100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
ECS3703 Assignment 2 Semester 2 2024 (Detailed Answers) $2.81   Add to cart

Exam (elaborations)

ECS3703 Assignment 2 Semester 2 2024 (Detailed Answers)

 19 views  1 purchase
  • Course
  • Institution
  • Book

Question 1: Correcting a Trade Deficit Using Exchange Rates Explanation: A trade deficit occurs when a country's imports exceed its exports. For South Africa, this means that more goods and services are being bought from the rest of the world than are being sold. To correct a trade deficit, ...

[Show more]

Preview 2 out of 12  pages

  • September 2, 2024
  • 12
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
avatar-seller
ECS3703


Assignment 2


Semester 2 2024

, Question 1: Correcting a Trade Deficit Using Exchange Rates
Explanation:
A trade deficit occurs when a country's imports exceed its exports. For South Africa,
this means that more goods and services are being bought from the rest of the world
than are being sold. To correct a trade deficit, one approach is to influence exchange
rates.


Exchange Rate Mechanism: The exchange rate is the price of one currency in
terms of another. If South Africa has a trade deficit, it may devalue its currency to
make its exports cheaper and imports more expensive.


Devaluation of the Rand:


• Export Stimulation: When the South African Rand depreciates (its value falls
relative to other currencies), South African goods become cheaper for foreign
buyers. This increase in demand for South African goods will boost exports.


• Import Reduction: Conversely, foreign goods become more expensive for
South African consumers when the Rand devalues. This leads to a decrease
in imports as local consumers switch to domestically produced goods.


• Improvement in Trade Balance: The combined effect of increased exports and
reduced imports helps reduce the trade deficit. Over time, this may correct the
deficit as the value of exports begins to exceed the value of imports.

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 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 these notes from?

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

Will I be stuck with a subscription?

No, you only buy these notes for $2.81. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

72042 documents were sold in the last 30 days

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

Start selling
$2.81  1x  sold
  • (0)
  Add to cart