Question 7 [12] Read the following statement in order to answer the question that follow:

Growth prospects for SA's trading partners, such as Europe, are slowly picking up momentum and improved Eurozone growth could benefit SA's economy.

Use the AS-AD model to explain and illustrate the short-run and long-run impact followed by supply adjustment on the aggregate price level and the level of national income of South Africa due to improved economic growth in the Eurozone. In your answer, use the Keynesian transmission mechanism's chain reactions (PE, SE, NE) to show the improved economic growth followed by supply adjustment in South Africa's income levels (Y), the aggregate price level (P) and interest rate (r).