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SOUTH AFRICA INFLATION ACCELERATES IN FEW MONTHS TO 7.4%

1. Name the South African institution responsible for combating inflation. (1)

2. Which school of thought believes that inflation is influenced by the total money supply? (1)

3. Briefly describe the term hyperinflation. (2)

4. How would the cost of imported key inputs contribute to a higher inflation rate? (2)

5. Why is a monetary policy effective in reducing demand-pull inflation? (2)

Sagot :

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Final answer:

The South African Reserve Bank combats inflation, the Quantity Theory of Money links inflation to the total money supply, hyperinflation is rapid uncontrollable price increases, imported key inputs drive inflation by raising production costs, and monetary policy controls demand-pull inflation.


Explanation:

Inflation:

1. The institution responsible for combatting inflation in South Africa is the South African Reserve Bank.

2. The school of thought that believes inflation is influenced by the total money supply is the Quantity Theory of Money.

3. Hyperinflation is a situation where prices increase uncontrollably, typically more than 50% per month.

4. The cost of imported key inputs can contribute to higher inflation rates due to increased production costs, which are passed on to consumers.

5. Monetary policy is effective in reducing demand-pull inflation by controlling the money supply, interest rates, and credit availability to manage demand.


Learn more about Inflation and Monetary Policy here:

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