Grade 11 · CAPS

Grade 11 Money and Banking

Economics practice questions and a worked example

Money's functions, how banks create credit, and the role of the South African Reserve Bank in protecting the value of the currency are all part of Grade 11's Money and Banking topic. The real questions here are built around an actual news extract on a SARB interest-rate hike, asking learners to identify monetary policy instruments and explain the central bank's own stated aim.

Worked example

3.1.2 How will the South African Reserve Bank intervene when a bank experiences bank failure?

Answer & explanation

The Reserve Bank will take curatorship of the bank and may provide financing to help it meet its obligations.
When a bank in South Africa faces failure, the South African Reserve Bank (SARB) can step in to stabilize the situation. 1. **Curatorship**: The SARB may place the bank under curatorship. This means appointing a curator to take control of the bank's operations to manage its affairs and protect the interests of depositors and the financial system. 2. **Financial Support**: The SARB might also provide financial assistance to the bank. This can help the bank meet its obligations and continue operations, ensuring stability in the banking sector. These actions help prevent panic and maintain confidence in the financial system.

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Money and Banking

Question 1 of 3

1.3.5 The minimum amount of deposits that must be kept by banks to meet short-term and emergency funding needs

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More practice questions

Explore additional Grade 11 Money and Banking questions.

  • 2
    SA RESERVE BANK HIKES RATES AGAIN -- MAY 2023 The Reserve Bank has raised interest rates by another 50 basis points. This puts the repo rate at 8,25 percent and the prime lending rate at 11,75 percent. High inflation, with persistent power cuts, was a key factor. The Reserve Bank governor ensured us that South Africans will benefit later from the SARB's tough stance. (Adapted from enca.com. Accessed on 31 March 2023.) 3.3.3 Briefly describe the term prime lending rate.
  • 3
    SA RESERVE BANK HIKES RATES AGAIN -- MAY 2023 The Reserve Bank has raised interest rates by another 50 basis points. This puts the repo rate at 8,25 percent and the prime lending rate at 11,75 percent. High inflation, with persistent power cuts, was a key factor. The Reserve Bank governor ensured us that South Africans will benefit later from the SARB's tough stance. (Adapted from enca.com. Accessed on 31 March 2023.) 3.3.4 Explain the aim of the SARB’s monetary policy.
  • 4
    SA RESERVE BANK HIKES RATES AGAIN -- MAY 2023 The Reserve Bank has raised interest rates by another 50 basis points. This puts the repo rate at 8,25 percent and the prime lending rate at 11,75 percent. High inflation, with persistent power cuts, was a key factor. The Reserve Bank governor ensured us that South Africans will benefit later from the SARB's tough stance. (Adapted from enca.com. Accessed on 31 March 2023.) 3.3.5 How is the South African economy negatively affected by the continuous hike in interest rates?
  • 5
    3.4 Briefly discuss foreign exchange risks and poor credit evaluation as reasons for bank failures.

Common mistakes

  • Confusing the prime lending rate (the rate banks charge their best customers) with the repo rate (the rate the Reserve Bank charges commercial banks) -- a change in the repo rate is what typically drives a change in the prime rate, not the other way round.

More Grade 11 Economics topics

Aligned to CAPS Grade 11 Economics — Money and Banking. Curriculum source: CAPS for the FET Phase, Department of Basic Education.

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