ECS3703 Assignment 2 (DETAILED ANSWERS) Semester 2 2024 - DISTINCTION GUARANTEED - DISTINCTION GUARANTEED - DISTINCTION GUARANTEED Answers, guidelines, workings and references ... 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] Question 2 Assume that South Africa’s trade balance improves due to an increase in exchange rates or changes in other factors. With the aid of a diagram, explain how this improvement would affect the country’s aggregate demand under fixed and flexible exchange rates……………………………………………….…………………[15 marks] Question 3 Briefly explain dollarization and its costs and benefits………………………[10 marks]
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