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ECS3701: MONETARY ECONOMICS
May/June Examination 2026 — Revision Guide
Based on May/June 2025 & May/June 2024 Past Papers
⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆
Economics — University of South Africa (UNISA)
Exam Revision Guide
ECS3701
Module Code:
Monetary Economics
Module Name:
May/June 2023 -May/June 2025
Papers Covered:
2026
Year:
100 marks (2 hours)
Total Marks:
5 compulsory questions
Questions:
Use this guide to revise thoroughly. Focus on understanding, not memorisation. An-
swers are calibrated to mark allocations.
Exam Revision Notes | ECS3701 | 2026
,ECS3701 | Exam Revision Monetary Economics
PART A
University Examinations: May/June 2025
ECS3701 Monetary Economics — 100 Marks — 2 Hours
Page 2 of 18 [UNISA]
,ECS3701 | Exam Revision Monetary Economics
Question 1 (2025) [25 marks]
(a) [10 marks]
Question: There have been debates about how the government of South Africa can com-
bat increasing inflation. While some economists are calling for the SARB to print more
money, others are strongly opposed to it. As a third-year economics student, advise the
government of South Africa on whether to print more money or not. Highlight 3 implica-
tions and 3 advantages of the suggestion given.
Answer: Recommendation: Against printing more money (contractionary
advice).
A responsible advisor would caution against unrestricted money printing because, while
it offers short-term stimulation, the long-term consequences undermine macroeconomic
stability.
3 Key Implications of Printing More Money:
• Inflation acceleration: When the money supply grows faster than real output,
more money chases the same goods, driving prices up. South Africa’s inflation was
already above the SARB’s 3–6% target band, so further money creation would
worsen the situation.
• Currency depreciation: An excess money supply reduces the rand’s purchasing
power relative to foreign currencies. This raises import costs, further stoking infla-
tion (imported inflation) and eroding household real income.
• Loss of credibility and investor confidence: Monetising government debt sig-
nals fiscal irresponsibility. International investors may downgrade South Africa’s
sovereign credit rating, increasing borrowing costs and capital flight from local bond
and equity markets.
3 Advantages of Not Printing More Money (i.e., maintaining monetary disci-
pline):
• Preserves price stability: Keeping money supply growth aligned with output
growth maintains purchasing power, which protects consumers — especially lower-
income households who are most vulnerable to price increases.
• Maintains SARB’s inflation-targeting credibility: South Africa adopted infla-
Page 3 of 18 [UNISA]
, ECS3701 | Exam Revision Monetary Economics
tion targeting in 2000. Adherence to this framework anchors inflation expectations,
reducing the real cost of keeping inflation low.
• Supports sustainable economic growth: Price stability creates a favourable
investment climate. When businesses can predict future costs and revenues reliably,
they invest more, creating jobs and boosting GDP in a sustainable way.
[EXAM TIP]
Always link your argument to SA-specific context — mention the SARB’s 3–6%
target band, the rand, and inflation targeting. Examiners reward applied knowl-
edge.
(b) [9 marks]
Question: Given the global increase in inflation resulting from the Russian invasion of
Ukraine, name and explain the three tools that the South African Reserve Bank (SARB)
can use to decrease inflation.
Answer: The SARB, as South Africa’s central bank, has three conventional monetary
policy instruments to control inflation:
1. Open Market Operations (OMOs) — most commonly used:
The SARB buys or sells government securities (bonds) in the open market. To de-
crease inflation, the SARB sells bonds to commercial banks. This withdraws excess
reserves from the banking system, reducing the money supply. With less money
in circulation, spending falls and inflation pressure eases. OMOs are the SARB’s
primary day-to-day tool.
2. Repo Rate (Repurchase Rate):
The repo rate is the rate at which the SARB lends money to commercial banks.
Raising the repo rate increases the cost of borrowing for banks, which pass this on to
consumers and businesses through higher lending rates. Higher borrowing costs re-
duce household consumption and business investment, contracting aggregate demand
and lowering inflationary pressure. The SARB’s Monetary Policy Committee (MPC)
meets every two months to review the repo rate.
