Answer to Question #218432 in Macroeconomics for Kathy

Question

Use a diagram to illustrate and explain the effect of a political unrest in South Africa on the dollar/rand exchange rate.

Answer 1

Due to the political unrest in the republic of south Africa, there has been a negative impact on the domestic currency. This is another economic crisis considering the already prevailing effects of the Covid-19.

The riots and the unrest have resulted in significant property damage, looting and also affected the movements of goods along important trade corridors. Due to this, export business have significantly declined and consequently affected the strength of the rand.

Since 30th April, the rand was at its weakest at 14.4681which marked a 2% decrease.

The price of the dollar increased due to the shift in the supply curve. The supply of the dollar increases due to the rise of the dollar. The demand of the dollar decreases due to this increase in increase.