On June 11, 2010, the FIFA Soccer World Cup started in Ellis Park Stadium, Johannesburg, South Africa with the opening match played between host country South Africa and Mexico. This was the first soccer World Cup event ever hosted by an African nation, and to ensure its success, the South African government spent billions of rands (the local currency) on sports-related infrastructure, such as stadiums.
Use the Three-Sector Model to explain the effects this increased government spending had on the South African economy. Use both graphical analysis and brief explanations to support your answer. Assume that South Africa's: international capital markets were highly mobile; (2) economy was in the intermediate range of AS; (3) real loan able funds market had the normal supply and demand shapes and elasticities; (4) national government had a budget deficit; and (5) exchange rate was fixed against the U.S. dollar.