It May Be Argued That a Factor That Can Affect

Multiple Choice

It may be argued that a factor that can affect the equilibrium exchange rate is changes in relative income growth between countries.If the growth in Australian national income rises substantially,while that in the USA remains stagnant,which of the following impacts would you expect to occur?

A) A new equilibrium exchange rate may see the AUD depreciate.
B) The relative strength of import growth and foreign investment inflows will impact upon the equilibrium exchange rate.
C) A new equilibrium exchange rate may see the AUD appreciate.
D) All of the given answers are correct.