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Q.3.1 The monetary transmission mechanism can be depicted in the form of a graph or using symbols. Explain, with the aid of symbols, the monetary transmission mechanism when interest rates increase (Note: Prices and wages are variable.) (10) Q.3.2 Explain, using the AD‐AS model, how the South African Government can use fiscal policy as a tool to recover from the negative effects of this COVID‐19 pandemic. Your answer must include the following: The description of the type of fiscal policy required; (4) An explanation of how the implementation of this tool will work their way through the economy to achieve the desired effect; (6) The AD‐AS graph showing the implications of your recommendations. (5) Marks will be awarded for your ability to integrate theory with the scenario provided. (15)
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