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QUESTION 3. (Marks 20) 3.1 Explain the three measures that can be taken to end the hyperinflation (6) 3.2. What is happening to the South African real exchange rate in each of the following situation. Explain 3.2.1. The SA nominal exchange rate is unchanged, but prices rise faster in SA than abroad. (2) 3.2.2. The SA nominal exchange rate is unchanged, but prices rise faster in abroad than SA. (2) 3.2.3. The SA nominal exchange rate declined, and prices are unchanged in SA and abroad. (2 3.2.4. The SA nominal exchange rate declined, and prices rise faster abroad than in South Africa. 3.3. What are the two ways the government can finance its budget deficit? 3.4. What are the causes in the foreign demand and how does this affect our trade balance? 2 |Page