Fiscal Policy – HIV/Aids Programme

The South African government has recently voted against a basic income grant that was initially proposed to create jobs. The proposition entailed handing out monthly stipends to citizens in order to quell the cry of poverty. Instead, as an expansionary policy, the government has focused more on funding various areas to promote growth and at the same time aim at increasing employment. Of all ailments, Aids reigns victor over the lives of mainly the poorest half of all citizens. In effect, being unable to prevent mother-to-child transmission of HIV, jobs go unfilled, lending a rise to the poverty line and giving a deadlock to economic growth. The current budget has allowed the government to increase spending by about 6.7% next year and will hopefully continue to see further growth over the course of the next few years, targeting more support towards reaching full employment via the treatment of Aids victims.

The initiatives are long-term orders and may take several years before the full effects are seen. Consequently, there is a cynical approach to positive economic growth without increased spending. Government programs will be forced to take severe actions if the problem continues to escalate. Unemployment will progress, which will essentially necessitate higher government support in the form of financial compensation (basic income grants, as mentioned above).

This indirect fiscal policy hopes to accomplish higher employment and better economic growth. The economy currently stands in a very optimistic position and the PPC is unreachable mainly because of the social problem at hand that is costing billions of dollars every year to handle and is still untreatable. Parliament agrees that it is very opportune to increase the funding that should go to the HIV/Aids Programme. Employment should see a tremendous increase, considering that many victims afflicted are physically unable to work, leaving industries under-worked, bound for bankruptcy, and of little contribution to the GDP. Economists predict that quantum changes in the size of the work force should boost the countries economic growth back up into double digits. Obviously, this is not a goal whose results will be observable over the next year or two, however, time will certainly pose positive change. Below, an aggregate supply/aggregate demand graph demonstrates possible effects.

Price Level