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ECS3703 EXAM PACK 2024/2025 (QUESTIONS & ANSWERS)
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ECS3703 EXAM PACK 2024/2025 QUESTIONS WITH COMPLETE ANSWERS, COMPILED FROM RECENT PAST EXAM PAPERS. PERFECT FOR EXAM PREPARATION.
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, UNIVERSITY EXAMINATIONSMay/June 2024
ECS3703
INTERNATIONAL FINANCE
100 Marks
Duration: 3 Hours
First Examiner: Dr MJ Khumalo
Second Examiner: Dr KO Amusa
External Examiner: Dr L Barnard
,QUESTION 1 [20 marks]
a) Explain fully the components of the balance of payments and why these
components always balance. [10]
b) The exchange rate market can either be stable of unstable. Explain fully with an
aid of diagram(s) the distinction between these scenarios. [10]
QUESTION 2 [20 marks]
Country A is a small nation that operates under the principle of free movement of capital
and a flexible exchange rate regime. The country desires to reach the full-employment
level of national income with equilibrium in its balance of payments.
(a) Which macroeconomic policy would you recommend and why?
[5]
(b) With the aid of a diagram, explain how country A should use the policy mentioned
in (a) to achieve the full-employment level of national income with equilibrium in its
balance of payments.
[15]
QUESTION 3 [25 marks]
, Suppose a country's trade balance is in a deficit position and it experiences internal
inflation. Demonstrate, with the aid of a diagram, the policy options needed for authorities
to achieve both
external and internal equilibrium.
[25]
QUESTION 4 [20 marks]
(a) Explain why monetary policy would be ineffective under fixed exchange rate
regime and perfectly elastic international capital flows. [14]
(b) Discuss the differences (if any) between an optimum currency area and a fixed
exchange rate system. [6]
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