a) Explain with an example what it means when the Australian dollar has appreciated against your home currency. (If you are a local student, use the New Zealand dollar as an example which, the exchange rate is A$1=NZ$1.05).

(2 marks)

b) If a company imported wine from Chile to sell in Australia, describe how its competitiveness is affected if the exchange rate of one Australian dollar to Chilean peso changed from 580 pesos to 480 pesos.