Term: ECONOMY

The economy of a country is the aggregate of all economic activity within that country. It is measured in various ways to determine whether it is growing or shrinking. The most commonly used measure is Gross Domestic Product or GDP. This measures the total of all productivity within the economy. Obviously, the real growth in the economy can only be established after allowing for inflation. The Reserve Bank, through its Monetary Policy Committee (MPC), constantly monitors and adjusts the level of interest rates so as to optimize the growth rate and the inflation rate. Very productive and efficient economies tend to have strong currencies in relation to the currencies of other countries.  The South African economy is primarily an exporter of raw materials in various forms – thus its strength is largely dependent on the other countries of the world that buy those raw materials. The challenge for our economy is to “beneficiate” our raw materials locally and then export more finished goods. Right now we mostly export raw materials and import finished goods.

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