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The difficulties of international trade can be seen when potential suppliers are not located in Australia. Comparisons are more difficult because the evaluation process is

The difficulties of international trade can be seen when potential suppliers are not located in Australia. Comparisons are more difficult because the evaluation process is complicated. To make such comparisons, the Australian buyer can check the appropriate exchange rate quotation in the foreign exchange market. One of the roles of a country's central bank is to influence the value of its currency relative to other currencies. The equilibrium exchange rate of a given currency is determined by the supply of and demand for the currency. Table 5.0 shows an initial equilibrium exchange rate of 0.60/$ for dollars that are being exchanged for British pounds in foreign exchange markets. Suppose Australian government decides this equilibrium exchange rate is contributing to a deficit in Australian current account with England.

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