Answer to Question #93675 in Macroeconomics for Blossom

Question

The core elements of the Growth Employment and Redistribution (GEAR) strategy of the South African government in 1996, under the leadership of the then finance minister Trevor Manuel were amongst other things: • budget reform to strengthen the redistributive thrust of expenditure • monetary policy to prevent a resurgence of inflation • a reduction in tariffs to contain input prices and facilitate industrial restructuring, compensating partially for the exchange rate depreciation.

With each tool in 1.2, provide a detailed explanation on how it can be measured.

Answer 1

 • budget reform to strengthen the redistributive thrust of expenditure; redistribution of government spending leads to more efficient use of them, which stimulates production and increases the level of employment. It can be measured:the ratio of the employed population of a certain age group to the total population. OR calculate the share of the poor, it is calculated by dividing the population living below the official minimum subsistence level for the entire population

• monetary policy to prevent a resurgence of inflation; rate of inflation - can be measure as the value of the consumer basket of goods in current prices, divided by the value in prices of the previous period.

• a reduction in tariffs to contain input prices and facilitate industrial restructuring, compensating partially for the exchange rate depreciation. The aim of this measure is to support production at an effective level. Production indicator is GDP.  It Can be measured as GDP = C + I + G + (X − M).