Question

. Suppose disposable income increases more in South Africa than it does in the United States. What is the short-run impact of this change in disposable income on U.S. net exports, the value of the U.S. dollar, and the value of the South African rand

Answer 1

Answer: A. Increase / Appreciate / Depreciate

Explanation:

If disposable income increases more in South Africa than it does in the U.S., assuming the U.S. is a trading partner to SA, they will export more goods to SA because South Africans will demand more goods and services as they can afford to.

This will lead to a higher demand for the U.S. dollar which is the price that the U.S. goods will be denominated in and a higher demand for the dollar will make it appreciate.

The South Africa rand will depreciate because there is less demand for it relative to the U.S. dollar.