Use the Information Below to Answer the Following Questions

question 126

Multiple Choice

Use the information below to answer the following questions.
Fact 25.3.1 Aussie Dollar Hit by Interest Rate Talk
The Australian dollar fell against the U.S. dollar to its lowest value in the past two weeks. The CPI inflation rate was reported to be generally as expected but not high enough to justify previous expectations for an aggressive interest rate rise by Australia's central bank next week.
Source: Reuters, October 28, 2009
-Consider Fact 25.3.1. Australia's exchange rate policy is a flexible exchange rate. An expected rise in the Australian interest rate with no change in the Canadian interest rate, everything else remaining the same, ________ the demand for Australian dollars and ________ the supply of Australian dollars.

• A)increases; increases
• B)increases; decreases
• C)decreases; decreases
• D)decreases; increases
• E)does not change; does not change

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Definitions:

Cacao

The seed from which chocolate is made and is the product of the cacao tree, native to the Americas. It is also used in making cocoa butter and cocoa powder.

Commercial Use

The utilization of goods or services for business purposes, often involving selling or profit-making activities.

Coins

Metal pieces that are issued by governments as money, typically stamped with designs and inscriptions indicating their value.

Money

A means of exchange used to make payments for other goods and services as well as to measure their value.