1.13 If the Minister of Finance wanted to withdraw funds from the economy using the flows of income, spending and production, you would advise him to … increase government spending to firms. decrease government spending to firms. increase spending on public goods and services. increase taxes received from households. increase consumer spending on goods and services by promoting the goods market.1.15 Which one of the following statements is true? Properties of money include durability, divisibility and intrinsic value. Iron and copper make good coins today, due to the scarce nature of these resources. Certificates of deposit were the first form of paper money. Fiduciary money refers to money that is completely backed by gold. Due to South Africa’s abundance of gold, South African paper money is backed by gold held at the South African Reserve Bank1.16 The most comprehensive measure of money is equal to … M2 plus all short-term and medium-term deposits of the domestic private sector with monetary institutions. M1 plus all short-term and medium-term deposits of the domestic private sector with monetary institutions. M2 plus all long-term deposits of the domestic private sector with monetary institutions. M2 plus all medium-term deposits of the domestic private sector with monetary institutions. M1 plus all medium-term deposits of the domestic private sector with monetary institutions.1.18 Which of the following statements is true regarding the financial sector? In most countries, governments are generally net borrowers and therefore not included among surplus units. Financial intermediaries make direct financing possible by acting as a link between surplus and deficit units. In South Africa, household savings are low and therefore, commercial banks generally do not grant loans to big businesses. Most transactions in the South African financial market involve goods, as South Africa has an abundance of natural resources. Entrepreneurs who need funds to start up a business are not classified as deficit units by the government, and are thus encouraged to raise their own funds.1.19 Which one of the following is a function of the South African Reserve Bank? To formulate and implement fiscal policy To maintain financial stability To finance government expenditure To provide public goods and services To act as a banker to foreign countries that wish to borrow funds1.20 The function of the South African Reserve Bank as bank supervisor entails … providing approval to banks when they apply to provide personal loans to their clients. reducing interbank settlement risks by reducing the potential for settlement default by one or more banks. making, issuing and destroying banknotes and coins. achieving a sound, efficient banking system in the interest of depositors of banks and the economy as a whole. formulating an exchange rate policy.1.21 Which one of the following statements is incorrect? The opportunity cost of holding money balances is the interest that could have been earned if the money had been used to purchase interest-bearing assets instead. Anyone who wishes to enter into transactions in a monetary economy has to hold money as a medium of exchange. The quantity of money demanded for transaction purposes depends on the level of income. The demand for money as an asset is also called the speculative demand for money. The quantity of money demanded for speculative purposes is negatively related to the interest rate.1.22 Which one of the following statements is incorrect? As interest rates increase, bond prices decrease. As interest rates decrease, bond prices increase. There is a positive relationship between interest rates and bond prices. If interest rates are high, the quantity of money demanded will tend to be low. If interest rates are low, the quantity of money demanded will tend to be high.1.24 Which one of the following statements is incorrect? The only important rate in the economy is the repo rate. The interbank lending rate is an example of an interest rate that is used in the South African economy. Interest rates can generally be thought of as the price that consumers pay for loans. Interest rates in an economy generally tend to move in harmony. Interest rates are the rates that banks earn on funds lent.1.25 The independent money supply curve … is determined by the South African Reserve Bank, as this institution has the authority to print and distribute money. is determined by the government, as they have the authority to make fiscal decisions. does not exist. is determined by commercial banks that provide loans to clients. is an upward-sloping curve independent of money demand.1.26 The quantity of money in an economy is … determined by the interaction between the cost of credit and the demand for money. fixed by the South African Reserve Bank. dependent on the money supplied. determined by the Minister of Finance. decided jointly by the Reserve Bank and the government, as it has important implications for inflation targeting.1.27 Which one of the following statements on monetary policy is incorrect? Monetary policy in South Africa is implemented by the South African Reserve Bank (SARB). The key decision-making unit is the Monetary Policy Committee of the SARB. The key instrument of monetary policy is the repurchase rate (repo rate). The SARB’s main objective is to control the growth of the money stock. The SARB pursues a formal inflation target, set by the Minister of Finance, in conjunction with the SARB.1.28 Which one of the following statements is incorrect? In South Africa, money is created exclusively by the South African Reserve Bank. The stock of money consists largely of bank deposits and banks create these deposits by making loans. Money creation by banks is constrained by the demand for bank loans. The South African Reserve Bank uses changes in interest rates as an attempt to regulate the rate at which new money is created. The stock (quantity) of money in the economy is essentially determined by the interaction of the interest rate and the demand for money. There is no independent supply of money.1.29 How would the South African Reserve Bank approach monetary policy in terms of its inflation-targeting mandate? Implement policy aimed at increasing the levels of inflation. Implement policy aimed at decreasing the levels of inflation. Implement policy aimed at keeping the inflation levels constant. Refrain from implementing policy, as it cannot control the levels of inflation. Advise government on the type of fiscal policy that can help with the inflation levels.1.30 Which tool would the South African Reserve Bank use to achieve these targets? Decrease the repo rate. Increase the repo rate. Keep the repo rate constant. Wait to see what government will do about it. Advise the government to increase income taxes.
This question was answered on: May 23, 2022
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