The foreign-exchange market can be analysed using a supply and demand diagram. For example, the AUD/INR (Indian Rupee) market would show 1 AUD = 52.81 INR as the equilibrium price as at 24 September 2018

a.) Show the above AUD/INR exchange rate on a correctly labelled diagram.

b) What happens to the AUD/Yen exchange rate when the demand for imported Prius hybrid cars increases? Explain your answer. Show on a correctly labelled diagram.

c) Show on a correctly labelled diagram the impact of a decrease in Australian interest rate relative to the Japanese interest rate. What has happened to the AUD/Yen exchange rate?

d )Economists agree that free trade is better for all countries than protection such as import tariffs or export subsidies. Explain in relation to opportunity costs and comparative advantage.