economics baby! (1 Viewer)

[darshil]

Hey everyone,
I cannot grasp this multiple choice question. The answer is A. Thanks for all the help, I will never forget it.

 

[bell531]

When Australia's interest rates fall relative to others', then our interest rates are providing lesser returns to investment than other countries are. Therefore, investment in Australia is less attractive, leading to capital outflow. When there is a capital outflow, there will be a lesser demand for the Australian dollar, thereby putting downward pressure on our currency.


Basically, with lower interest rates we will have:
- less foreign investment coming into Aus, and
- a depreciating exchange rate

 

[darshil]

Thanks man! really appreciate it. Totally got it now

 

[gnrlies]

bel531 has done a good job in explaining this, but I just want to emphasize to you and anyone else reading that this is one of the most profound relationships in the Australian economy. Highlight this, write it out, recite it, stick it on your wall. This is one to remember and one that will get you marks in the HSC.

 

[bell531]

bell531 has done a good job in explaining this, but I just want to emphasize to you and anyone else reading that this is one of the most profound relationships in the Australian economy. Highlight this, write it out, recite it, stick it on your wall. This is one to remember and one that will get you marks in the HSC.

I accept payment in cash or rep's.

 

[gnrlies]

I accept payment in cash or rep's.

heh nice try

 

[gnrlies]

wait can u explain it with a diagram, thanx!

Why do you want it explained with a diagram you did your HSC 5 years ago....

 

[gnrlies]

very funny, now will u explain it or not?

I wasn't attempting to be funny, I was being genuinely curious....

But heres something I prepared earlier.

Its not necessarily the best way to represent it, but its approximate and should be good enough to put in an essay, although usually it would not be required.

 

[gnrlies]

thought so, thats wat i had in mind, was just clarifying cheers !

I reuploaded another one as I made a mistake in the first one.

 

[gnrlies]

wait wat now uve confused me a little

The first diagram should be upward sloping. Alternatively you could keep the original diagram as it was but have "supply of AUD" on the bottom diagram