Monetary policy ICE 2

If product prices in South Africa were stated in terms of sugar beans (instead of Rands and cents), then sugar beans would be functioning primarily as:

• Store of value

• Unit of account

• Medium of exchange

Short- and medium-term deposits are included in:

• M1

• Both M1 and M2

• M2

Banks can create money by:

• Printing additional banknotes;

• Paying interest to their depositors;

• Making loans that result in additional deposits.

The demand for money is:

• The interest that is earned when the money is used to purchase bonds;

• The amount that various participants in the economy plan to hold in the form of money balances;

The liquidity preference theory holds that the demand for passive balances is determined by:

• The transactions motive;

• The speculative motive;

• The precautionary motive;

The present governor of the South African Reserve Bank is:

• Tito Mboweni;

• Trevor Manuel;

• Lesetja Kganyago

The repo rate is the

• Interest rate at which commercial banks lend to the public.

• Interest rate at which the Reserve Bank lends to commercial banks

• Interest yield on government bonds.

Identify three main functions of money and clearly explain each function.

Answer explanation

Medium of exchange

Store of value

Unit of account

Standard of deffered pyment

Identify the properties that a commodity should possess to be suitable as a form of money.

Answer explanation

Durability,transportability, divisibility, uniformaty, non counterfitability