ECS3703 Assignment 2 (COMPLETE ANSWERS) Semester 2 2024 - DUE August 2024 ; 100% TRUSTED Complete, trusted solutions and explanations. For assistance, Whats-App 0.6.7-1.7.1-1.7.3.9. Ensure your success with us .. Question 1
Assume that South Africa trades with the rest of the world and has a defi...
To correct the trade balance deficit, South Africa could devalue or depreciate its currency, the
South African rand (ZAR). This means that the ZAR would lose value relative to foreign
currencies. For example, if the exchange rate moves from
R=1ZAR/EUR = 1 to R=1.20ZAR/EUR = 1.20 ZAR/EUR,
the rand has depreciated by 20%. This makes South African goods and services cheaper for
foreign buyers, while making foreign goods and services more expensive for South African
consumers. This change would incentivize foreign buyers to purchase more South African
products, increasing exports. Simultaneously, South African consumers would find imported
goods more expensive, leading to a reduction in imports.
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