Which of the following is not a source of demand for the Australian dollar? a. A...

Which of the following is not a source of demand for the Australian dollar?

a.		A German firm that wants to purchase agricultural products from Australia.
b.		An Indian financier who wants to buy an Australian bond.
c.		A currency trader who thinks the value of the Australian dollar will be greater in the future relative to the value today.
d.		An Australian bank that wants to buy a Japanese bond.

Expert Solution

The answer to the question is d- An Australian bank that wants to buy a Japanese bond..

In all the other cases there will be a demand for the Australian Dollar, However in this case the payment would be mostly done in JPY currency.

An exchange rate is the value of one currency in terms of another currency. Exchange rates matter to Australia's economy because of their influence on trade and financial flows between Australia and the rest of the world. Changes in exchange rates affect the Australian economy in two main ways:

There is a direct effect on the prices of goods and services produced in Australia relative to the prices of goods and services produced overseas.
There is an indirect effect on economic activity and inflation as changes in the relative prices of goods and services produced domestically and overseas influence decisions about production and consumption.

Together these effects also have implications for the balance of payments.

Rahul Sunny answered 1 year ago

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