Question 1

Which of the following is NOT a function of money as described in the study materials?

Accepted Answer

Factor of production

Question 2

Which equation correctly represents the conventional measure of money (M1) in South Africa?

Accepted Answer

$$M = C + D$$

Question 3

What is the main opportunity cost of holding money instead of other assets?

Accepted Answer

Interest forgone

Question 4

Which of the following best describes the role of financial intermediaries in the monetary sector?

Accepted Answer

They act as go-betweens between surplus and deficit units, facilitating the flow of funds.

Question 5

Which of the following is included in M2 but NOT in M1?

Accepted Answer

Short-term and medium-term deposits

Question 6

If the South African Reserve Bank (SARB) wants to decrease the money supply, which open-market operation should it conduct?

Accepted Answer

Sell government bonds

Question 7

Which of the following is the best description of the speculative motive for holding money?

Accepted Answer

Holding money as a store of value in anticipation of changes in interest rates

Question 8

What is the main determinant of the transactions demand for money?

Accepted Answer

Income

Question 9

Which of the following is NOT a function of the South African Reserve Bank?

Accepted Answer

Regulation of fiscal policy

Question 10

If the SARB increases the repo rate, what is the most likely immediate effect on the quantity of money?

Accepted Answer

It will decrease

Question 11

Which of the following best explains why money is not considered wealth?

Accepted Answer

Wealth consists of all accumulated assets, while money is only one form of asset.

Question 12

Which monetary aggregate is regarded as the best measure of developments in the monetary sector in South Africa?

Accepted Answer

M3

Question 13

Which of the following is a key instrument of monetary policy used by the SARB?

Accepted Answer

Open-market policy

Question 14

Suppose the SARB wants to stimulate economic growth. Which action is it most likely to take?

Accepted Answer

Lower the repo rate

Question 15

Which of the following best describes the relationship between interest rates and bond prices?

Accepted Answer

They are inversely related

Question 16

Which of the following is NOT a component of the monetary policy framework in South Africa?

Accepted Answer

Fiscal deficit targeting

Question 17

A household decides to keep more of its wealth in cash rather than in bonds because it expects interest rates to rise soon. Which motive for holding money does this illustrate?

Accepted Answer

Speculative motive

Question 18

Which of the following statements about money creation is correct?

Accepted Answer

Banks create money by granting loans, not by printing notes and coins.

Question 19

Which of the following is a non-market-oriented instrument of monetary policy that has been discontinued in South Africa?

Accepted Answer

Credit ceilings

Question 20

If the demand for money increases while the supply of money remains unchanged, what is the likely effect on the interest rate?

Accepted Answer

The interest rate will increase

The Monetary Sector: Money, Financial Intermediaries, and Monetary Policy in South Africa

Study Guide - Practice Questions

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