Consider a Textbook Situation in Which Australia and the USA

question 71

Multiple Choice

Consider a textbook situation in which Australia and the USA are experiencing similar low rates of inflation.Then if the rate of inflation were to increase significantly in USA,relative to the Australia,which of the following impacts would be expected to occur?

• A) The prices of goods and services in USA would decrease in USD terms.
• B) Australian demand for USA goods and services would decline.
• C) There should be an increase in Australian demand for the US dollar.
• D) There would be an increase in the supply of AUD in the FX markets.

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