Question 1 (5 marks)

1.1 Assume Australian interest rates fall relative to Malaysian interest rates. Other things being equal, how should this affect the (a) Australian demand for Malaysian ringgits, (b) supply of ringgit for sale, and (c) equilibrium value of the ringgit?

1.2 Assume the spot rate of the Indian rupee is A$0.0905. The expected spot rate one year from now is assumed to be A$0.0205. What percentage depreciation does this reflect?