ECS3703
ASSIGNMENT 2 (SEMESTER 2)
DUE DATE: August 2024
Written Assignment Submission Guidelines:
Please ensure that your assignment is submitted electronically through the myUnisa platform no
later than August 2024. Kindly note that fax or email submissions will not be accepted.
NB: Assignment submitted to the lecturer(s) through email will not be considered.
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]
ANSWER:
When a country like South Africa has a trade deficit, it means that the value of its imports exceeds
the value of its exports. One way to correct this deficit is through exchange rate adjustments.
Mechanism:
1. Depreciation of Currency: If the South African Rand (ZAR) depreciates, South African goods and
services become cheaper for foreign buyers, leading to an increase in exports. Conversely,
foreign goods become more expensive for South Africans, leading to a decrease in imports. This
can help reduce the trade deficit.
2. Appreciation of Currency: If the Rand appreciates, South African goods and services become
more expensive for foreign buyers, leading to a decrease in exports. Conversely, foreign goods
ASSIGNMENT 2 (SEMESTER 2)
DUE DATE: August 2024
Written Assignment Submission Guidelines:
Please ensure that your assignment is submitted electronically through the myUnisa platform no
later than August 2024. Kindly note that fax or email submissions will not be accepted.
NB: Assignment submitted to the lecturer(s) through email will not be considered.
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]
ANSWER:
When a country like South Africa has a trade deficit, it means that the value of its imports exceeds
the value of its exports. One way to correct this deficit is through exchange rate adjustments.
Mechanism:
1. Depreciation of Currency: If the South African Rand (ZAR) depreciates, South African goods and
services become cheaper for foreign buyers, leading to an increase in exports. Conversely,
foreign goods become more expensive for South Africans, leading to a decrease in imports. This
can help reduce the trade deficit.
2. Appreciation of Currency: If the Rand appreciates, South African goods and services become
more expensive for foreign buyers, leading to a decrease in exports. Conversely, foreign goods
