Question 6

a.State four reasons why people need foreign currencies.

b.Indonesia is the world's biggest producer of palm oils. The global demand for palm oils increases and, at the same time Indonesia's central bank increases interest rates. In the Singapore's foreign exchange market, what happens to the demand for rupiahs, the supply of rupiahs and Singapore dollar against to Indonesian rupiah exchange rate?

c.Explain the "crowding-out effect". What action could the Central Bank take to reduce the crowding-out effect.

d.Discuss two links between the goods market and the money market.