Answer the following questions - NSC Economics - Question 2 - 2023 - Paper 1

During the prosperity phase, the demand for goods and services is significantly high, which leads to an increase in prices. Additionally, with more money circulating in the economy, consumers tend to spend more, further driving up prices due to increased demand.

The year in which South Africa recorded the highest value of exports is 2021.

The account that records portfolio investments in the balance of payments is the Financial account.

The trade balance is the difference between the value of a country's visible exports and visible imports. A positive trade balance indicates that exports exceed imports, while a negative trade balance indicates that imports exceed exports.

Electricity shortages can significantly decrease export volumes as businesses may be unable to operate at full capacity due to power cuts. This disruption can lead to a reduction in production and hence a lower volume of goods available for export. Furthermore, businesses may have to invest in alternative energy sources, which can increase operational costs and further hamper export potential.

The SARB can reduce the balance of payments deficit through several methods:

• Increasing repo rates to discourage consumer spending and imports, which can help balance the current account.
• Encouraging investment by making interest rates more attractive, thus leading to a stronger capital account.
• Controlling currency depreciation by managing foreign exchange reserves and making it less burdensome for importers to acquire foreign exchange.