QUESTION 2
Assume that the central bank has successfully maintained price stability for the past decade, with inflation rates averaging around 2% annually. Despite fluctuations in global oil prices and occasional supply shocks, the country has managed to keep its overall price level relatively constant. Based on this scenario, which of the following statements is most likely to be true regarding the impact of price stability on the economy of this country?
A. Businesses in this country frequently adjust their prices in response to changes in demand and supply.
B. Consumers in this country experience unpredictable and significant fluctuations in the prices of essential goods and services.
C. This country faces persistent periods of high inflation and deflation.
D. The environment in this country fosters investor confidence, encourages long-term planning, and supports sustainable economic growth.
QUESTION 3
If South Africa is currently trading at R18/$, a trade balance deficit of R12 billion could lead to:
A. A change in the value of the currency to R16/$
B. A change in the value of the currency to R20/$
C. A change in the rate of unemployment from 25% to 22%
D. An increase in foreign direct investment