Question

Considering five microeconomics objectives. Develop the recovery plan for the South Africa economy. What is that the government can do to boost the economy in relation to employment, inflation, economics growth, balance of payment and income distribution.

Answer 1

Employment- Employment indicates the healthy economy. Employment can be increased by skilling or re-skilling people, which will increase in production output and it will lead to inflation.

Inflation- Inflation helps to increase production which later helps to increase spending and increase in aggregate demand. When there is demand and consumers are spending, it indicates a healthy economy. Low rate of inflation increases the chances of price stability- helps to make convenient fiscal or monetary policy.

To increase the economic growth need to reduce the cost the cost of borrowing and need to increase investment.

             Need to increase nominal wage above inflation then consumers will have more disposables to spend.

Balanced of Payment- Improve in trade performance in short-run and long-run.

                 Reduction on government spending, higher interest rate can reduce import and can decrease the demand.

Moreover, it will encourage domestic firms to produce more and there will be economic growth. In long run led to a healthy economy.

Income distribution have a long run effect on the level of GDP per capita, as it has a direct role with the purchasing power of the consumer. When the income of the people increase equally, people will spend more and economy will grow up.