Question 2 (40 marks) Assume that Australia trades mostly with two countries only, the United States and the United Kingdom, and that 65% of the trade is conducted with the United States, 30% with the United Kingdom, and 5% with the rest of the world. The exchange rates of the Australian dollar at two points in time, 0 and 1, are as follows: Exchange Rate AUD/USD AUD/GBP Period 0 1.4541 2.1555 Period 1 1.7800 2.5700 i. ii. iii. Calculate the exchange rates in indirect quotation from an Australian perspective. [Provide your answers to 4 decimal points]. [5 marks] Calculate the percentage rates of depreciation or appreciation of the Australian dollar against the two currencies. Comment on your results. [Provide your final answers to 2 decimal points] [15 marks] Calculate the exchange rate relatives, using Period 0 as a base period, and the base value = 100 [Provide your answers to 2 decimal points]. [5 marks] Calculate an unweighted effective exchange rate index, using Period 0 as a base period in which the index assumes the value of 100. [5 marks] Calculate the normalised trade weights. [Provide your final answers to 2 decimal points] [5 marks] Calculate the trade-weighted effective exchange rate index using geometric approach, and explain the result with reference to the Australian dollar. [Provide numerical answers to 2 decimal points] [5 marks] iv. v. vi. Question 2 (40 marks) Assume that Australia trades mostly with two countries only, the United States and the United Kingdom, and that 65% of the trade is conducted with the United States, 30% with the United Kingdom, and 5% with the rest of the world. The exchange rates of the Australian dollar at two points in time, 0 and 1, are as follows: Exchange Rate AUD/USD AUD/GBP Period 0 1.4541 2.1555 Period 1 1.7800 2.5700 i. ii. iii. Calculate the exchange rates in indirect quotation from an Australian perspective. [Provide your answers to 4 decimal points]. [5 marks] Calculate the percentage rates of depreciation or appreciation of the Australian dollar against the two currencies. Comment on your results. [Provide your final answers to 2 decimal points] [15 marks] Calculate the exchange rate relatives, using Period 0 as a base period, and the base value = 100 [Provide your answers to 2 decimal points]. [5 marks] Calculate an unweighted effective exchange rate index, using Period 0 as a base period in which the index assumes the value of 100. [5 marks] Calculate the normalised trade weights. [Provide your final answers to 2 decimal points] [5 marks] Calculate the trade-weighted effective exchange rate index using geometric approach, and explain the result with reference to the Australian dollar. [Provide numerical answers to 2 decimal points] [5 marks] iv. v. vi