International Economics

1. Explain international trade in context of tourism. What was the contribution of tourism exports to Australia's economy in both $ and percentage terms during 2019-20 period?

2. As of 2019-2020, did Australia have a tourism trade deficit or surplus? Support your response with relevant figure noting accurate amount and the trend over the last decade. What are the key factors responsible for the noted trade balance?

3. Explain how Australia's current low inflation rate influences the lower exchange rate of 1AUD compared to 1USD. How do the changes in exchange rate in turn influence tourism imports and exports?

4. Describe how the equilibrium exchange rate is determined through the interaction of supply and demand for a currency in the foreign exchange market. Support your response with relevant graphs. In your explanation use:

USD/AUD as traded currency with AUD as the base currency

The current exchange rate as equilibrium exchange rate

Use appreciation and depreciation of 10% each on the current exchange rate to explain changes in supply and demand and equilibrium.

5. Explain graphically the change in the equilibrium exchange rate if Australian government increases taxes on foreign investment.