ECS1601 ASSIGNMENT 3 FOR 2025 - DUE 11 AUGUST 2025

IA




ECS1601 ASSIGNMENT 3 FOR 2025
FOR 2025




FEND TUTORIALS

,Question 1
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A decrease in the interest rate leads to an increase in investment spending, increase in aggregate
spending and an increase in total production or income. This chain of events may be summarised as
follows, in symbols,


a.
↓i→↑I→↑A→↑Y→↑AD→↑Y→↑P

b.
↑i→↓I→↓AS→↓Y

c.
↓i→↓I→↓AD→↓Y

d.
↓i→↑I→↑AD→↑Y
uestion 2
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When the SARB decreases the interest rates, investment spending will increase, which will lead to an
increase in aggregate spending and aggregate demand in the economy. This chain of events is called
…


a.
monetary policy transmission mechanism.

b.
transmission mechanism of contractionary monetary policy.

c.
transmission mechanism of contractionary fiscal policy.

d.
fiscal policy transmission mechanism.
Question 3
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According to the classical cash reserve system, which of the following statements is/are true
regarding banks in South Africa?
(a) They are required to hold a minimum cash reserve of 2,5% of their deposits.
(b) The level of the repo rate influences the interest rate at which the banks provide credit to
individuals.
(c) The SARB provides cash reserves through accommodation policy to the banks experiencing
liquidity shortage.


a.
(b)


b.
(a)


c.
(a) and (b)


d.
(c)


e.
(a), (b) and (c)
Question 4
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Which one of the following would increase per unit production cost and therefore shift the aggregate
supply curve to the left?


a.
An increase in worker productivity and production advances.

b.
A reduction in business taxes.