100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
ECS3703 Assignment 2 (COMPLETE ANSWERS) Semester 2 2024 - DUE August 2024 ; 100% TRUSTED Complete, trusted solutions and explanations. R47,12
Add to cart

Exam (elaborations)

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

 13 views  2 purchases

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

Preview 2 out of 7  pages

  • July 30, 2024
  • 7
  • 2023/2024
  • Exam (elaborations)
  • Questions & answers
book image

Book Title:

Author(s):

  • Edition:
  • ISBN:
  • Edition:
All documents for this subject (10)
avatar-seller
mwendwatabitha37
BRILLIANT TUTORS
ECS3703
Assignment2

Semester 2
2024 [Year]




[Type the company address]

,  Book
 International Economics

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]

Correcting a Trade Deficit through Exchange Rate Adjustment

Understanding the Trade Deficit

A trade deficit occurs when a country imports more goods and services than it exports. This
imbalance can lead to economic challenges, including pressure on the domestic currency.

Role of Exchange Rates

Exchange rates, which represent the price of one currency in terms of another, play a crucial role
in managing trade imbalances. A country can influence its trade balance by adjusting its
exchange rate.

Devaluation as a Corrective Measure

Definition: Devaluation is a deliberate downward adjustment of a country's currency value
relative to other currencies.

Mechanism:

 Cheaper Exports: A weaker currency makes a country’s exports less expensive for
foreign buyers, boosting demand for those exports.
 More Expensive Imports: Conversely, a weaker currency makes imports more
expensive for domestic consumers, reducing the demand for foreign goods and services.

Diagrammatic Representation

To illustrate how South Africa might use exchange rates to correct a trade deficit:

1. Initial Equilibrium:
o Demand for ZAR (D1): Represents foreign demand for South African currency.
o Supply of ZAR (S1): Represents domestic supply of South African currency in
the foreign exchange market.

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying this summary from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller mwendwatabitha37. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy this summary for R47,12. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

52510 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy summaries for 14 years now

Start selling
R47,12  2x  sold
  • (0)
Add to cart
Added