Page 4 of 18 [UNISA]
Ê ⋆
]]
ECS3701: MONETARY ECONOMICS
May/June Examination 2026 — Revision Guide
Based on May/June 2025 & May/June 2024 Past Papers
⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆
Economics — University of South Africa (UNISA)
Exam Revision Guide
ECS3701
Module Code:
Monetary Economics
Module Name:
May/June 2023 -May/June 2025
Papers Covered:
2026
Year:
100 marks (2 hours)
Total Marks:
5 compulsory questions
Questions:
Use this guide to revise thoroughly. Focus on understanding, not memorisation. An-
swers are calibrated to mark allocations.
Exam Revision Notes | ECS3701 | 2026
,ECS3701 | Exam Revision Monetary Economics
PART A
University Examinations: May/June 2025
ECS3701 Monetary Economics — 100 Marks — 2 Hours
Page 2 of 18 [UNISA]
,ECS3701 | Exam Revision Monetary Economics
Question 1 (2025) [25 marks]
(a) [10 marks]
Question: There have been debates about how the government of South Africa can com-
bat increasing inflation. While some economists are calling for the SARB to print more
money, others are strongly opposed to it. As a third-year economics student, advise the
government of South Africa on whether to print more money or not. Highlight 3 implica-
tions and 3 advantages of the suggestion given.
Answer: Recommendation: Against printing more money (contractionary
advice).
A responsible advisor would caution against unrestricted money printing because, while
it offers short-term stimulation, the long-term consequences undermine macroeconomic
stability.
3 Key Implications of Printing More Money:
• Inflation acceleration: When the money supply grows faster than real output,
more money chases the same goods, driving prices up. South Africa’s inflation was
already above the SARB’s 3–6% target band, so further money creation would
worsen the situation.
• Currency depreciation: An excess money supply reduces the rand’s purchasing
power relative to foreign currencies. This raises import costs, further stoking infla-
tion (imported inflation) and eroding household real income.
• Loss of credibility and investor confidence: Monetising government debt sig-
nals fiscal irresponsibility. International investors may downgrade South Africa’s
sovereign credit rating, increasing borrowing costs and capital flight from local bond
and equity markets.
3 Advantages of Not Printing More Money (i.e., maintaining monetary disci-
pline):
• Preserves price stability: Keeping money supply growth aligned with output
growth maintains purchasing power, which protects consumers — especially lower-
income households who are most vulnerable to price increases.
• Maintains SARB’s inflation-targeting credibility: South Africa adopted infla-
Page 3 of 18 [UNISA]
, ECS3701 | Exam Revision Monetary Economics
tion targeting in 2000. Adherence to this framework anchors inflation expectations,
reducing the real cost of keeping inflation low.
• Supports sustainable economic growth: Price stability creates a favourable
investment climate. When businesses can predict future costs and revenues reliably,
they invest more, creating jobs and boosting GDP in a sustainable way.
[EXAM TIP]
Always link your argument to SA-specific context — mention the SARB’s 3–6%
target band, the rand, and inflation targeting. Examiners reward applied knowl-
edge.
(b) [9 marks]
Question: Given the global increase in inflation resulting from the Russian invasion of
Ukraine, name and explain the three tools that the South African Reserve Bank (SARB)
can use to decrease inflation.
Answer: The SARB, as South Africa’s central bank, has three conventional monetary
policy instruments to control inflation:
1. Open Market Operations (OMOs) — most commonly used:
The SARB buys or sells government securities (bonds) in the open market. To de-
crease inflation, the SARB sells bonds to commercial banks. This withdraws excess
reserves from the banking system, reducing the money supply. With less money
in circulation, spending falls and inflation pressure eases. OMOs are the SARB’s
primary day-to-day tool.
2. Repo Rate (Repurchase Rate):
The repo rate is the rate at which the SARB lends money to commercial banks.
Raising the repo rate increases the cost of borrowing for banks, which pass this on to
consumers and businesses through higher lending rates. Higher borrowing costs re-
duce household consumption and business investment, contracting aggregate demand
and lowering inflationary pressure. The SARB’s Monetary Policy Committee (MPC)
meets every two months to review the repo rate.
Page 4 of 18 [UNISA]
