Non-profit SA Water Warriors delivers relief supplies to drought-hit farmers

In 2019, the Northern Cape region clocked its lowest average recorded rainfall since 1933. That came after an already devastating drought, now in its eighth year. In this part of the world, wetter and drier periods usually alternate in cycles of seven to nine years, but the current drought was preceded by just two years of normal rainfall, says Willem Symington, head of disaster management at industry body Agri SA. By the time this drought started, pasture and water reserves were already below their usual levels. The impact has been devastating for farmers across the province, where about 70% of land is used for livestock. For generations, farmers here have kept mostly cattle and sheep, though some breed game too. Symington, also vice-president of non-profit farmers’ group Agri Northern Cape, says red meat production in the province has plummeted by 50% since the drought began, causing devastating losses for farmers and knock-on effects in local communities. But their plight has rallied South Africans countrywide to help, with donations of groceries, water, animal feed and even toiletries being driven in or sent by post. – Petro Kotze Source: Business Day (2020)

Question 6 [18]

6.1. Use the AD-AS model to illustrate and explain the impact of the devastating drought on the general price level and the level of real production and income in the economy. (4)

6.2. The AD-AS model in Question 6.1 illustrates a certain type of inflation known as cost-push inflation. Do you agree with this statement? Substantiate your answer. (2)

6.3. Provide a detailed explanation of the Phillips curve. Your explanation should include the definition of the Phillips curve and what is meant by a “trade-off” between inflation and unemployment. (3)

6.4. Using the Phillips curve, illustrate and explain how cost-push inflation impacts the relationship between the unemployment and inflation rates. (5)

6.5. Which phenomenon is illustrated in Question 6.1? Explain your answer with reference to the unemployment and inflation rates. (2)

6.6. “Although high inflation hurts an economy, deflation, or falling prices, is not desirable either.” Do you agree with this statement? Substantiate your answer. (2)

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