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3 Cards in this Set
- Front
- Back
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What is a demand side policy? |
- A demand side policy aims to increase or decrease the aggregate demand and spending in an economy depending on the phase of the business cycle - Demand side policies include the Fiscal Policy and the Monetary Policy |
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What is a Monetary Policy and how does the Reserve Bank uses it to influence growth in the economy? |
- The Monetary Policy is a policy of the Reserve Bank regarding interest rates,inflation and the money supply
- Instruments of the Monetary Policy 1. Interest rates- If the Reserve Bank decreases it repo rate it causes other banks to reduce their interest rates If the Reserve Bank increases it's repo rate it causes other businesses to increase their interest rates - The lending rate determines the amount of money repaid by the household and business on the loans they made with the commercial banks - if the rate is high less credit will be demanded as the costs of repaying the loan are high - if rates are low more credit will be demanded, aggregate demand rises as consumer spending increases, stimulating growth but an increase in inflation may occur 2. The SARB can influence the money supply by changing the cash reserve requirements 3. The SARB can influence the money supply through open market transactions 4. They can also influence the money supply by moral suasion by persuading commercial banks through consultation to take account of the current economic conditions |
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What is the Fiscal Policy and how does the government use it to influence growth in the economy?? |
Fiscal Policy |
