ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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decreasing the repo rate
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increasing the reserve requirement
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selling securities on the open market
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making banks hold a reserve for all types of deposits
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Detailed explanation-1: -The SARB fulfils its constitutional mandate to protect the value of the rand by keeping inflation low and steady. Monetary policy is the means by which central banks manage the money supply to achieve their goals. The SARB uses interest rates to influence the level of inflation.
Detailed explanation-2: -By contrast, if the Fed sells or lends treasury securities to banks, the payment it receives in exchange will reduce the money supply.
Detailed explanation-3: -When the Federal Reserve decreases the reserve ratio, it lowers the amount of cash that banks are required to hold in reserves, allowing them to make more loans to consumers and businesses. This increases the nation’s money supply and expands the economy.
Detailed explanation-4: -The SARB changes the repo rate to prevent inflation and to keep it between the 3% to 6% target range. The prime lending rate (from bank to consumer) is now at 8, 75% from 9, 75%.