If a fall in the price level results in a decline in interest rates, the latter may result in an increased
outflow of capital in pursuit of higher interest rates overseas and/or a decline in capital inflows,
because domestic interest rates are less attractive than before. This would result in a g...
PREVIEW OF QUESTION 1
1. 1 Reference: Prescribed book PG 361
The inverse relationship between the price level and the quantity of aggregate output demanded by
households, firms, the government, and the rest of the world
This study source was downloaded by 100000838690865 from CourseHero.com on 06-02-2023 10:16:58 GMT -05:00
The inverse relationship between the price level and the quantity of aggregate output demanded by
households, firms, the government, and the rest of the world
2. 1 Reference: Prescribed book PG 362
If a fall in the price level results in a decline in interest rates, the latter may result in an increased
outflow of capital in pursuit of higher interest rates overseas and/or a decline in capital inflows,
because domestic interest rates are less attractive than before. This would result in a greater
demand for foreign currency and a lower demand for the rand, which will give rise to a depreciation
of the rand against the major currencies. The weaker rand, in turn, will tend to boost exports X and
dampen imports Z, resulting in an increase in the quantity of domestic goods and services
demanded. The change in the prices of domestic goods relative to the prices of foreign goods will
reinforce this effect.
3. 2 Reference: Prescribed book PG 361
When the price level falls, this may lead to a decline in interest rates, which will stimulate investment
spending I. The result is an increase in the quantity of goods and services demanded.
4. 4 Decrease in the quantity of goods and services demanded in the SA economy.
5. 1 Reference: Prescribed book PG 340
Taxes reduce the income that households have available to spend on goods and services. We say
that taxes reduce the disposable (or after-tax) income of households, with the result that households
can afford to purchase fewer goods and services than before. By reducing disposable income, taxes
indirectly reduce consumption spending C by households.
6. 4 Reference: Prescribed book PG 406
If expansionary monetary and fiscal policies are used to stimulate aggregate demand,
unemployment can be lowered but inflation will increase further.
This study source was downloaded by 100000838690865 from CourseHero.com on 06-02-2023 10:16:58 GMT -05:00
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