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ECS3703 Assignment 2 (COMPLETE ANSWERS) Semester 2 2024 - DUE August 2024 ; 100% TRUSTED Complete, trusted solutions and explanations $2.50
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ECS3703 Assignment 2 (COMPLETE ANSWERS) Semester 2 2024 - DUE August 2024 ; 100% TRUSTED Complete, trusted solutions and explanations

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ECS3703 Assignment 2 (COMPLETE ANSWERS) Semester 2 2024 - DUE August 2024 ; 100% TRUSTED Complete, trusted solutions and explanations

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  • July 29, 2024
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, ECS3703 Assignment 2 (COMPLETE ANSWERS) Semester 2
2024 - DUE August 2024 ; 100% TRUSTED Complete, trusted
solutions and explanations.
Question 1 Assume that South Africa trades with the rest of the
world and has a deficit in its trade balance. With the aid of a
diagram, explain how South Africa would use exchange rates to
correct the
deficit……………………………………………………….[25
marks]

To address a trade deficit using exchange rates, South Africa can
use currency devaluation or depreciation strategies. Here's a
detailed explanation along with a diagram illustrating the process:
Explanation:
1. Understanding Trade Balance:
• A trade deficit occurs when a country's imports exceed its
exports.
• South Africa's trade deficit indicates that it spends more on
foreign goods and services than it earns from its exports.
2. Exchange Rates and Trade Balance:
• Exchange rates influence the prices of goods and services
traded internationally.
• By manipulating exchange rates, South Africa can affect the
relative prices of its exports and imports.
3. Currency Devaluation/Depreciation:

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