Answer to Question #133693 in Macroeconomics for Sinethemba

Question

2 Identify any two reasons that US dollars would be demanded in South Africa

Answer 1

There are many reasons that may cause US dollars to be demanded in south Africa/Appreciating US Dollars.

1.     An increase in gold price brings about high demand of US dollars in South Africa. This is because; Gold is sold in dollars that is exported. Export price has reduced while import increased in US.

2.     Many United State tourists visiting South Africa will also lead to increase in demand of the US dollars.

3.     Also when US buys more of South Africa’s capital goods increases demand for Dollars.

4.     Unexpected decline in value of the rand relative to dollars.