Answer to Question #218352 in Economics for Andie

Question

In 2020, the SARB’s monetary policy committee decided to decrease the repo rate by 1%. As a result, investment spending financed by borrowing increased which led to an increase in the aggregate spending, stimulating aggregate demand and increased price level in the economy.

4.1     The relationship described above is referred to as …

[1]     the monetary transmission mechanism.

[2]     the wealth effect.

[3]     the exchange rate effect.

[4]     the fiscal transmission mechanism.

Answer 1

[1]     the monetary transmission mechanism.