Tea Tourism Shows Huge Potential as Engine of Growth for South African Economy

EconEye Admin

4 years ago

Tea tourism is growing as foreign tea enthusiasts explore South Africa’s tea-producing regions. Once dilapidated tea planters’ bungalows are being turned into boutique hotels and lodges. Tea tourism is a new engine of growth, which can create jobs and alleviate poverty.—zawya.com

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

Why is tea tourism a “new engine of growth”?

Tea tourism is a “new engine of growth” because _______________.

a) the increase in exports is an increase in induced expenditure, which increases jobs, which increases induced expenditure by even more

b) it alleviates poverty

c) the increase in exports increases aggregate expenditure, which increases jobs, which increases aggregate expenditure by even more

d) expenditure on the conversion of dilapidated tea planters’ bungalows increases real GDP

Wrong! - Expenditure on tea tourism is an export of South Africa. Is expenditure on exports an induced expenditure or an autonomous expenditure? How does a change in this type of expenditure induce growth?

Correct! - Expenditure on tea tourism is an export of South Africa. Growing tea tourism increases exports, which increases aggregate expenditure and real GDP. As real GDP increases, employment in South Africa increases and the newly employed spend their incomes. Induced expenditure increases so aggregate expenditure increases by even more. This cycle of growth that continues through several rounds is the “new engine of growth”.

When would a “tea tourism” multiplier have the greatest effect on South Africa’s economy?

The “tea tourism” multiplier effect on South Africa’s economy is greatest if the percentage of disposable income that _______________.

a) South Africans spend on domestically-produced goods increases

b) South Africans save increases

c) the South African government takes in income taxes increases

d) South Africans spend on imported goods increases

Wrong! - How does the multiplier effect of tea tourism change when the percentage of disposable income saved, or paid as income taxes, or spent on imports changes? What decision by South Africans increases this multiplier effect?

Good Job! - As the percentage of disposable income spent on domestically-produced goods increases, the marginal propensity to consume increases, which increases the multiplier effect of tea tourism.

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