In 2016 the Australian dollar Japanese Yen exchange rate is

In 2016 the Australian dollar - Japanese Yen exchange rate is given by $A 1 80 Yen. In 2017, this exchange rate is given by 1 Yen- $A 0.01. Which of the following statements is correct? a. Australian exports are cheaper in 2017 compared to 2016 b. Japanese exports are more expensive in 2017 compared to 2016. c. Japanese imports are more expensive in 2017 compared to 2016 d. Australian imports are more expensive in 2017 compared to 2016.

Solution

Answer:

1- The correct statement is :

d. Australian imports are more expensive in 2017 compared to 2016

Because value of $ has improved as compare to yen in 2017 so to import from Australia has become expensive.

2- When the RBA reduces the overnight cash rate, this leads to a reduction in home loan interest rates as well because:

d. the supply of bonds with longer maturities decreases and the demand for bonds with longer maturities increases.

3-Consider two countries, A and B. if country A has persistently high inflation compared to country B and purchasing power parity holds, then, everything else being equal, in the long run:

Country A’s currency will depreciate relative to country B’s currency

Due to the high inflation in country A as compare to country B, the value of currency of A country will reduce

4-If Okun’s beta is equal to 2 and the natural rate of output is 2500, then this economy is experiencing cyclical unemployment of:

b.-10%

5- The size of the multiplier in this economy is:

a.4

(Kf = 1/s+m; s= marginal propensity to save, m= marginal propensity to import )

6-In an economy experiencing deflation, other things being equal, it is most likely that :

b. there will be redistribution of wealth to borrowers

because to increase investments the interest rates will be reduced which will increase demand of money for investments in the economy and people will borrow more money

7- The real GDP must be equal to :    

b. $400 billion

(GDP deflator = nominal GDP /real GDP *100)