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Part 2: The United Kingdom and Australia are trade partners, each with a current account balance of zero. Australia's national income increases relative to the United Kingdom. (e) On a fully labeled foreign exchange market graph, illustrate the impact of the relative change in national income on the British pound sterling (GBP) with the price in terms of Australian dollars (AUD). (f) Based on your response to part (e), has the Australian dollar appreciated or depreciated? (g) Assume the new exchange rate is 2 AUD per 1 GBP. Calculate the price of the Australian dollar in terms of British pounds sterling.

Part 2: The United Kingdom and Australia are trade partners, each with a current account balance of zero. Australia's national income increases relative to the United Kingdom. (e) On a fully labeled foreign exchange market graph, illustrate the impact of the relative change in national income on the British pound sterling (GBP) with the price in terms of Australian dollars (AUD). (f) Based on your response to part (e), has the Australian dollar appreciated or depreciated? (g) Assume the new exchange rate is 2 AUD per 1 GBP. Calculate the price of the Australian dollar in terms of British pounds sterling.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Part 2: The United Kingdom and Australia are trade partners, each with a current account balance of zero. Australia's national income increases relative to the United Kingdom. (e) On a fully labeled foreign exchange market graph, illustrate the impact of the relative change in national income on the British pound sterling (GBP) with the price in terms of Australian dollars (AUD). (f) Based on your response to part (e), has the Australian dollar appreciated or depreciated? (g) Assume the new exchange rate is 2 AUD per 1 GBP. Calculate the price of the Australian dollar in terms of British pounds sterling. Part 3: Respond succinctly and precisely to each of the following scenarios. Hint: these are beginning with a currency value change; start from there, and do not consider what caused the change. (h) The countries Zeta and Epsilon are trade partners. The currency of Epsilon depreciates relative to the currency of Zeta. Ceteris paribus, how will this change affect: (i) Epsilon's net exports? Explain. (ii) the capital and financial account of Epsilon?
Transcribed Image Text:Part 2: The United Kingdom and Australia are trade partners, each with a current account balance of zero. Australia's national income increases relative to the United Kingdom. (e) On a fully labeled foreign exchange market graph, illustrate the impact of the relative change in national income on the British pound sterling (GBP) with the price in terms of Australian dollars (AUD). (f) Based on your response to part (e), has the Australian dollar appreciated or depreciated? (g) Assume the new exchange rate is 2 AUD per 1 GBP. Calculate the price of the Australian dollar in terms of British pounds sterling. Part 3: Respond succinctly and precisely to each of the following scenarios. Hint: these are beginning with a currency value change; start from there, and do not consider what caused the change. (h) The countries Zeta and Epsilon are trade partners. The currency of Epsilon depreciates relative to the currency of Zeta. Ceteris paribus, how will this change affect: (i) Epsilon's net exports? Explain. (ii) the capital and financial account of Epsilon?
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