18 Questions
In a free-market economic system, how are resource allocation decisions made?
Through the price system
Which of the following is a leakage in the circular flow model?
Imports
What is the primary goal of inflation targeting by the South African Reserve Bank (SARB)?
To control inflation within a specific framework
How does fiscal policy impact the economy when it is tightened?
Higher taxes or reduced government spending
What is the purpose of direct controls in economic management?
Control inflation through price and income policies
How do open market operations influence the economy?
By controlling the money supply and interest rates
What does the bank or discount rate policy influence directly?
Market interest rates
Why is coordination between fiscal and monetary policies considered crucial?
To ensure both policies are effective
In a mixed economy, the allocation of resources is influenced by which of the following?
Political philosophies only
Which factor does NOT impact the circular flow model?
Exports
What does aggregate demand in an economy encompass?
Consumer spending, government spending, investment spending, and net exports
How are real and financial flows related in the circular flow model?
Real and financial flows coexist
How does the Reserve Requirements policy impact the economy?
By affecting money supply and credit extension
What is the main purpose of open market operations in monetary policy?
To influence interest rates and credit growth
Why does the coordination of fiscal and monetary policies play a crucial role in economic management?
To prevent one policy's effects from canceling out the other
What is the primary function of the Bank or Discount Rate Policy?
To influence market interest rates
How does fiscal policy impact economic activity when it is loosened?
By reducing tax burdens on citizens
What happens when there is a budget surplus in a country?
It indicates a healthy fiscal situation where receipts exceed expenditures
Explore different types of economic systems including centrally planned, free-market, and mixed economies. Learn about resource allocation, state control, and private ownership in the context of addressing scarcity.
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