Name: Priyesh Kasan
Student Number: 448851
Course: Economics 1 (ECON 1000)
Topic: Essay – Semester 2 (2010) (Final Copy)
Essay Topic 2:
“During the 2006-2008 period COSATU called for changes to government fiscal policy citing “prospects for a more expansionary fiscal policy” (COSATU Secretariat Report to the Ninth National Congress, Sept 2006) and arguing that “[fiscal policy] is unduly focused on chasing macro-economic targets, such as low budget deficits” (COSATU General Secretary, Zwelinzima Vavi’s address to the AGM of NEHAWU Securities, Nov 2008).”
Answer the following:
By making reference to the compulsory readings, discuss whether you think it was advisable for the South African government to increase government spending during the 2006 and 2007 financial periods. Explain why you feel this way with reference to the information contained in the readings.
Tutor: Maite (14:15 - 15:00)
Due Date: 20 September 2010

No. Of Words: 1097
INRODUCTION:
This essay will explore the meaning of the fiscal policy, an increase in government expenditure and how it relates to inflation and the aggregate expenditure model. It will discuss whether it was advisable for the South African government to increase government spending during the 2006 and 2007 financial periods. The mains views that will be discussed will be based on how an increase in government expenditure affects the aggregate expenditure curve, what is the result of this on the GDP gap and also its effect on the inflation rate. Economic theories prove that an increase in government expenditure shifts the aggregate expenditure curve upwards which increases total aggregate expenditure and real GDP. I disagree with COSATU and think that it was not advisable to increase government expenditure during the 2007 and 2008 financial periods based on macro economic theories and facts which this essay will discuss in detail.