Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 15, Problem 4WNG
To determine
Effects of
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The mandate of the South African Reserve Bank (SARB) states that “the Reserve Bank is required to achieve and maintain price stability in the interest of balanced and sustainable economic growth in South Africa”.
There are several macroeconomic determinants that in many ways affect the outlook of the economy, such as inflation, growth, interest rates, unemployment and exchange rates. There has been an ongoing conversation among economists and politicians about the mandate of the SARB.
Do you think that the mandate of the SARB should change? Support your view.
The use of monetary policy is highly debated among classical and Keynesian economists. Where do they agree and where do they disagree with respect to monetary policy?
Show graphically that the less responsive is investment to interest rates, the less effective is monetary policy as a stabilization tool.
Chapter 15 Solutions
Macroeconomics
Ch. 15.1 - Prob. 1STCh. 15.1 - Prob. 2STCh. 15.1 - Prob. 3STCh. 15.4 - Prob. 1STCh. 15.4 - Prob. 2STCh. 15.4 - Prob. 3STCh. 15 - Prob. 1QPCh. 15 - Prob. 2QPCh. 15 - Prob. 3QPCh. 15 - Prob. 4QP
Ch. 15 - Prob. 5QPCh. 15 - Prob. 6QPCh. 15 - Prob. 7QPCh. 15 - Prob. 8QPCh. 15 - Prob. 9QPCh. 15 - Prob. 10QPCh. 15 - Prob. 11QPCh. 15 - Prob. 12QPCh. 15 - Prob. 13QPCh. 15 - Prob. 14QPCh. 15 - Prob. 15QPCh. 15 - Prob. 16QPCh. 15 - Prob. 17QPCh. 15 - Prob. 18QPCh. 15 - Prob. 1WNGCh. 15 - Prob. 2WNGCh. 15 - Prob. 3WNGCh. 15 - Prob. 4WNGCh. 15 - Prob. 5WNGCh. 15 - Graphically portray the Keynesian transmission...Ch. 15 - Prob. 7WNGCh. 15 - Prob. 8WNG
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- Which of the following is NOT an example of monetary policy to restrict aggregate demand? a)Raising interest rates b)Reducing money supply c)Rationing credit d)Increasing income taxarrow_forwardExplain in detail how policy rate affects aggregate demand through a monetary transmission mechanism.arrow_forwardState the main features of the monetary model. Use the model to analyse the impact of an expansionary monetary policy.arrow_forward
- Sylvia, a writer for a newspaper, interviewed top managers at 50 large corporations. All of the managers indicated that the primary determinant of planned investment is the interest rate and not their expected sales. In addition they all told her that their desired investment function is very flat. From this information, if Sylvia is a good macroeconomist, she would conclude that Group of answer choices neither expansionary nor contractionary monetary policy would be very effective. both expansionary and contractionary monetary policy would be very effective. fiscal policy would be very effective, but monetary policy would not be very effective. fiscal policy would not be very effective, but monetary policy would be very effective.arrow_forwardMonetary policy as one of the macroeconomic policies is generally implemented in line with the cycle of economic activity (business cycle). Based on this, answer the following questions: a) Explain what monetary policy is appropriate to apply when there is a decline in GDP, economic growth slows and there is a decline in the prices of goods? b) Explain what monetary policy is appropriate to apply when there is an increase in the amount of real output or economic growth and an increase in the price of goods? Explain!arrow_forwardTrue or False? Because the central bank uses the nominal interest rate as its policy instrument, the nominal interest rate is the transmission mechanism of monetary policy.arrow_forward
- “Monetary policy is the macroeconomic policy laid down by the central bank of an economy.”In terms of the above statement, explain how monetary policy can be used to combat inflationarrow_forwardNot copy pastearrow_forwardWhich of the following is an appropriate monetary policy to combat a negative GDP gap? a. raise income tax rates b. increase government spending c. lower real interest rates d. raise real interest ratesarrow_forward
- How is a monetary policy rule helpful for understanding U.S. monetary policy?arrow_forwardConsider the economy represented by the aggregate supply-aggregate demand graph below, which is initially at a short-run equilibrium at point A. How could monetary policy be used to improve the economy? Price level (GDP deflator. 2009-100) Pi IRASI SRASI AD₂ GDP GDP* Real GDP (trillions of 2009 dollars) Contractionary monetary policy could be used to increase economic growth. Expansionary monetary policy could be used to decrease prices. Expansionary monetary policy could be used to increase GDP to its potential. Contractionary monetary policy could be used to lower unemployment.arrow_forwardSuppose that you are employed as an advisor to the central bank. Select the proper policy recommendation or economic prediction for each of the following scenarios. Which policy is appropriate when a rising aggregate price level is a concern but GDP is growing at an acceptable rate? contractionary or restrictive monetary policy (tight money policy) It is unclear which type of monetary policy is appropriate. expansionary monetary policy (easy money policy) Which policy is appropriate when a rising aggregate price level is a concern and GDP is not growing at an acceptable rate? It is unclear which type of monetary policy is appropriate. contractionary or restrictive monetary policy (tight money policy) expansionary monetary policy (easy money policy) Contractionary or restrictive monetary policy (tight money policy) will cause interest rates to increase sometimes and decrease sometimes. decrease. increase.arrow_forward
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