SECTION E

The fiscal framework underlines government's commitment to narrowing the budget deficit and stabilising debt. In the context of weak economic growth and the need to address the large risk posed by Eskom, the 2019 Budget proposes large-scale expenditure reprioritisation and tax measures that narrow the deficit from 4.5 per cent of GDP in 2019/20 to 4 per cent by 2021/22. Gross national debt is projected to stabilise at 60.2 per cent of GDP in 2023/24. - National Treasury (2019)

Question 7 [10]

In essay format, provide a detailed discussion of fiscal policy by explaining how policymakers can stimulate or contract the economy.

Your discussion should incorporate the following:

Introduction

Fiscal policy

o Definition

o The budget

o Expansionary fiscal policy

o Contractionary fiscal policy

Conclusion