Essay
ECS1601 ASSIGNEMNT 7 2024
- Course
- Economics IB (ECS1601)
- Institution
- University Of South Africa (Unisa)
ECS1601 ASSIGNEMNT 7 2024
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DISCLAIMER: THIS IS NOT AN OFFICIAL GUIDE FROM UNISA. THE REPORT ISNOT PREPARED NOR APPROVED BY UNISA, RATHER REPRESENTS A
POSSIBLE SOLUTION TO THE TASK CONSISTENT WITH THEORY OF
RESEARCH METHODOLOGY (HMEMS80). THIS ASSIGNMENT IS INTENDED TO
ASSIST STUDENTS IN GETTING STARTED WITH THEIR ASSIGNMENT, AND IN
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, Question 1 (100 words)
According to Barro (1997) purchasing Proudly South African products supports the
circular flow of income, keeping money within the local economy. When households
buy local products, they stimulate demand for goods and services, which supports
South African firms and jobs, generating income that circulates back through spending
on further goods, taxes, and government services. This fosters economic growth and
reduces dependence on foreign imports (Blanchard & Fischer, 1989). The opportunity
cost of buying international brands includes the lost benefits of supporting local
industry, reduced local job creation, and a possible increase in the trade deficit, as
more funds leave the country rather than fueling domestic economic activity (Mohr,
2004).
Question 2 (10 marks)
2.1
In 2023, as Mauritius’ economic growth moderates to around 5%, the demand for
money may also decrease compared to the peak tourism rebound. According to
Snowdon, Vane and Wynarczyk (1994) slowdown in GDP growth typically signals
lower overall spending and investment, leading to a reduced demand for money in the
economy. In a money market diagram, this effect can be represented by a leftward
shift in the demand curve for money, leading to a potential decrease in interest rates
as the supply of money outpaces demand (Blanchard & Fischer, 1989). This
adjustment helps stabilize economic activity as spending and investment align with the
moderated growth rate.
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