Answer to Question #283419 in Macroeconomics for Comfort

Question

QUESTION SIXTEEN

Suppose you own a car assembly line in Zambia. The different parts of the car are imported

from the South Africa and the assembled cars are exported back to the South Africa.

a. What happens to the price of the imports when the Zambian kwacha depreciates?

b. Does your car become more or less attractive for South African consumers when the

Zambian kwacha depreciates? Explain.

c. As a Zambian producer, do you think the depreciation of the kwacha is a good

thing? [15 marks]

Answer 1

Question a

There will be a decrease in both exports and imports

Question b

No. It will be less attractive because as the kwacha depreciate the quality also minimizes

Question c

The depreciation is not a good thing because there will be high inflation and also low selling of cars