Institution
University Of South Africa
(Unisa)
Course
International Finance (ECS3703)
ECS3703 Assignment 1
(COMPLETE ANSWERS)
Semester 1 2026 - DUE 2 April
2026; 100% TRUSTED
Complete, trusted solutions
and explanations.
, Assume that the Southern African Development Community (SADC) countries operate under flexible
exchange rate systems, and they desire to maintain balanced current accounts and reach full
employment
(a) Explain which macroeconomic policy these countries should use to achieve this under a scenario of
perfect capital mobility and imperfect capital mobility, and why? With the aid of diagrams, briefly
explain how the governments of the Southern African Development Community (SADC) can use the
relevant policies mentioned in (a) under each scenario Suppose the Southern African Development
Community (SADC) region intends to adopt a common currency for its member countries, as it would be
economically beneficial for the participants (nations). (a) What is this arrangement called . (b) In your
view, would the Southern African Development Community (SADC) benefit from this kind of
arrangement? Explain your answer(c) Discuss the risks and benefits associated with the adoption of a
common currency
a) Explain which macroeconomic policy these countries should use to achieve this under a scenario of
perfect capital mobility and imperfect capital mobility, and why? With the aid of diagrams, briefly
explain how the governments of the Southern African Development Community (SADC) can use the
relevant policies mentioned in
a) Appropriate Macroeconomic Policy under Different Capital Mobility Scenarios
1. Perfect Capital Mobility
Under perfect capital mobility, capital flows freely across borders in response to interest rate
differentials.
Policy to Use: Monetary Policy
Monetary policy is most effective under flexible exchange rates and perfect capital mobility.
Expansionary monetary policy (e.g., lowering interest rates or increasing money supply):
Leads to capital outflows
Causes currency depreciation
Boosts exports and aggregate demand
Helps achieve full employment and current account balance
Why Monetary Policy Works Best
University Of South Africa
(Unisa)
Course
International Finance (ECS3703)
ECS3703 Assignment 1
(COMPLETE ANSWERS)
Semester 1 2026 - DUE 2 April
2026; 100% TRUSTED
Complete, trusted solutions
and explanations.
, Assume that the Southern African Development Community (SADC) countries operate under flexible
exchange rate systems, and they desire to maintain balanced current accounts and reach full
employment
(a) Explain which macroeconomic policy these countries should use to achieve this under a scenario of
perfect capital mobility and imperfect capital mobility, and why? With the aid of diagrams, briefly
explain how the governments of the Southern African Development Community (SADC) can use the
relevant policies mentioned in (a) under each scenario Suppose the Southern African Development
Community (SADC) region intends to adopt a common currency for its member countries, as it would be
economically beneficial for the participants (nations). (a) What is this arrangement called . (b) In your
view, would the Southern African Development Community (SADC) benefit from this kind of
arrangement? Explain your answer(c) Discuss the risks and benefits associated with the adoption of a
common currency
a) Explain which macroeconomic policy these countries should use to achieve this under a scenario of
perfect capital mobility and imperfect capital mobility, and why? With the aid of diagrams, briefly
explain how the governments of the Southern African Development Community (SADC) can use the
relevant policies mentioned in
a) Appropriate Macroeconomic Policy under Different Capital Mobility Scenarios
1. Perfect Capital Mobility
Under perfect capital mobility, capital flows freely across borders in response to interest rate
differentials.
Policy to Use: Monetary Policy
Monetary policy is most effective under flexible exchange rates and perfect capital mobility.
Expansionary monetary policy (e.g., lowering interest rates or increasing money supply):
Leads to capital outflows
Causes currency depreciation
Boosts exports and aggregate demand
Helps achieve full employment and current account balance
Why Monetary Policy Works Best
