Question

How can the south African Reserve Bank use the monetary policy to stabilise the price level in the country

Answer 1

Answer:

The South African Reserve Bank can use an effective monetary policy to stabilize the price levels in the country .

Explanation:

The primary tools the Central banks have to maintain price levels are as follows:

• Interest Rates: High interest rates make borrowing difficult which reduces inflation whereas in times of deflation low interest rates make borrowing easy and stimulate economic growth.
• Money supply: The supply of money in the market is also used as a tool of monetary policy. The higher amounts of money in the market create inflationary pressures, whereas lower amounts create hurdles against growth.

The Reserve Bank of South Africa, like other Central banks, will have to be vigilant and maintain a careful balance in demand and supply of money to achieve price stability.