South Africa Economic Outlook: Electricity Woes Could Impact Growth

EconEye Admin

4 years ago

South Africa’s growth in 2022 Q2 depends on the severity of electricity outages, the effects of flood damage, and weakening consumer confidence. The price level is rising.—howwemadeitinafrica.com

Answer the following questions to check your understanding of the story.

How do the events given in the news clip influence South Africa’s aggregate demand and short-run aggregate supply?

______________ short-run aggregate supply and ______________ aggregate demand.

a) Flood damage and weakening consumer confidence that decrease consumption expenditure decrease; electricity outages decrease

b) Electricity outages decrease; flood damage and weakening consumer confidence that decreases consumption expenditure decrease

c) Electricity outages and flood damage decrease; weakening consumer confidence that decreases consumption expenditure and electricity outages decrease

d) Weakening consumer confidence that decreases consumption expenditure decreases; electricity outages and flood damage increase;

Wrong! - Which of the events influence production capabilities of firms and change short-run aggregate supply? What are the components of aggregate demand? Which of the events decrease aggregate demand?

Good Job! - Electricity outages and flood damage hamper the production capabilities of firms and decrease short-run aggregate supply. Consumption expenditure is a component of aggregate demand. Weakening consumer confidence decreases consumption expenditure, and electricity outages that decrease consumption of heating, cooling, and cooking also decrease consumption expenditure. A decrease in consumption expenditure decreases aggregate demand.

Why is the price level rising?

The price level is rising because ______________.

a) short-run aggregate supply and aggregate demand are both decreasing

b) aggregate demand is decreasing by more than short-run aggregate supply is decreasing

c) short-run aggregate supply is decreasing by more than aggregate demand is decreasing

d) consumer confidence is weakening

Wrong! - How does the price level change when aggregate demand decreases? How does the price level change when short-run aggregate supply decreases? What must happen for the price level to rise?

Correct! - The price level rises when short-run aggregate supply decreases and the price level falls when aggregate demand decreases. The price level is rising because short-run aggregate supply is decreasing by more than aggregate demand is decreasing.

Share this: