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ECS1601 ASSESSMENT 7 OF 2024 EXPECTED QUESTIONS AND ANSWERS
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THIS DOCUMENT CONTAINS ECS1601 ASSESSMENT 7 OF 2024 EXPECTED QUESTIONS AND ANSWERS. USE IT CORRECTLY AS A GUIDE TO HELP YOU SCORE ABOVE 75%

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  • October 24, 2024
  • 63
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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Buying Proudly South African products supports local businesses, increasing income and employment
within the domes c economy. This boosts household spending, which circulates through local firms and
government via taxes, crea ng a posi ve mul plier effect. It reduces reliance on imports, helping the
country retain foreign currency. The opportunity cost of buying interna onal brands is the loss of these
local benefits. Spending on foreign goods redirects income abroad, reducing local investment, job
crea on, and government revenue from taxes, which could otherwise enhance South Af

,When economic growth slows, as seen with the 0.9% GDP increase being below expecta ons, this
suggests a lower demand for goods and services, which could reduce the demand for money (shi ing
the money demand curve from Md0 to Md1). A fall in money demand would lead to a decrease in
interest rates, as seen by the movement from i0 to i1. This reduc on in interest rates aims to s mulate
investment and spending, helping to boost economic ac vity.

,The slowing economic growth in China, as described in Extract 2B, would nega vely impact South
Africa’s foreign exchange market, given China’s role as a significant trading partner. When demand for
Chinese exports declines due to rising living costs in key markets, China's need for imports from

, countries like South Africa also falls. This decrease in export demand would reduce South Africa’s export
earnings, leading to less demand for the South African Rand in the foreign exchange market.

Effects:

 Deprecia on of the Rand: As Chinese importers demand fewer South African goods, they
require less Rand to pay for them, reducing the demand for Rand. This could cause the Rand to
depreciate rela ve to other currencies.

 Weaker Trade Balance: With reduced exports to China, South Africa's trade balance may
worsen, further pressuring the Rand.




The demand curve:D0 Shi ed le due to reduced Chinese demand to D1for South African goods. The
supply curve: S is fixed in this case as assuming no change in supply. The Result is that S and D1
intersects at a lower exchange rate for the Rand.

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