ECS3703 2025 ASSIGNMENT 2 SEM 2 2025 ECS3703 2025
DISCLAIMER
THE DOCUMENT PRESENTED IS A DEMOSTRATION ON HOW STUDENTS CAN
APPROACH THE ASSIGNMENT FOR ECS3703. IT IS BASED ON PRESCRIBED
MATERIAL AND EXTERNAL RESEARCH. THE DOCUMENT CONTAINS BOTH SHORT
NOTES AND A RESPONSE EXAMPLE FOR EACH QUESTION. STUDENTS ARE
THEREFORE ADVISED NOT TO COPY AND PASTE BUT USE THE DOCUMENT AS A
RESEARCH GUIDE THAT WOULD HELP THEM DRAFT THEIR OWN FINAL COPIES.
, ECS3703 2025 ASSIGNMENT 2 SEM 2 2025 ECS3703 2025
QUESTION 1 [15 MARKS]
Foreign Exchange Market and Tariffs
The foreign exchange market (FOREX) determines the price of one currency in terms
of another through supply and demand (Mankiw, 2021). Here, the South African Rand
(ZAR) is exchanged for the Chinese Yuan (CNY). An increase in Chinese tariffs on
South African exports raises the price of South African goods, reducing Chinese
demand for imports (Krugman & Obstfeld, 2022). Since Chinese importers must
exchange CNY for ZAR to pay exporters, reduced import demand lowers demand for
ZAR in the FOREX market.
Under a flexible exchange rate, this decline shifts the demand curve for ZAR leftward
while supply remains constant. The new equilibrium exchange rate (R₂) is below the
initial rate (R₁), leading to depreciation of the ZAR and appreciation of the CNY (World
Bank, 2023). Protectionist policies like tariffs thus weaken exporters’ competitiveness
and reduce currency demand.0717513144
QUESTION 2 [10 MARKS]
DISCLAIMER
THE DOCUMENT PRESENTED IS A DEMOSTRATION ON HOW STUDENTS CAN
APPROACH THE ASSIGNMENT FOR ECS3703. IT IS BASED ON PRESCRIBED
MATERIAL AND EXTERNAL RESEARCH. THE DOCUMENT CONTAINS BOTH SHORT
NOTES AND A RESPONSE EXAMPLE FOR EACH QUESTION. STUDENTS ARE
THEREFORE ADVISED NOT TO COPY AND PASTE BUT USE THE DOCUMENT AS A
RESEARCH GUIDE THAT WOULD HELP THEM DRAFT THEIR OWN FINAL COPIES.
, ECS3703 2025 ASSIGNMENT 2 SEM 2 2025 ECS3703 2025
QUESTION 1 [15 MARKS]
Foreign Exchange Market and Tariffs
The foreign exchange market (FOREX) determines the price of one currency in terms
of another through supply and demand (Mankiw, 2021). Here, the South African Rand
(ZAR) is exchanged for the Chinese Yuan (CNY). An increase in Chinese tariffs on
South African exports raises the price of South African goods, reducing Chinese
demand for imports (Krugman & Obstfeld, 2022). Since Chinese importers must
exchange CNY for ZAR to pay exporters, reduced import demand lowers demand for
ZAR in the FOREX market.
Under a flexible exchange rate, this decline shifts the demand curve for ZAR leftward
while supply remains constant. The new equilibrium exchange rate (R₂) is below the
initial rate (R₁), leading to depreciation of the ZAR and appreciation of the CNY (World
Bank, 2023). Protectionist policies like tariffs thus weaken exporters’ competitiveness
and reduce currency demand.0717513144
QUESTION 2 [10 MARKS]
