Answer to Question #135848 in Macroeconomics for Amogelang Amantle

Question

An increase in criminal activity in South Africa acts as a deterrent to foreign tourists
considering visiting South Africa, and as a result, there is a decline in the number of
American tourists to South Africa.

Explain, with the aid of a graph, the effect of this on the rand/dollar exchange rate
and the equilibrium quantity of dollars.
(8)

Answer 1

The exchange rate of Rand depreciate as the demand to tourists attraction reduces the supply curve to S2 from S1 also the equilibrium supply of dollar decreases to Q2 from Q1.