Answer to Question #147903 in Macroeconomics for Dlumbedlu

Question

Q.3.2
Explain, using the AD‐AS model, how the South African Government can use fiscal policy as a tool to recover from the negative effects of this COVID‐19 pandemic.

Answer 1

COVID-19 pandemic resulted to high rate of unemployment in South Africa. The main aim of fiscal policy is to improve on affected economy of the country and settle the conditions for the economy to normal. Fiscal policy enacted on South African government was to reduce government spending and lowering tax rates on it's citizens. The fiscal policy increases demand, raising output and bringing back the economy's prerecession conditions.