1. Suppose India follows China and accelerates its industrialization. For India, this will:

A. Decrease imports and raise net exports

B. Increase imports and lower net exports

C. Increase imports and increase domestic investment

D. Decrease imports and decrease domestic investment

2. Suppose India follows China and accelerates its industrialization. For Australia, this will:

A. Decrease exports and decrease net exports

B. Increase exports and increase net exports

C. Increase exports and decrease domestic investment

D. Decrease exports and increase domestic investment

3. Suppose the foreign exchange market is initially in equilibrium. Suppose also that foreigners then increase their demand for Australian goods and services by AUD 100 million (an exogenous change). The final increase in demand for Australian goods and services by foreigners will:

A. Be higher than AUD 100 million due to the appreciation of the AUD

B. Remain unchanged at AUD 100 million

C. Be lower than AUD 100 million due to the appreciation of the AUD

D. Be higher than AUD 100 million due to the depreciation of the AUD

4. If the AUD appreciates, then the value of Australia’s imports will RISE if the price elasticity of demand for Australian goods and services is:

A. Less than one

B. More than one

C. Equal to one

D. All of the above

5. According to the article by Vanessa Desloires, Australia’s exchange rate has been affected by a variety of global factors. This is because Australia uses a floating exchange rate. Supposing that Australia enters a recession, Australian interest rates are lowered, so causing Ki into Australia to fall. The AUD exchange rate can assist the Australian economy’s recovery from the recession by:

A. Depreciating and reducing the balance of trade

B. Depreciating and increasing the balance of trade

C. Appreciating and reducing the balance of trade

D. Appreciating and increasing the balance of trade