Economics

QUESTION 4 (10) "SOUTH African financial markets recorded steady recovery during January. Higher returns on bonds and listed property shares surprised investors, and the rand had one of its strongest recovery months in more than a year. Foreign sentiment towards South Africa is improving and more and more signs of a steady recovery of the economy are emerging. The news on Thursday that the US Federal Reserve (Fed) turned dovish and foresaw a strong possibility that no further increases in US interest rates were on the cards also fuelled renewed risk appetite for emerging markets assets." https:/www.iolco.za/bus -in-january-19121048 Graphically illustrate and briefly explain the movement that occurred in the rand (against the US$) 4.1 during January. (3) 4.2 Explain what happened to the value of the US$ against the rand. What is likely to happen to the (2) supply of loanable funds in South Africa, ceteris paribus? Read the extract below and answer the question that follows. (5) SONA reaction: Stellenbosch University economics professor Nicola Theron says the implementation of the measures set out by President Cyril Ramaphosa in the 2021 State of the Nation Address (SoNA) will be key for South Africa. With "sober realism", she stated on February 16 that there was "not much new" said during the SoNA, and that there now needed to be "a focus on fixing the fundamentals" in the country, foremost of which should be excellence in planning and execution in government. While Ramaphosa did acknowledge the challenges surrounding the country's State-owned entities and related stresses, Theron lamented that the President spoke about "things that are not really new", such as South Africa's rising unemployment rate, which last saw numbers this high in 2011. The SoNA, according to Theron, made "the right sounds" but she remained concerned about the pace and scale of implementation. These concerns were echoed by Investec chief economist Annabel Bishop, who provided more insight into the financial markets aspect, noting that the SoNA, despite "little to no reaction", provided a sense of optimism in the financial markets. This is also owing to South Africa's Covid-19 vaccination drive, which is expected to bring about the "return to normal". As a consequence of this, Bishop noted that the financial markets had "heavily invested" into emerging markets and their financial assets, whether they be bonds or equities. While South Africa did benefit (though not as much as other emerging markets), she noted that this increased investment and investor optimism had seen the rand improve to about R14.50 to the dollar on February 16. However, Bishop lamented the lack of clarity surrounding the dire state of South Africa's government finances, which "is quite key" for financial markets, especially considering the massive government expenditure bill. "The SoNA was certainly light on a few details, [which resulted] in some of the lack of reaction. While all [of the same themes in the SoNA] were very key, we are just not getting there very quickly," she said. https:/engineeringnews.co.zafar implementation-key-for-south africas-way-forward-following-ramaphosas-2021-sona-2021-02-16 4.3 Given the context of the case study: How do you think the outcome of SONA 2021 will influence loanable funds in SA