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29. Australia and the USA are trading partners, and both countries operate floating exchange regimes. a. Suppose Australia's inflation rate becomes higher than USA's inflation

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29. Australia and the USA are trading partners, and both countries operate floating exchange regimes. a. Suppose Australia's inflation rate becomes higher than USA's inflation rate. Discuss how higher relative Australian inflation rate would impact the Australian dollar (AUD) and the USD. Illustrate your answer with a clearly labelled demand and supply diagram of the Australian dollar. What would be the impact on Australia's NX? b. Suppose Australia's real GDP growth rate becomes higher than USA's real GDP growth rate. Discuss how higher relative Australian real GDP growth rate would impact the Australian dollar (AUD) and the USD. Illustrate your answer with a clearly labelled demand and supply diagram of the Australian dollar

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