CHAPTER 10: MACROECONOMIC POLICY Activity 1 Figure 10.2 page 285 Consider the interest rate channel for the transmission of monetary policy. Indicate the impact of a decrease of the repo rate on the listed aggregates. Aggregate Answer Borrowing and spending. Increase Investment spending. Increase Aggregate expenditure. Increase Production. Increase Activity 2 Page 287 government stimulus package Consider the Keynesian transmission mechanism. The SARB aims at reducing the corporate and individual tax rates. Indicate the impact of this policy stand on the following aggregates. Aggregates Answer M s Unchanged M d Increase Interest rates. Increase Investment spending. Decrease Aggregate expenditure. Decrease GDP. Decrease Activity 3 Figure 10.3 page 286 Consider the Keynesian transmission mechanism. Assume that the SARB applies its open- market policy instrument in order to lower high inflation in the country. Indicate the impact of this policy stand on the following aggregates.