This document contains workings, explanations and solutions to the ECS3703 Assignment 2 (QUALITY ANSWERS) Semester 2 2024. For assistance call or us on 0.6.8..8.1.2..0.9.3.4..... 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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