Question 1: If Australian inflation exceeds US inflation over the next year, would you expect the dollar to appreciate or depreciate relative to the US dollar?

Question 2: Over the past decade, an increasing number of Chinese have decided to invest in Australia. That is, Australian net foreign investment in China is negative.

A)If the Chinese decided they wanted to buy more Australian assets, what would happen in the Australian market for loanable funds? In particular, what would happen to Australian interest rates, Australian saving and Australian investment?

B)What would happen in the market for foreign-currency exchange? In particular, what would happen to the value of the dollar and the Australian balance of trade?