In a free floating exchange rate regime, the demand and supply for a currency determine its price.

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In a free floating exchange rate regime, the demand and supply for a currency determine its price. For each of the following conditions, explain what is expected to happen to the demand and supply curve for the Australian dollar and therefore its equilibrium price.

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a) The inflation rate in the US suddenly becomes much higher than the inflation rate in Australia.

b) Australia's national income increases at a higher rate relative to a stable growth rate in the USA.

Related Book For answer-question

Microeconomics An Intuitive Approach with Calculus

ISBN: 978-0538453257

1st edition

Authors: Thomas Nechyba

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Posted Date: May 31, 2022 05:37 AM

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In a free floating exchange rate regime, the demand and supply for a currency determine its price.

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a Higher inflation in the US will lead to more supply of USD and Higher demand for AUD and the... View the full answer

Microeconomics An Intuitive Approach with Calculus

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