3. Exchange rates [LO 21.1] The exchange rate for the Australian dollar is currently one US dollar...

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3. Exchange rates [LO 21.1] The exchange rate for the Australian dollar is currently one US dollar buys A$1.40. This exchange rate is expected to rise by 10 per cent over the next year.

1. Is the Australian dollar expected to get stronger or weaker relative to the US dollar?

2. What do you think about the relative inflation rates in the United States and Australia?

3. What do you think about the relative nominal interest rates in the United States and Australia? Relative real rates?

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