ECO332: The Story of Macroeconomics - Economics Assignment Help

Assignment Task

Questions: Take note of the following report by the mail & guardian and answer the question that follows

We are currently in an upward trending repo rate cycle as the South African Reserve Bank (SARB) is trying to contain rising cost-push inflation with monetary policy. This policy is implemented even though the economy is under recessionary pressure. The governor of the bank hit the panic button by increasing the repo rate by 0.75% at the 21 July monetary policy committee meeting to an upward trending repo rate of 5.5%.

This increase is the highest single increase since September 2002. The interest rate increases 20 years ago contributed to pushing the country into a recession. The GDP growth rate for quarter two was released on 6 September, indicating a negative growth rate of -0.7%. The 2022 growth rate is predicted at between 1.8% to 2.0%. The SARB has also already indicated that low economic growth of 1.3% and 1.4% in 2023 and 2024, respectively, will continue.

Despite the negative growth rate for the second quarter of 2022, pointing to a struggling economy, more interest rate increases are expected this year. The next increase will most probably be announced on 22 September of between 0.25% and 0.5%. This upwards cycle is only expected to turn in 2023, with inflation only expected to reach the 4.5% mid-point of the SARB inflation target by then, according to the SARB.

1. Considering the decline or negative growth in SA, refer to the Macroeconomic theories/ models discussed in chapter 25, choose one and discuss how you believe it can be used to ensure the forecasted economic output in South Africa for 2023 and 2024.
2. Further choose another Economic theory/Model discussed in chapter 25 that you believe would not be appropriate for the South African Economy and discuss why.

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