Principles of Economics - Assignment Sample
Added on 2021-04-16
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Running head: PRINCIPLES OF ECONOMICSPRINCIPLES OF ECONOMICSName of the StudentName of the UniversityAuthor’s Note
1PRINCIPLES OF ECONOMICSExecutive SummaryThe aim of this report is to highlight on the fluctuations of exchange rate and it affect on thebusiness organizations and economy. It also highlights on the factors affecting Australianexchange rate and US dollar. This study also focuses on the impact of depreciation of Australiandollar on the organizations. In addition, the impact of depreciation of AUD on the forms is alsoexplained in this study. The last section provides an overview on the actions taken by ReserveBank of Australia for stabilizing the exchange rate and its impact on the Australian economy.The whole analysis has been done on the given case study.
2PRINCIPLES OF ECONOMICSTable of ContentsIntroduction......................................................................................................................................3Answer a..........................................................................................................................................3Answer b..........................................................................................................................................5Answer c..........................................................................................................................................7Answer d..........................................................................................................................................9Answer e........................................................................................................................................10Conclusion.....................................................................................................................................11References......................................................................................................................................12
3PRINCIPLES OF ECONOMICSIntroductionThe present report highlights on the case study focusing on the Australian dollar slidingback to 70 US cents. Based on this case study, the following questions are answered. The firstquestions reflect on the determination of AUD exchange rate in the Forex market using thedemand and supply framework. The second question analyzes the movement of AUD in relationto that of USD. The third question discusses about the driving forces that affect the AUD/USDexchange rate. The fourth question elucidates on the influence of depreciation of Australiandollar on the firm. The last question focuses on the actions taken by the Reserve Bank ofAustralia for bringing the exchange rate back to US 80C AUD. Answer aExchange rate refers to a specific nation currency in terms of foreign currency. Thedemand –supply framework of determination of exchange rate indicates that equilibriumexchange rate varies when some of the factors that impact demand as well as supply conditionvaries. Unlike determination of price as well as quantity, the demand-supply model basicallyguides authorities to forecast this exchange rate in the next period. In addition, it also aids totrace different causes that impact the exchange rate of the nation and thereby directspolicymakers to measure the condition effectively. The determination of exchange rate of AUDin the forex market has been described below.The figure below represents the demand- supply model of the foreign exchange market inwhich the demand of currencies has been attained through demand of export of the nation whilethe supply has been determined through demand of its imports (Amiti, Itskhok and Konings
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