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1.1 The South African Reserve Bank has 4 main responsibilities of which three are outlined below; a) Services to the government The SARB acts as governments bank and offer advice on how they should gain, spend and store the nations funds. They are also the custodian of gold and foreign reserves, regulating the exchange and trade of foreign currency in South Africa.

b) Rendering economical and statistical services The SARB provides and analyses statistical information every year to key decision makers to help them make fiscal decisions.

c) Maintaining financial stability The SARB maintains financial stability in the market in four methods; by supervising banks making sure there is no mismanagement and fraud, by being a medium for bank-to-bank transactions, by making overseas transactions easier and through the creation and destruction of coins and notes for legal tender. (Mynheardt, 2011)

1.2

a) A change in consumer behavior, preferences and trends b) Political and other shocks c) The wearing away of misconceptions and entitlement d) The redistribution of income towards the previously disadvantaged e) The growth of the population and an increasing rate of urbanization

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Injection Government Spending Investment Imports

Factors of Production

Goods and Services

Leakages Savings Taxes Imports

3.1

The five other assumptions are; o o o o o Government Income and Spending Public Consumption and Investment Net Balance of Payments, Aggregate supply Human capital and workforce

3.2

By definition the consumption factor in the macroeconomic model encompasses all expenditure within the said economy. As mentioned, consumers wealth affects consumption and in contrast consumer income is a factor that consumer wealth and in turn consumption.

Another factor that affects consumptions is the consumer confidence in the future of the economy. If the consumer has a pessimistic view of the future, they are less likely to spend thus reducing consumption.

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The third factor is the government taxation levels. Higher tax rates reduce disposable income and unless government puts that money back into economic circulation, consumption will decrease.

Inflation is also anther factor that affects consumption. During a period of inflation, the revenue figures may increase but the buying power of the consumer decreases, ultimately reducing the value of consumption. A major contributor to consumption is the consumers capital expenditure; expenditure on fixed assets such as homes and government bonds.

Consumption

C = a + b (Y)

A 45o
Disposable Income 4.1

4.2

Consumption = a + b Yd With a being the autonomous consumption and b being our marginal propensity to spend. Yd is Gross Income - (Deductions from Direct Taxation + Benefits (tutor2u, 2011)

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4.3

The difference between autonomous and induced expenditure is that autonomous expenditure will be incurred regardless of whether there is income or not. It is labeled in the above diagram as A

5.1

The Equilibrium exchange rate is the rate at which the quantity of dollars demanded equals the quantity of dollars supplied. (IMM GSM, 2010)

5.2

Exchange Rate ()

Quantity (Billions)

5.3

The graph shows the original equilibroium price as 10 The shift in supply from 4 Billion to 3 Billion results in an increase of of the equilibrium price to 14.50 This means that the " has strengthened against the rand which may result in increased exports to the UK.

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6.1

The reserve requirement is the minimum amount, in relation to the value of deposits that a financial institution must have kept untouched as reserve. It is kept as a security buffer in case of emergency liquidity situations.

6.2

The reserve ratio is the percentage of bank deposits that a bank holds into its reserves. It must be equal to or exceed the minimum reserve requirement set by the governing body. (Moffatt, 2010)

6.3

Say for instance a bank has R20 Billion worth of customer deposits and R2 Billion in its reserves, to calculate the reserve ratio the following formula must be used:

Value of Reserves Value of Deposits

X 100

Hence;

R2 Billion R20 Billion

X 100

= 10%

6.4

These term refer to different types of money that contribute to the total money in circulation

M1 refers to all conventional methods of measuring money; Notes, coins, demand deposits in the private sector in financial institutions.

M2 is defined as M1 plus all other short and medium term deposits in the private sector in financial institutions.

M3 is M2 plus all long term deposits in the private sector in financial institutions. (Mynheardt, 2011)

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Bibliography
IMM GSM. (2010). Good Answer Booklet Macroeconmics (MAC). IMM GSM. Moffatt, M. (2010 23-7). A Beginner's Guide to the Reserve Ratio. Retrieved 2011 15-8 from About.com: http://economics.about.com/cs/money/a/reserve_ratio.htm Mynheardt, D. H. (Writer), & GSM, I. (Director). (2011). Economics 1 [Motion Picture]. South Africa. Todaro, M. (1977). Economics for a Developing World: An Introduction to Principles, Problems and Policies for Development. USA: Longman. tutor2u. (2011 1-8). consumption theory. Retrieved 2011 15-8 from tutor2u: http://tutor2u.net/economics/content/topics/consumption/consumption_theory.h tm