Mr Lincoln

Table of Contents

1. INTRODUCTION 4

2. ECONOMIC GROWTH 6

2.1. Definition of Economic Growth 6

2.2. Sources of Economic Growth 7

2.2.1. Interrelationships 8

2.2.2. Monetary and Fiscal Policies in driving economic growth in SA 8

3. FULL EMPLOYMENT 10

3.1. Current situation 10

3.2. Economic interpretation of unemployment 10

3.3. Achieving full employment 11

4. BALANCE OF PAYMENT STABILITY 13

4.1. Exchange rate 13

4.2. Global pricing 14

4.3. Appreciation/Depreciation 15

4.4. Foreign Exchange Markets 15

5. PRICE STABILITY 16

6. EQUITABLE OR SOCIALLY ACCEPTABLE INCOME DISTRIBUTION 17

6.1. Job creation 18

6.2. Redistributive fiscal policy 18

7. MONETARY POLICY AND THE CONTROL OF MONEY IN SOUTH AFRICA 19

8. CONCLUSION 21

9. REFERENCES 22

10. APPENDIX 24

1. Introduction

South Africa (SA) has undergone momentous political and socio-economic transformations during the past decade. This entailed a multi-faceted, complex and time-consuming process that had to be initiated and pursued while at the same time the state day-to-day operations had to continue. Since 1994, SA’s democratic government has shown an unwavering commitment to the modernisation of the country’s economic policy. All components of macroeconomic policy (i.e. labour, trade, fiscal and monetary policies) have undergone fundamental reforms. In general, macroeconomic policy management has played a critical role in creating a credible and sustainable platform for growth and development. Structural changes to fiscal and monetary policies have played the lead role in the process of modernization and dynamic harmonization of economic governance in the country. (http://www.aprm.org.za/docs/APROct05.pdf )

“Macroeconomics is the study of aggregate economic behaviour of the economy as a whole.” Schiller (2008, p.235). Schiller defines the business cycle as “alternating periods of economic growth and contraction.” In order to stabilise business cycles, the monetary and fiscal policies must be...