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Added on  2021-04-24

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Running head: ECONOMICS FOR PROFESSIONALSEconomics for professionalsName of the student:Name of the University:Author note

1ECONOMICS FOR PROFESSIONALSTable of ContentsAnswer a:.........................................................................................................................................2Answer b:.........................................................................................................................................4Answer c:.........................................................................................................................................6Answer d:.........................................................................................................................................8Answer e:.........................................................................................................................................9Reference:......................................................................................................................................11

2ECONOMICS FOR PROFESSIONALSAnswer a:21st century is the era of internationalisation, where countries are getting attached witheach other for mutual economic development (Altback and Wit 2015). For instance, Australiabeing one of the developed nations performs substantial amount of trade with the countries likeUK, US and others (Cooper 2014). In order to shape the economy of the nations, internationaltrade, plays an important role through determining the level of future growth. Exchange rate, onthe other hand being the comparative value of domestic currency against the foreign currencytakes a vital role in order to determine the flow of international trade. When it comes toAustralia, then it can be seen that the country has a moderate exchange rate compared to the USdollar that makes it one of the stable economy in the world(Gabaix and Maggiori 2015). Determining the exchange rate is one of the toughest jobs due to eve evolving marketscenario, however, over the period researchers has came with various solution (Corazza andMalliaris 2015). Among many, supply and demand framework can be considered as the simplestyet effect tool to determine the foreign exchange rate market. (Gilpin 2016) According to thegiven requirement for this task, below is the analysis of Australia – US exchange rate throughsupply and demand framework as shown in figure 1:The figure below highlights the demand and supply framework of Australian exchangerate, where the demand curve “D” is drawn, which is based on the derived demand of theAustralian goods and services. On the other hand Supply curve “S” in figure 1, has been drawnconsidering the importable aggregate demand (Caballero, Farhi and Gourinchas 2016). Let theinitial equilibrium takes place at point E, where the AUD/USD exchange rate is 80C USDagainst every unit of AUD and the AUD demand is Q. Now if there is rise in the demand of theAUD to the US citizens, then it will shift the demand curve D to rightward D1 position. At D1,

3ECONOMICS FOR PROFESSIONALSequilibrium occurs at E1, where the AUDUSD is hypothetically as high as 81C USD for eachunit of AUD. On the flip side, if there is fall in the demand of AUD to the US citizens, then itwill lead to fall in demand from D to D2. At the new demand situation, equilibrium occurs at E2,where AUD hypothetically fell to 77C USD for each unit of AUD. Thus, depending upon thedemand and supply framework, AUD/USD exchange can easily be explained as well the factorsthat can alter the same (Jammazi et al. 2015)Figure 1: determination of exchange rate through supply and demand modelSource: (Created by Author)Considering the explanation of foreign exchange rate scenario of the Australia – UStrade, it can be stated that Australia is one of the developed nations that follows the flexiblemarket system (Wiedmann et al. 2015). Under various circumstances foreign exchange ofAustralia can get altered and supply and demand can point those factors easily. Factors that canlead to the fluctuation in the Australian dollar are as follows:

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