Answer Happy

In April 2022, days of heavy rain across KwaZulu-Natal led to deadly floods. Thousands of homes were damaged or destroyed, while critical infrastructure, including major roads, transportation, communication, and electrical systems, were also impacted a) Use the Real Business Cycle model to illustrate and explain the likely effects that the floods would have on South Africa's real output, employment, wage rate, investment, consumption and price level if we assume that the floods destroyed a significant portion of the province's capital stock and thus had an adverse effect on total factor productivity. (Relevant fully labelled diagrams must form part of your answer). [20] b) According to the Real Business Cycle model how, if at all, should the government respond to the impact the floods had on the country's capital stock? (5)