1) The depreciation of the Euro against all other currencies impacts on Australi
ID: 1136476 • Letter: 1
Question
1) The depreciation of the Euro against all other currencies impacts on Australia’s aggregate demand through affecting Australia’s ______. This is referred to as the _______.
a) imports; international trade effect
b) domestic household wealth; international wealth affect
c) imports; international trade effect
d) imports and exports; international trade effect
2) The velocity of money is constant and the price level in the Quantity Theory of Money is measured by GDP deflator. If money supply growth rate is 3%, then which of the following scenarios is consistent with Quantity Theory of Money ?
a) Real GDP growth is 3% and inflation is 3%
b) Nominal GDP growth rate is 3% and inflation is 3%
c) Real GDP is unchanged and inflation is -3%
d) None of the above
Explanation / Answer
1)
Depreciation of Euro implies that other currencies have become dearer relatively. Australian dollar will appreciate and its export will become difficult and import shall be cheaper.
it affects both export and import.
Right answer is : (D)
2)
right answer is (B)
if there is no change in real gdp, the rise in money supply will get reflected into the nominal gdp of country. Both price and nominal gdp will increase in similar proportion.
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