ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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decrease interest rates because low interest rates encourage business growth and expansion
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raise interest rates because high interest rates encourage business growthand expansion
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increase the repo rate, which would increase the money supply
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increase consumer spending by reducing the money supply
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Detailed explanation-1: -The SARB uses interest rates to influence the level of inflation. National Treasury, in consultation with the SARB, sets the inflation target, which acts as a benchmark against which price stability is measured. The SARB then independently makes monetary policy so as to achieve this target.
Detailed explanation-2: -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-3: -Key Takeaways. Central banks cut interest rates when the economy slows down in order to reinvigorate economic activity and growth. Rates go up when the economy is hot. The goal of cutting rates is to reduce the cost of borrowing so that people and companies are more willing to invest and spend.
Detailed explanation-4: -When the Fed adjusts the reserve requirement, it allows banks to charge lower interest rates. Banks often take on a financial burden when limits change, so the Fed often uses open market operations instead to influence banks.