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Economics

Home > Economics > Australia's place in the global economy > Determination of exchange rates

Exercise 3 Answers

1. There are a number of different foreign exchange markets to buy and sell currencies.
   True

2. Under a floating exchange rate system the value of the Australian dollar determined by the Reserve Bank.
   False

3. Under a fixed exchange rate system a revaluation would tend to increase the volume of imports.
   True

4. Under a flexible or floating exchange rate system the balance of payment is zero.
   True

5. An appreciation of the Australian dollar increases the price of imports.
   False

6. A depreciation of the Australian dollar encourages overseas travel by Australians.
   False

7. Under a fixed exchange rate system a country needs to reduce international reserves to prevent a currency depreciation.
   True

8. Speculation of an appreciation in the value of the Australian dollar tends to increase the demand for the Australian currency.
   True

9. A depreciation of the Australian dollar makes exports dearer and imports cheaper.
   False

10. Intervention by the RBA in the market to alter the exchange rate is known as a dirty float or a managed float.
    True

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