According to the exchange rate market model, what happens to the US Dollar/Australian Dollar exchange rate when the interest rate in Australia increases? a. Australian financial assets become more attractive relative to US assets. As a result, the demand for Australian Dollars increases, and the Australian Dollar appreciates. b. Australian financial assets become more attractive relative to US assets. As a result, the supply for Australian Dollars increases, and the Australian Dollar appreciates. c. Australian financial assets become more attractive relative to US assets. As a result, the demand for Australian Dollars increases, and the Australian Dollar depreciates. d. Australian financial assets become more attractive relative to US assets. As a result, the supply of US Dollars increases, and the Australian Dollar depreciates.
According to the exchange rate market model, what happens to the US Dollar/Australian Dollar exchange rate when the interest rate in Australia increases? a. Australian financial assets become more attractive relative to US assets. As a result, the demand for Australian Dollars increases, and the Australian Dollar appreciates. b. Australian financial assets become more attractive relative to US assets. As a result, the supply for Australian Dollars increases, and the Australian Dollar appreciates. c. Australian financial assets become more attractive relative to US assets. As a result, the demand for Australian Dollars increases, and the Australian Dollar depreciates. d. Australian financial assets become more attractive relative to US assets. As a result, the supply of US Dollars increases, and the Australian Dollar depreciates.
Chapter29: International Finance
Section: Chapter Questions
Problem 8P
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. According to the exchange rate market model, what happens to the US Dollar/Australian Dollar exchange rate when the interest rate in Australia increases?
a. Australian financial assets become more attractive relative to US assets. As a result, the demand for Australian Dollars increases, and the Australian Dollar appreciates.
b. Australian financial assets become more attractive relative to US assets. As a result, the supply for Australian Dollars increases, and the Australian Dollar appreciates.
c. Australian financial assets become more attractive relative to US assets. As a result, the demand for Australian Dollars increases, and the Australian Dollar depreciates .
d. Australian financial assets become more attractive relative to US assets. As a result, the supply of US Dollars increases, and the Australian Dollar depreciates.
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