Exam (elaborations)
ECS1601 ASSIGNMENT2 SEMESTER 2 2023 (DUE 7 SEPTEMBER 2023 11PM))
- Course
- Economics IB
- Institution
- University Of South Africa (Unisa)
DISTINCTION MATERIAL
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ECS1601 ASSIGNMENT 2 (TWO)SEMESTER 2 2023
DUE Thursday, 07 September
2023
ECS1601
ASSIGNMENT 2 (TWO)
SEMESTER 2
2023
,Assessment 2: Attempt review https://mymodules.dtls.unisa.ac.za/mod/quiz/review.php?attempt=84
Dashboard Calendar
Dashboard / Courses / UNISA / 2023 / Semester 1 / ECS1601-23-S1 / Online assessments / Assessment 2
Started on Friday, 1 September 2023, 8:41 AM
State Finished
Completed on Friday, 1 September 2023, 9:07 AM
Time taken 25 mins 48 secs
Marks 20.00/20.00
Grade 100.00 out of 100.00
Question 1
Correct
Mark 1.00 out of 1.00
Suppose that the price of Brent Crude oil rises, which is a critical import in South Africa. At the same time, there is an increase in the
number of American tourists coming to South Africa. What would be the impact on the US Dollar/Rand exchange rate?
a. The Rand will appreciate against the Dollar and the quantity of Dollars will increase.
b. The Rand will depreciate against the Dollar and the quantity of Dollars will decrease.
c. The effect on the Rand is indeterminate and the quantity of Dollars will rise.
d. The Rand will depreciate against the Dollar and the quantity of Dollars will rise.
Brent Crude oil is a critical input in the production process and consequently the increase in the price of the good will raise the demand
for US Dollars in the South African market ceteris paribus. The increase in the number of American tourists coming to South Africa will
increase the supply in the US Dollar. Consequently, the supply and demand curves will both shift to the right. As a consequence, the
quantity of US Dollars in the market will rise, but there is no determined impact in the exchange rate. See Section 4.3 of the prescribed
book.
1 of 15 3/27/2023, 9:07
,Assessment 2: Attempt review https://mymodules.dtls.unisa.ac.za/mod/quiz/review.php?attempt=84
Question 2
Correct
Mark 1.00 out of 1.00
Dashboard Calendar
If two countries have differing opportunity costs of production for two goods, then
Dashboard / Courses / UNISA / 2023 / Semester 1 / ECS1601-23-S1 / Online assessments / Assessment 2
a. each country should specialise in the good for which it has a higher opportunity cost of production.
b. only the country with an absolute advantage in the production of both goods stands to gain from trade.
c. each country should purchase inputs from the other country in order to gain an absolute advantage.
d. each country should specialise in the production of the good for which it has a relative advantage.
e. each country should import all goods instead of producing them domestically.
Your answer is correct.
Absolute advantage is not a prerequisite for international trade. Trade can also be beneficial when one country is more efficient in the
production of both goods. According to the English economist, David Ricardo, who formulated the law of comparative (or relative)
advantage, all that is required for both countries to benefit from trade is that the opportunity costs of production (or relative prices)
differ between the two countries. Each country will tend to specialize in and export those goods for which it has a comparative or
relative advantage. See pages 67 to 70 in the prescribed book.
Question 3
Correct
Mark 1.00 out of 1.00
Suppose that the price of Brent Crude oil, which is a South African import, falls and is denominated in US Dollars. What is the impact of
the price decrease on the foreign exchange market?
a. The supply of Dollars will increase and the Rand will appreciate.
b. The supply of Dollars will decrease and the Rand will depreciate.
c. The demand for Dollars will decrease and the Rand will appreciate.
d. The demand for Dollars will increase and the Rand will depreciate.
The decrease in the price of Brent Crude oil will decrease the demand for US Dollars, as this implies that less Rands will be needed to
buy a barrel of oil. Consequently, the decrease in the demand for Dollars will shift the demand curve to the left and the Rand will
appreciate. See Section 4.3 of the prescribed book.
2 of 15 3/27/2023, 9:07
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