The Saudi Arabian government is promoting the expansion of the private sector. It is a low-cost producer of oil, yet its exports to South Africa have declined lately. South Africa uses a floating foreign exchange rate, although its central bank has recently attempted to stop a sharp drop in that foreign exchange rate.
(a)[2]
Define what a floating foreign exchange rate is.
(b)[4]
Explain two benefits that a government may receive from the expansion of the private sector.
(c)[6]
Analyse why a country with low production costs may see its exports decrease.
(d)[8]
Discuss whether a government ought to prevent a fall in its country’s foreign exchange rate.
Worked solution & mark scheme
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