Australia produces natural resources (coal, iron ore, natural gas, and others), the demand for which has increased rapidly as China and other emerging economies expand.

a. Explain how growth in the demand for Australia’s natural resources would affect the demand for Australian dollars in the foreign exchange market.

b. Explain how the supply of Australian dollars would change.

c. Explain how the value of the Australian dollar would change.

d. Illustrate your answer with a graphical analysis.