Practical Application

Lecture 5: Based on
Lectures 12-14

+27 (0)51 401 3406 e-mail: camphercs@ufs.ac.za www.ufs.ac.za

BALANCE OF PAYMENTS
(BOP)
The table below shows a summary of the transactions that took place
between the individuals, firms and government units of country XYZ
and those of all other nations during the year 2006.

Item
Merchandise exports
Merchandise imports
Service receipts
Net direct investment
Net portfolio investment
Other investments
Payments for services
Unrecorded transactions

Rand (billion)
330
300
100
32.4
68
359
134
21

1.1 Calculate the balance on the current account.

(2)

1.2 Calculate the change in gold and other foreign reserves.

(2)

1.3 How much would the trade balance be if the countrys imports were to
increase by R125bn? (2)

EXCHANGE RATES
2. Consider the rand/yen exchange rate, and focus
on the market for yen. Using the demand and
supply curves, explain whether the yen would
appreciate or depreciate against the rand, and
whether that rand would appreciate or depreciate
against the yen if the following things happened:
2.1 Chase Beijing, a major Chinese bank, buys
Standard Bank.
(4)
2.2 Due to the imposition of an import quota on
Chinese clothing, South Africa imports much less
from the China. (4)

INCOME & POVERTY

The table below provides information from the
World Bank on the Gini coefficients for South Africa
andYear
Canada:
Country
Gini coefficient
2000

South Africa

0.578

2000

Canada

0.326

3.1
Illustrate the Lorenz curves for the two
countries on the same graph and compare the
level of income inequality in these two countries
[6]

EXCHANGE RATES
Consider the rand/dollar exchange rate, and focus on
the market for dollars. Using the demand and supply
curves, explain whether the dollar would appreciate
or depreciate against the rand, and whether that rand
would appreciate or depreciate against the dollar if
the following things happened:
4.1 More foreign tourists visit South Africa.

[4]

4.2 South Africa discovers a large oil field off the

coast of Durban and as a result our oil imports
decrease substantially. [4]

Thank you / Dankie