Essay
ECS3701 ASSIGNEMNT 2 2023 MONETARY ECONOMICS (CALL OR //)
- Course
- Institution
- Book
ECS3701 ASSIGNEMNT 2 2023 MONETARY ECONOMICS (CALL OR 4/3/5)
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
More summaries for
-
[The Economics of Money, Banking and Financial Markets,Mishkin,11e] 2023-2024 Test Bank: Your Study Companion
-
Solution Manual for The Economics of Money, Banking and Financial Markets 11th Edition / All Chapters 1 - 25 / Full Complete 2023
-
ECS3701 ASSIGNMENT 2 2023
Seller
Follow
passmatetutorials
Reviews received
Content preview
PASSMATES TUTORIALS passmatetutorials@gmail.comDISCLAIMER: THIS IS NOT AN OFFICIAL GUIDE FROM UNISA. THE
FRAMEWORK IS NOT PREPARED NOR APPROVED BY UNISA, RATHER
REPRESENTS A POSSIBLE SOLUTION TO THE TASK CONSISTENT WITH
THEORY. THIS FRAMEWORK IS ONLY INTENDED TO ASSIST STUDENTS IN
GETTING STARTED WITH THEIR ASSIGNMENT, AND IN NO CASE THIS
DOCUMENT SHOULD BE USED FOR CHEATING, THUS NO STUDENT IS
ENCOURAGED TO COPY THIS DOCUMENT, NOR ITS SECTIONS FOR
SUBMISSION. WE BELIEVE THE FRAMEWORK WILL BE A GOOD STARTING
POINT AS IT WAS PREPARED BY OUR TEAM OF PROFESSIONAL PRIVATE
TUTORS WHO ARE EXPERTS IN THE FIELD, AND IT WAS PREPARED USING
VARIOUS SOURCES. ANY SIMILARITY WITH ANY EXISTING THEORY OR
DISCUSSION BY OTHER AUTHORS IS EXCUSED. THE AUTHORS HOWEVER DO
NOT CLAIM MONOPOLY TO KNOWLEDGE HENCE MODIFICATION OF THE
ANSWERS CONTAINED IN THIS FRAMEWORK MAY NOT BE PROHIBITED AS IT
CONTRIBUTES TO EXPANSION OF KNOWLEDGE. FOR ANY FURTHER
GUIDELINE ABOUT THE INFORMATION CONTAINED HERE AND THE MODULE
IN GENERAL, CONTACT PASSMATE TUTORIALS.
WE ASSIST WITH OTHER MODULES INCLUDING:
ECSs, FACs, MACs, MNGs, INTs, TRLs, HMEMS, PRMs, PROs, MNBs, DSC, QMI,
MNMs, MNO, MNPs, FIN, PUBs, MNMs, RESEARCH among others.
WE OFFER CLASSES, ASSIGNMENT GUIDELINES, EXAMINATION
PREPARATION, RESEARCH AND RESEARCH PROPOSALS, DISSERTATION
EDITING etc.
OTHER THAN UNISA, WE ALSO ASSIST STUDENTS AT VARIOUS INSTITUTIONS
INCLUDING MANCOSA, REGENT, REGEYNESES, BOSTON, STADIO, OLG, UJ,
UP etc
For any enquiries the following numbers can be used for calling, sms, whatsapp and
telegram
CONTACT PASSMATE TUTORIALS @061 262 1185/068 053 8213/0717 513 144 or
email passmatetutorials@gmail.com
PASSMATE TUTORIALS 061 262 1185/068 053 8213/0717 513 144
,PASSMATES TUTORIALS passmatetutorials@gmail.com
Table of Contents
1) (a) As an economist, what advice would you give the South African Reserve Bank (SARB) regarding
the continuous increase in interest rates? In your answer indicate whether you think the SARB MPC is
doing the right thing. Explain why and what can be done better, if any. If you believe this move is correct,
explain why you think this is so. [10] ....................................................................................................... 3
(b) Which monetary policy mandate is the SARB pursuing? Provide in detail a further illustration of the
chosen mandate. [5] ................................................................................................................................ 4
(c) Which transmission mechanism is the SARB using in this case? Illustrate in detail, the effect of this
channel on the general price level. [7] .................................................................................................... 5
THREE POSSIBLE CHANNELS IN THE SCENARIO ............................................................................ 5
CHANNEL 1. Credit supply .............................................................................................................. 5
CHANNEL 2. Saving and Investment Channel .................................................................................... 6
CHANNEL 3. Cash-flow Channel ...................................................................................................... 7
2. Interest rates have an impact on the overall health of an economy. Explain its importance on the
sides of both the consumers and businesses. [10] ................................................................................. 7
How do Interest Rates Influence the Economy? ................................................................................... 13
Examples and empirical evidence of the contribution of interest rates ................................................. 15
Influence on savings ............................................................................................................................. 15
Influence on investment ........................................................................................................................ 17
Demand management........................................................................................................................... 20
Interest rate reform ................................................................................................................................ 21
3 (a) Explain the main characteristic that any object must have to function as money. [4] .................. 22
(b) What are the 3 types of payment systems? Explain the problems associated with each type. [9] 24
1) electronic Payment ....................................................................................................................... 24
2) e-Money ........................................................................................................................................ 24
3) Commodity Money ........................................................................................................................ 25
4) Fiat Money .................................................................................................................................... 26
4) Describe an advantage and a disadvantage of the fact that monetary policy has so many different
channels through which it can operate. [5) ........................................................................................... 26
Advantage ............................................................................................................................................. 26
Disadvantage ........................................................................................................................................ 26
PASSMATE TUTORIALS 061 262 1185/068 053 8213/0717 513 144
, PASSMATES TUTORIALS passmatetutorials@gmail.com
1) (a) As an economist, what advice would you give the South African
Reserve Bank (SARB) regarding the continuous increase in interest
rates? In your answer indicate whether you think the SARB MPC is
doing the right thing. Explain why and what can be done better, if any.
If you believe this move is correct, explain why you think this is so. [10]
• Of course, interest rates is the most common and powerful monetary policy tool
in the hands of monetary authorities.
• The government, through the monetary authority, uses the interest rate to
control economic activities and outcome, towards a desired ending, including
low inflation.
• Therefore, the government can continue using the interest rate for the intended
purpose.
• However, it must consider alternative tools such as open market operations and
reserve requirements.
• This is because interest rate can be directly inflationary as interest is a cost of
borrowing hence negatively affect (discourage) investment and consumption,
consequently, reduce real output and can cause unemployment rise.
• If interest has to be used, an optimal interest rate should be set
• Alesina (1988) notes that interest rate must be used cognisant of the transission
mechanism
• Transmission process is generally complex and involves high degree of
uncertainty in terms of timing and size of impact in the economy.
• Barro (1997) adds that transmission mechanism involves long, variable and
uncertain time lags, making it difficult to predict precise effect of monetary policy
actions on targeted variables such as inflation.
• Alternative policy can be used namely fiscal policy or supply side policies to
increase productivity hence reduce inflation
• Fiscal policy can be used together as a policy mix with interest rate
PASSMATE TUTORIALS 061 262 1185/068 053 8213/0717 513 144
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller passmatetutorials. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $2.90. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
79650 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now
Recently viewed by you
Exam (elaborations) ·
CNA chapter 2 EXAM Questions and Answers (2024) (Verified Answers)
