Show the Impact That a Relative Increase in Australian Interest

question 132

Essay

Show the impact that a relative increase in Australian interest rates will have on the exchange rate of Chinese yuan for dollars. Explain what this will do to the level of goods imported from China to Australia and discuss the effect it will have on Australia's current account.
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Definitions:

Inelastic Demand

A market condition where the demand for a product does not change significantly when its price changes.

Elastic Supply

Describes a situation where the quantity supplied of a good changes significantly when its price changes.

Tax Burden

The measure of the financial charge or impact of taxes on an individual or a corporation.

Excise Tax

A tax on specific goods or services, such as tobacco, alcohol, and gasoline, designed to raise revenue and/or discourage consumption of certain products.