Question

Consider any recent macroeconomic policy change in your country. Indicate whether this policy change is a demand-side measure, a supply-side measure or a combination of both. Now use the AD-AS framework to predict and critically analyse the macroeconomic impact of this policy change in South Africa.

Explicitly mention whether the policy measure shifts the AD curve, the AS curve or both curves and in which direction. Also, mention how this policy change has affected  

- banking entity

-Construction entity

-manufacturing entity

- agriculture entity

- education entity
[Hint: Analyse the effect of the policy change on the following macroeconomic variables: GDP (economic growth), P (inflation), L (employment), i (the interest rate) and W (the wage rate).]

Answer 1

HERE IN THE SCREENING OF THE MACROECONOMIC MODEL WE HAVE GONE THROUGH THE STAGES AT WHICH THE AGGREGATE DEMAND AND SUPPLY CURVES IS SHIFTED, HERE THE DEMAND CURVE IS SHIFTED RIGHT SIDE BECAUSE OF DECREASE IN INTEREST RATE,INCREASE IN WAGE RATES ARE THE MAIN REASONS THAT MAY CAUSE THE CHANGES IN THE AGGREGATE DEMAND CURVE. ON OTHER SIDE WE HAVE CHANGES IN THE AGGREGATE SUPPLY CURVE THIS IS CAUSED BY GDP RISING, EMPLOYMENT INCREASES AND  INFLATION RATES DECREASING . THE MEASURES THAT ARE CONSIDERED BY THE SOUTH AFRICAN ECONOMY ARE HAVING AN HUGE IMPACT ON THE POSITIVE SIDE OF EXTERNALITIES AND HELPS THE ECONOMY IN COMPETING MORE WITH THE GLOBAL ECONOMY, AS THE GDP LEVEL RISES THE LEVEL PRODUCTION ALSO INCREASED AND ALSO THE RATE OF INFLATION DECREASING AND EMPLOYMENT RATE INCREASED WOULD HAVE GREAT IMPACT ON THE DEVELOPING ECONOMY.

BANKING SECTOR WOULD HAVE A GREAT IMPACT IN THIS CHANGES CAUSED IN THE ECONOMY BY MACROECONOMIC POLICY AS THE GDP LEVEL, INTEREST RATE LEVEL ARE THE MAJOR IMPACTS FOR INCREASING THE OPERATIONS OF THE ECONOMY.

CONSTRUCTION ENTITY HAD AN IMPACT ON THE WAGE RATE ON THE POSITIVE RESULT AS THE BURDEN MIGHT RISE IN THE INITIAL STAGES OF THE BUSINESS BUT THE LEVEL OF PRODUCTION OF OUTPUT WILL HAVE MUCH IMPACT

MANUFACTURING INDUSTRY HAS AN IMPACT BY THE LEVEL OF GDP AS IT IS THE HAS THE EFFICIENT AND MAIN CONTRIBUTION IN THE ECONOMY BECAUSE THE PRODUCTION PROCESS IS DONE BY MANUFACTURING INDUSTRY AND GDP IS CALCULATED USING THE OUTPUT PRODUCTION.

AGRICULTURE IS ACCOUNTING THERE ECONOMY WITH SUPPLEMENTS SO HERE THE EMPLOYMENT IS HAVING THERE ROLE FOR THE DEVELOPMENT OF ECONOMY

EDUCATION IS IMPACTED POSITIVELY BECAUSE OF THE DECREASE IN THE INTEREST RATES OF LOAN LENDING AND HELPS THE PEOPLE TO TAKE LOANS AND INCREASE MONEY CIRCULATION.