QUESTION 4 (30) 4.1 Differentiate between an exchange rate and the foreign excha

Question

QUESTION 4 (30) 4.1 Differentiate between an exchange rate and the foreign exchange market. (4) 4.2 Explain how changes in exchange rates can influence exports and imports in your country. (6) 4.3 Discuss ANY FIVE (5) arguments for and against the use of trade barriers by the government of your country. (15) 4.4 As a result of pressure from the Southern African Clothing and Textile Workers Union (SACTWU), the South African government has decided to increase the tariff on textiles. Explain who would gain and who would lose as a result of the decision taken by the South African government.

Explanation / Answer

Answer:

4.1:

An exchange rate is the cost of country's cash regarding money. In this manner, a conclusion standard has two segments, the residential money and outside cash, and can be cited either straight forwardly or in a roundabout way. A foreign rate is the cost of all residential money expressed as far as cash. At the end of the day, an outside conversion scale cont. Last one cash and other to demonstrate their relative qualities. Since institutionalized monetary form far and wide buyer in an incentive with request, supply and buyer certainly, their quality changes in respect to each after some time.

4.2:

The exchange rate affects the exchange overflow (or shortage), which thus influences the swapping scale, at Calera. By large notwithstanding a weaker residential cash invigorates fares and make imports more costly. On the other hand, solid household money hampers fares and makes imports less expensive.

4.3:

Continuation for trade barrier

a) To shield residential employments from "shuddy" work abroad.

b) To enhance an exchange shortfall.

c) To ensure "baby ventures"

d) Insurance for dumping.

e) To procure from income

Contentions against trade barrier:

1) Market mutualism and loss of locative effectiveness.

2) Higher cost for shoppers: Tariff push up the cost from buyer and protect wasteful position of assets both locally and all around.

3)Reduction in showcase access for makers: Exports sponsorship discourage would cost and harm yield benefits, ventures and occuparism in numerous lower pay creating nations that depends on sending out essential and produce merchandise for their development. Protectionism can be inadequate and expensive methods for maintaining employment.

4) As a result of tariff imposed by South African government, the producer of clothing and textile industries will be benefitted and the consumers of these products in the country will have to shell more for the same products out of their pockets.

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