Explain how each of the following events affect the (i) Demand for AUD (Australian Dollar), (ii) Supply of AUD, and (iii) Exchange rate (value of AUD relative to other currency).

(Hint: You must analyse from the perspective of Australia and Australian dollars relative to other currencies).

Suppose that the European Union experiences an economic expansion, which causes a rise in income in the European Union relative to Australia. (0.75 marks)

Suppose the rest of the world increase their interest rates relative to Australia. (0.75 marks)

Suppose speculators believe that the value of the Australian Dollar will be low in the future relative to other currencies. (0.75 marks)

Suppose Australia faces relatively lower inflation compared with the rest of the world. (0.75 marks)