Our Individual Economic Life

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Our individual economic life is impacted by the decisions made in our economic policies. Thus making the country’s economic performance significant. Some of South Africa’s macroeconomic objectives are: inflation between 3% -6%, relative price stability, low unemployment, sustainable economic growth, exchange rate constancy and balance of payments stability. The biggest challenge for any economy however is to achieve these goals all at the same time.These objectives prompt for government to intervene in the economy, to try and achieve most of these objectives at the same time. Therefore it is imperative that policy creators prioritize these objectives. The focus in most if not all central banks is to achieve price stability and the SARB is no exception. Monetary policy Monetary policy can be defined as a set of policies that a country's central bank sets in motion to influence the supply of money and interest rates and thus influencing the country's economic activity and the amount of inflation. Monetary policy is based on the logic that all monetary variables are related for example,the quantity of money and the interest rate, and macroeconomic variables for example, price level, unemployment rate and GDP. In South Africa the SARB has purely just focused on the goal of achieving price stability as it's objective. The monetary policy in South Africa wants to protect the buying power of the rand and this is clearly stated in the objectives of the SARB. To achieve this goal the SARB has chosen the primary objective of inflation targeting which is trying to set inflation between 3-6%, this is done with the use of changing interest rate to influence the level of spending and credit extension in the economy. This is all done to achi... ... middle of paper ... ... general interest rates to increases this may crowd out the spending in the economy. A possible conflict may arise between the fiscal and monetary policy objectives, if an expansionary fiscal policy results in a reduction of capital investment and in risk taking by the private sector. This could also aid on to inflation increasing rapidly in the near future. Works Cited Beires, L. (2009). Understanding the difference between monetary and fiscal policy. Retrieved May 01, 2014, from KZN Department of Economic Development And Tourism: http://www.kznded.gov.za/Portals/0/UNDERSTANDING%20THE%20DIFFERENCES%20BETWEEN%20FISCAL%20AND%20MONETARY%20POLICY.pdf Mollentze, S. (2009, August 26). How does fiscal policy affect monetary policy? Retrieved May 01, 2014, from Financial Markets Journal: http://www.financialmarketsjournal.co.za/10thedition/printedarticles/policies.htm
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