When the inflation rate is expected to exceed thetarget rate by a significant margin, the SARB will tendto:O A.reduce the cost of credit to the banks.O B. increase the repurchase rate (repo rate).С.Purchase government bonds on the openmarket.O D. decrease the repurchase rate (repo rate).O E.use moral suasion to persuade banks toprovide more loans to their clients.

Inflation is the increase in price level so that the price of all goods and services increases and…

Answered: When the inflation rate is expected to…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Similar questions

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Correct answer is given..
If the real interest rate is 2% and expected inflation is 3%, the nominal interest rate is O -1%. O 1%.. 6%. 5%.
Suppose that the aggregate price level in Country X's economy decreases. Which of the following is true? consumer demand increases. O interest rates decrease. O investment decreases. O imports decrease.
10. Which of the following statements is true? a Cost-push inflation occurs as prices rise because of a rise in per-unit cost of production (unit cost = total cost/units of output). With cost-push inflation, prices rise but output falls. b Rising costs reduce profits and the amount of output firms are willing to supply at the current price level. As a result, the economy’s production of goods and services declines and the price level rises. c Supply shocks have been the major source of cost-push inflation. Supply shocks occur when there are dramatic increases in the price of raw materials or energy. d All of the above. e Only a) and b)
Using the simple monetary rule Rt-r=m(T-), if m=0.5 and the inflation rate is 2 percent below the target inflation rate, the Federal Reserve will A. raise the marginal product of capital by 1 percent. B. lower the interest rate by 1 percent. O C. raise the interest rate by 1 percent. OD. lower the marginal product of capital by 1 percent. O E. lower the target rate by 2 percent.
Consider the short run and the long run and then choose the statement that is correct. O A. The real interest rate is independent of the inflation rate in the long run. B. The real interest rate is dependent on the price level in the long run. C. In the short run, money market equilibrium determines the price level. D. In the short run, other things remaining the same, a given percentage change in the quantity of money brings an equal percentage change in the price level.
Refer to the information provided in the figure at right to answer the question that follows. The level of aggregate output that can be sustained in the long run without inflation O A. is $400 million. B. is $700 million. O C. is $800 million. O D. cannot be determined from this information because aggregate demand is not given. Price level, P LRAS AS :800 400 700 Aggregate output (income), Y ($ million)
1st attempt Assume that people in the economy have adaptive expectations. If the inflation rate has been stable at 2% in each prior year (because of passive monetary policies) and the central bank wants to lower unemployment, which policy should it implement? Choose one: O A. a policy that makes the inflation rate less than 2% O B. a policy that makes the inflation rate equal to 2% O C. a policy that makes the inflation rate greater than 2%
To achieve long term economic growth.....O a. Money is neutralO b. All answers are correctOC. Money and inflation are neutralO d. Money is not neutral
Use the table of data to answer the following question: Table 17.3 Nominal interest rate 7% Inflation rate 1.5% Risk premium 1% Suppose you have the option to purchase for $955 a two-year old bond with a $1,000 face value and one year left that has a coupon rate of 8-percent, or, purchase a new one-year bond for $1,000. What should you do? O a. Purchase used bond because the real interest rate is higher than the new bond's real interest rate. O b. Purchase new bond because the real interest rate is higher than the used bond's real interest rate. OC There is not enough information to determine the best investment option. O d. Purchase either bond because the real interest rate is the same for both options.
A C Inflation rate, Inflation Inflation T 4.5 4 Chart D 3.5 3 2.5 2 1 2 Select one or more: O Chart A Chart B Chart C 3 4 5 6 VPC 7 8 PC = π¹ 9 MR Output, Y B Inflation Inflation 11 10 Time period Figure 14 Policy response to a positive demand shock 13 15 17 12 14 16 18 19 4.5 20 4 3.5 3 2.5 2 2 3 19 4 5 7 9 11 13 15 17 8 10 12 14 16 18 20 Time period 6 D Inflation VPC 76 rate, Figure 14 shows four charts labelled A to D depicting aspects of a positive permanent demand shock. Charts B and C are from the DD209 macrosimulator, while Charts A and D show MR curves. Which two of these charts are consistent with the policy response from a central bank that has a strong inflation aversion? (Choose two answers.) MR PC = n¹ Output, Y

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