Question

An appreciation of the South African Rand against the US Dollar will lead to a(n)…
[1] decrease in South Africa's exports to the United States and worsen the South African current
account balance.
[2] decrease in South Africa's imports from the United States and improves the South African
current account balance.
[3] increase in South Africa's exports to the United States and Improve the South African current
account balance.
[4] increase in United States’s imports from South Africa and worsens the South African
financial account.

Answer 1

Solution

[1] decrease in South Africa's exports to the United States and worsen the South African current

account balance.

If rand is appreciated then it will be more expensive for Americans to import from south africa. So there will be decrease in export from south Africa. And there will be more money in market because south african bank will buy large amount of foreign currency so it will worsen the south African current account balance.