Answer to Question #92265 in Macroeconomics for ROTENDA

Question

3. List four possible reasons for an appreciation of the rand against the US dollar. (Do not explain, just list)

4. Explain how changes in exchange rates can influence exports and imports

Answer 1

List four possible reasons for an appreciation of the rand against the US dollar. (Do not explain, just list)

1.    Rising demand for Rand.

2.    Reduced supply for Rand.

3.    Increased economic growth

4.    Reduced rates of inflation.

Explain how changes in exchange rates can influence exports and imports

The exchange rate has an effect on the trade surplus, which in turn affects the exchange rate. A weaker domestic currency stimulates exports and makes imports more expensive (Copeland, 2014). On the other hand, a strong domestic currency hampers exports and makes imports cheaper.

Reference

Copeland, L. S. (2014). Exchange rates and international finance.