Answer to Question #44877 in Macroeconomics for Cecil John van Wyk

Question

Consider the rand/US dollar exchange rate.let's assume that at a given point in time the exchange rate is R6.50 to the US dollar.Assuming that the exchange rate is flexible, explain how the following occurrences are likely to impact on the exchange rate.in each case look at the market for US dollar,and use a graph to illustrate your explanation to questions..

a)The oil price increase and South Africa is a major importer of oil

b)Citibank,a large US bank buys Standard Bank

c)South Africa becomes the destination of choice for US tourists

d)the South Africa Reserve Bank increases the Repo rate

e)the US Federal Reserve (the central bank ) increases the interest rate

f)Speculators believe that the rand is overvalued and take positions in which they expect to profit from a depreciation of the rand.

1.2 what was the impact of the depreciation and the subsequent appreciation on (i) South Africa importers,and (ii) South Africa exporters?