Question

With aid of graph what impact of more South Africans spend their holidays in the United States world be on Rands or Dollars exchange rate centers Paribas

Answer 1

Vertical axis represents rands per dollars.

$D_0$When more South African tourists visit American, exchange rates market for US dollars will react to higher interest rates. A higher rate of return will make holding dollars more attractive. Demand for dollars in South Africa will shift from to $D_1$ while supply for dollars will shift to the left from $S_0$ to $S_1$ . The new equilibrium $(E_1)$ has a stronger exchange rate than the original equilibrium$(E_0)$ . The equilibrium quantity traded does not change in this case.