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ECS3709 Assignment 3 Semester 2 2024

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ECS3709 Assignment 3 Semester 2 2024 ;100 % TRUSTED workings, Expert Solved, Explanations and Solutions. For assistance call or W.h.a.t.s.a.p.p us on ...(.+.2.5.4.7.7.9.5.4.0.1.3.2)........... Read the South African Reserve Bank Working Paper, “Identifying Supply and Demand Shocks in the South African Economy, 1960–2020’’, which is written by Johannes W. Fedderke. The link to this Working Paper is: After reading the Working Paper, attempt the following questions: QUESTION 1 [Marks: 15] According to Fedderke (2021), “supply shocks have declined in magnitude and amplitude since the 1990s, while demand shocks remain relatively prominent.” Using the AD-AS model, illustrate graphically and explain how the temporary demand shocks, experienced during the COVID-19 outbreak, affected the level of prices, output, and employment in South Africa. Assume that there is no government intervention and no monetary policy response to restore the economy to its initial equilibrium. QUESTION 2 [Marks: 5] ased on the Working Paper by Fedderke (2021), discuss any five limitations of the Blanchard and Quah (BQ) identification strategy, which affect its theoretical coherence in analysing the demand and supply shocks in South Africa.

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ECS3709
ASSIGNMENT 3 SEMESTER 2 2024
UNIQUE NO.
DUE DATE: SEPTEMBER 2024

, ECS3709

Assignment 3 Semester 2 2024

Unique Number:

Due Date: September 2024

Applied Macroeconomics

Question 1

1. The AD-AS Model Overview

The AD-AS model is used to analyze macroeconomic conditions and how they are
affected by changes in aggregate demand (AD) and aggregate supply (AS). In this
context:

 Aggregate Demand (AD) represents the total demand for goods and services in
an economy.
 Aggregate Supply (AS) represents the total output of goods and services
produced by the economy at different price levels.

2. Temporary Demand Shock During COVID-19

The COVID-19 outbreak caused a sudden and significant reduction in demand due to
lockdowns, restrictions on businesses, and reduced consumer and investment
spending. This situation represents a negative demand shock. Since we assume no
government intervention or monetary policy response, the economy will have to adjust
naturally to the demand shock.

3. Graphical Illustration: AD-AS Model

 The initial equilibrium is at the intersection of the AD curve and the short-run
aggregate supply (SRAS) curve, where the economy is producing at the full-
employment output level Y0Y_0Y0 and the price level is P0P_0P0.
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Christian A. Conrad Applied Macroeconomics
Publisher: 2022 ISBN: 9783658393151 Edition: Unknown

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