Started on Wednesday, 6 September 2023, 6:01 PM
State Finished
Completed on Wednesday, 6 September 2023, 6:39 PM
Time taken 38 mins 5 secs
Marks 17.00/20.00
Grade 85.00 out of 100.00
Question 1 What impact is the increase in the supply of Dollars on price and the supply curve’s direction?
Complete (a) The price of the Dollar becomes relatively lower.
(b) The Rand appreciates against the Dollar.
M ark 1.00 out of
(c) The supply curve for the Dollar will shift to the left.
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(d) The equilibrium point will be lower down on the Dollar demand curve.
Statement a and b.
All the statements are correct.
Statements b and c are correct.
Statements b, c and d are correct.
Statements b and d are correct.
When the supply of dollars increases it means that the price of dollars becomes relatively lower in rand terms and therefore the rand
appreciates. This can be illustrated by a rightward shift of the dollar supply curve, and a new equilibrium point lower down on the dollar
demand curve.
,Question 2 Which of the following statements regarding the theory of comparative advantage is correct?
Complete
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a. Each country will specialise in and export the good for which it has an absolute advantage.
b. Each country will specialise in and export the good for which it has a comparative advantage.
c. Trade between two countries will only take place if their opportunity costs of production are equal.
d. None of the above.
Countries should specialise in the production of and export the good for which it has a comparative advantage. Absolute advantage is
not a prerequisite for trade between two countries. In addition, if the opportunity costs between both countries is the same, there is no
basis for trade. Differences in opportunity costs of production between two countries are a necessary condition for gains from trade.
,Question 3 If two countries have differing opportunity costs of production for two goods, then
Complete
M ark 1.00 out of a. each country should specialise in the good for which it has a higher opportunity cost of production.
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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.
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 4 As a result of more Americans visiting South Africa, we can expect, ceteris paribus
Complete
M ark 1.00 out of a. an appreciation of the Rand relative to the Dollar.
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b. a depreciation of the Rand relative to the Dollar.
c. an appreciation of the Dollar relative to the Rand.
d. that it will cost South Africans more to visit the United States.
e. an appreciation of the Dollar relative to all major currencies.
An increase of American tourists into South Africa will increase the supply of dollars on the South African foreign exchange
market, ceteris paribus. The supply curve for dollars on the South African foreign exchange market, will thus shift to the right, while the
demand for dollars curve will remain constant, ceteris paribus. The rand will appreciate relative to the dollar, while the dollar will
depreciate relative to the rRand. Refer to pages 71 to 76 in the prescribed textbook prescribed book, as well as figures 4-3 and
Tables 4-1 and 4-2.
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