Recommended length: 4 000 words or roughly 7 typed pages. Write an essay with the title "Inflation and inflation targeting in South Africa", in which careful attention is given to at least the following aspects: The nature of inflation as a symptom of conflict over income distribution. (15/100) Indicate the reasons why inflation cannot come down, unless economic sectors (labour, business, government and the foreign sector) collectively accept that their real income cannot grow ahead of real productivity gains. The role of money in the inflationary process. (5/100) The cost of inflation. (10/100) The mechanism through which an increase in the central bank's policy interest rate can put downward pressure on inflation. (10/100) The meaning of inflation targeting as a monetary policy framework and how it is applied in South Africa. (10/100) The importance of inflation expectations in determining the inflation rate and the role of anchoring inflation expectations in inflation targeting. (10/100) The key challenges that emerging market economies, such as South Africa, face when adopting an inflation targeting framework. (15/100) The pros and cons of nominal income targeting as an alternative to inflation targeting and the empirical evidence for an inflation-unemployment trade-off in South Africa. (25/100)

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