Page 6 - FINAL CFA SLIDES DECEMBER 2018 DAY 6
P. 6
Session Unit 5:
18. Monetary and Fiscal Policy
LOS 18.e: Describe the Fisher effect, p.110
Nominal interest rate = sum of the real interest rate and expected inflation.
LOS 18.f: Describe roles and objectives of central banks, p.110
SARB Primary objective:
1. Sole supplier of currency (legal tender vs fiat money)
2. Banker to the government and other banks Control inflation/promote price stability
3. Regulator and supervisor of payments system To reduce:
4. Lender of last resort • Menu (business) costs (i.e. constant change of
5. Holder of gold and foreign exchange reserves prices); and
6. Conductor of monetary policy • Shoe leather (individual) costs (i.e. frequent
bank trips to minimize cash holdings).
