Summary
Summary ECS1601 GRAPHS
- Course
- Institution
Summary of 6 pages for the course ECS1601 - Economics IB at Unisa (ECS1601 GRAPHS)
[Show more]
Seller
Follow
kevinvandermerwe
Reviews received
Content preview
EXAMPLES:EXCHANGE RATE AD-AS
R/$ S1 P
S S
D↓ S1 D↑
S↓ S↑
D1
D D
0 D1 Q 0 Y
KEYNESIAN
NB! - Keynesian Model
A The only 3 things that results in a swivel in curve:
**This also only impacts the slope of AD curve
(1) Tax; (2) MPC; (3) MPI - foreign sector
*Any change in autonomous makes the curve shift
Graph to the left:
RED illustrates a swivel
Blue illustrates curve that shifts
0 45˚ Y
RELATIONSHIP AND EFFECT ON THE RAND / DOLLAR EXCHANGE RATE
When Tourists come to SA
Supply for R ↑
Dollars appreciates. Rand depreciates.
When SA citizens go to Usa
Demand for $ ↑
Dollars appreciates. Rand depreciates.
When foreigners sell SA financial assets
Demand ↑
Rand depreciates against dollar
When Gold prices ↑ in SA
Supply ↓ as exports are less as gold is more expensive QTY ↓.
Rand depreciates. Dollar appreciates
The supply of dollars decreases, for example, when households, firms or the government in the
United States import fewer South African goods, or when the price of gold falls on the world market.
Impact of economic Recession in SA on Rand / Dollar
Demand for $ ↓ recession causes a slump in demand.
Supply of $ ↓, QTY $ ↓
Rand depreciates against dollar
Page 1 of 6
, IMPORTANT CONCEPT:
Income
Production Spending
RELATIONSHIP AND EFFECT BETWEEN INTEREST RATES AND DEMAND FOR MONEY
When interest rates ↑ then the opportunity cost of holding money goes ↑
Demand for money therefore goes ↓ because:
People prefer to hold less money and more bonds which they can earn interest on
When interest rates ↓ then the opportunity cost of holding money goes ↓
Demand for money therefore goes ↑ because:
People prefer to hold more money and fewer bonds
RELATIONSHIP AND EFFECT ON REPO RATE ON THE ECONOMY
RepoRate = Rate SARB charges to the commercial banks.
Commercial banks add 3.5% to repo rate and charges us the Prime rate
When repo rates ↑ then prime rate goes ↑
Money demand goes ↓ because people will spend less money
Prices will go ↓
When repo rates ↓ then prime rate goes ↓
Money demand goes ↑ because people will spend less money
Prices will go ↑
HOW MONETARY POLICY CAN BE USED TO COMBAT ↓ OUTPUT, UNEMPLOYMENT AND RECESSION
AD-AS S ↑ and shifts to the right downwards
P (1) Interest rates ↓ Investment Spending ↑
S OR
S1 ↑ in production without ↑ remuneration will ↓ price
(2) When Investment Spending ↑ Output also ↑
P0 (3) If investment spending, however, does not react to interest rate
P1 changes and output and income stays the same, the monetary
transmission mechanism breaks down
D
0 Y
Y0 Y1
Page 2 of 6
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller kevinvandermerwe. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $4.68. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
78998 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now