Answer to Question #69264 in Macroeconomics for ibn hassan

Question

4.1 The South African Government after protracted negotiations has recently allowed the tariff free
importation of some poultry into the country.
4.1.1 Explain who would benefit and who would lose in the local economy as a result of the duty free
importation of chicken. (5)
4.1.2 Local poultry farmers are not happy with this new development and are canvassing for tariffs to be
imposed on these imports. Discuss FIVE (5) arguments which the local poultry farmers can use to
support their position. (15)
4.2 Distinguish between currency appreciation and currency depreciation. (2)
4.3 Discuss any FOUR (4) factors that could lead to the appreciation of the currency of your country in terms of
the US Dollar. (8)

Answer 1

4.1.1. In case of duty free importation of chicken consumers will win (they will have cheaper product) and local chicken producers will lose (they will have to deal with more competitive market).

4.1.2. – preserving local business from competition for local employment;
– preserving local business from competition for budget incomes;
– preserving local business from competition for food security / national defense;
- protect local infant industry;
- protect local market from aggressive trade practices (damping).

4.2. Сurrency appreciation is an increase in the value of one currency in terms of another.
Currency depreciation is a decrease in the value of one currency in terms of another.

4.3. Factors that could lead to the appreciation of the currency of your country in terms of the US Dollar include:
- cuntry’s current account / positive balance of payments;
- decreased inflation of the local currency;
- greater ratio of export operations compared to import;
- political stability / performance.