Answer to Question #270159 in Macroeconomics for Audrey

Question

1.10 When the rand depreciates against the dollar: (2) (1) The balance on the current account of the balance of payments worsens; (2) The South African Reserve Bank can influence the exchange rate by raising interest rates to attract foreign capital and thus strengthen the value of the rand; (3) The South African Reserve Bank can buy dollars to strengthen the value of the rand; (4) The South African Reserve Bank can take steps to limit the supply of dollars and in this way strengthen the value of the rand relative to the dollar.

Answer 1

(4) The South African Reserve Bank can take steps to limit the supply of dollars and in this way strengthen the value of the rand relative to the dollar.