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ECS1601 ASSIGNMENT 4: SEMESTER 1 & 2: 2021: ANSWERS WITH ELABORATIONS
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ECS1601 ASSIGNMENT 4: SEMESTER 1 & 2: 2021: ANSWERS WITH ELABORATIONS
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ECS1601 ASSIGNMENT 04: SEMESTER 1 & 2 2021: ANSWERS WITHELABORATIONS. 100% GUARANTEED
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Questions 4.1, 4.2 and 4.3 are based on the following diagrams, which show the
aggregate demand and supply curves.
4.1 Which one of the diagrams above illustrates the effects of expansionary fiscal
and monetary policies?
[1] figure 1
[2] figure 2
[3] figure 3
[4] figure 4
The fiscal and monetary policies are demand management policies. They
affect the demand curve and specifically if they are of an expansionary
nature, they increase demand, ie, shift the demand curve outwards or to
the right.
, 4.2 Which of the following best demonstrates a movement that would result from
the economic (supply) shock of COVID-19 pandemic?
[1] b to c on figure 4
[2] a to b on figure 3
[3] b to c on figure 2
[4] E1 to E0 on figure 1
Figure 4 shows a shift of the supply curve which is likely caused by a suuply
shock as a result of covid 19. Upward shifts of the AS curve are often referred
to as adverse supply shocks.
4.3 The effects of the decision by the South African Reserve Bank
(SARB) to increase the repo
rate and by the National Treasury of South Africa to increase taxes are shown
by …
[1] figure 1.
[2] figures 1 and 2.
[3] figure 2.
[4] figures 2 and 3.
[5] figure 4.
This acts as a contractionary Monetary and fiscal policy. They have the
same effect on the demand curve which is to shift to the left.
4.4 The monetary policy transmission mechanism shows the relationship between
.
[1] the interest rate and spending by firms
[2] the interest rate and spending by government and households
[3] the total income and investment expenditure
[4] the price level and total production
A key element of the transmission mechanism is the relationship between the
interest rate (i) and investment spending (I), which is an import ant
component of aggregate spending (A) and aggregate demand (AD).
4.5 The monetary transmission mechanism can be illustrated and explained
using three diagrams showing the link between .
[1] interest rate, prices and wages
[2] consumption spending, interest rate and total production
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