Answer to Question #134275 in Macroeconomics for lesego

Question

An appreciation of the rand against the dollar:
(1) Will worsen the current account balance but improve domestic prices.
(2) Improve the current account balance but worsen domestic prices.
(3) Improve the current account balance as well as reduce domestic prices.
(4) Worsen both the balance on the current account as well as domestic prices

Answer 1

(3) Improve the current account balance as well as reduce domestic prices.

If demand for the rand increases, it will be more valuable and therefore its price will increase, this will stimulate exports and reduce imports.