There is a decrease in equilibrium output in response to the increase in the interest rate.
4.  There is an increase in equilibrium output in response to the decrease in the interest rate.

II) only.

(I) and (III) only.

(II) and (IV) only.

(II) and (III) only.

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.

3.To counteract a recession, the SARB could:

A. Raise the required reserve ratio and lower the repo rate.

B. Buy government securities on the open market and raise the required reserve ratio.

C. Sell government securities on the open market and raise the repo rate.

D. Buy government securities on the open market and lower the required reserve ratio.

E. Buy government securities on the open market and raise the repo rate.

Suppose that the economy is operating at full employment. If the government wants to discourage consumption spending and stimulate investment spending, which of the following combinations of monetary and fiscal policy would most likely achieve these goals, assuming that consumption does not depend on the interest rate?

Monetary Policy- decrease money supply and Fiscal Policy- Increase personal income taxes

Monetary Policy- Increase money supply and Fiscal Policy- Increase personal income taxes

Monetary Policy- decrease money supply and Fiscal Policy-Increase government spending

Monetary Policy- Increase money supply and Fiscal Policy- decrease personal income taxes

Which of the following would result in the largest increase in aggregate demand?

A R30 billion increase in military expenditure and a R30 billion open market sale of government securities.

A R30 billion tax increase and a R30 billion open market purchase of government securities.

A R30 billion tax decrease and a R30 billion open market sale of government securities.

A R30 billion increase in military expenditure and a R30 billion open market purchase of government securities.

1. Why did prices rise ahead of the change in supply?

good day can you please send me fiscal policy and monetary policy notes that i can read before writing my exams

An expansionary fiscal policy would most likely cause which of the following changes in output and

interest rates?

"An increase in money supply leads to a balance of payments deficit regardless of the degree of capital mobility". Explain whether this is true or false