ECS3701 EXAM PACKS 2023(2 EXAM PACKS COMPLETE WITH ANSWERS)

Explain the following terms i. Inflation targeting Monetary policy strategy that involves public announcement of a medium-term numerical target for inflation. ii. Interest rate risk The riskiness of earnings and returns that is associated with changes in interest rates iii. Monetary Policy Monetary policy can be defined as the measures taken by the monetary authorities to influence the quantity of money or the rate of interest with a view to achieving stable prices, full employment and economic growth. Monetary policy in South Africa is conducted by the South African Reserve Bank iv. Money Money or money supply is defines as anything that is generally accepted in payment for goods or services or in the repayment of debts. Money is linked to changes in economic variables that affect all of us and are important to the health of the economy. 1.2 Differentiate between hierarchical and dual mandates of monetary policy Hierarchical versus Dual Mandates Hierarchical mandates is when an economic goal, such as price stability, is put first and the say that as long as it is achieved other goals can be pursued. Dual Mandate is when a central bank is required to achieve two co-equal objectives; price stability and maximum employment (output stability) 1.3 Can monetary policy alleviate South Africa ‘s high unemployment problem? Explain The goals of employment and economic growth appear particularly important because of the high unemployment rate, and the prevalence of poverty among large sections of the population.