If the Australian dollar were depreciated by 10 per cent, which one of the following would not be true?

A. Imported Japanese motor vehicles would cost more in the Australian market.

B. Imported Japanese motor vehicles would cost less in the Australian market.

C. Japanese buyers would pay less for Australian wool.

D. Australian consumers would be encouraged to buy locally manufactured goods.

An improvement in Australia’s terms of trade is said to occur when:

B. the general level of export prices increases relative to the general level of import prices.

A. the general level of export prices decreases relative to the general level of import prices.

C. there is a decline in the terms of trade index.

D. the terms of trade index remains constant.

The rate of exchange:

C. is the number of units of a foreign currency that can be purchased with an Australian dollar.

A. measures the relationship between the prices of imports and the prices of exports.

B. is the rate at which the composition of Australia’s trade is changing.

D. is the quantity of foreign exchange that Australian banks hold.

Under Australia’s floating exchange rate system, the Reserve Bank of Australia acts in the foreign exchange market to:

B. prevent excessive movements in the value of the Australian dollar.

A. encourage speculation in the Australian dollar.

C. fix the value of the Australian dollar.

D. achieve a target exchange rate.

An appreciation of the exchange rate of the Australian dollar means that:

B. one Australian dollar can buy more US dollars.

A. more Australian dollars are needed to buy one US dollar.

C. the Australian dollar has been devalued.

D. there has been a fall in the trade-weighted index.

An appreciation of the Australian dollar is most likely to:

A. increase the value of foreign currency in terms of the Australian currency.

B. make Australia less attractive to foreign investment.

C. lower the value of overseas reserves.

Which of the following will occur if the Reserve Bank of Australia increases domestic interest rates?

A. increased financial inflows leading to an appreciation

B. decreased financial inflows leading to a depreciation

C. decreased financial inflows leading to an appreciation

D. increased financial inflows leading to a depreciation

If the Australian dollar appreciated against the euro, then one result would be that:

A. Australian wool would be more expensive in Germany.

B. French tourists would receive more Australian currency in exchange for euros.

C. the demand for Australian goods by the Netherlands would increase.

Which of the following increases the demand for Australian dollars on the foreign exchange market?

D. interest and dividend payments from overseas to Australian firms

A. Australian imports of goods and services

B. interest and dividend payments to US firms

C. purchases of military equipment overseas by the Australian Government

A change in the value of the Australian dollar from US$0.75 to US$0.85 represents:

A. an appreciation of the Australian dollar.

B. a depreciation of the Australian dollar.

C. a devaluation of the Australian dollar.

D. an appreciation of the US dollar.

Everything else being equal, for products priced in Australian dollars, a fall in the exchange rate value of the Australian dollar:

A. will raise the price of imported goods and services in Australian dollars in Australia.

B. will lower the price of exports from Australia in Australian dollar terms.

C. will lower the price of exports from Australia in both Australian dollar and local currency terms.

D. will lower the price of imported goods and services in Australia in both Australian dollar and overseas currency terms.

Everything else being equal, a rise in the sale of exports to Asia would be reflected in:

C. a rise in the foreign exchange value of the Australian dollar.

A. a fall in the value of the Australian dollar.

D. a rise in interest rates in Australia.

Under a System of floating exchange rates, a shift to the right in the demand curve for the Australian dollar will:

B. Cause the Australian dollar to appreciate

A. Ultimately cause Australian exports to increase and its imports to fall

C. Cause other currencies to appreciate

D. Cause the Australian dollar to depreciate

The Reserve Bank of Australia can increase the level of the Australian dollar by:

C. Buying Australian dollar on the foreign exchange market

A. Reducing interest rates in the Australian economy

B. Increasing the level of government expenditure

D. Reducing the level of lending of domestic banks

Foreign Exchange Review

Authored by Lachlan Brennan

Business

12th Grade

Used 3+ times

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Depreciation of our currency tends to decrease the price of imported commodities, thereby making them more attractive to domestic consumers.

True

False

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

When an Australian business exports goods or services overseas, they expect to receive payment in Australian dollars.

True

False

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The US dollar is the major currency held as part of Australia’s official reserve assets.

True

False

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The exchange rate is the price of one country’s currency in terms of another currency.

True

False

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

A decrease in demand for Australian wool increases the demand for Australian dollars.

True

False

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

When Australian firms invest in China, the supply of Australian dollars falls on the foreign exchange market.

True

False

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

An appreciation of the Australian dollar will make imports cheaper.

True

False

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Foreign Exchange Review

Depreciation of our currency tends to decrease the price of imported commodities, thereby making them more attractive to domestic consumers.

When an Australian business exports goods or services overseas, they expect to receive payment in Australian dollars.

The US dollar is the major currency held as part of Australia’s official reserve assets.

The exchange rate is the price of one country’s currency in terms of another currency.

A decrease in demand for Australian wool increases the demand for Australian dollars.

When Australian firms invest in China, the supply of Australian dollars falls on the foreign exchange market.

An appreciation of the Australian dollar will make imports cheaper.

A fixed exchange rate is one that is determined by market forces.

Under a floating exchange rate, a decline in the value of the Australian dollar is known as a devaluation.

A managed exchange rate is controlled by the Australian Government.

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