2003 Economics HSC Past Paper Help! (1 Viewer)

[SGSII]

Hi Guys
I came across a few questions that I didnt know how to answer:
Briefly explain why an exchange rate can move in the opposite direction to the Trade Weighted Index
Explain the likely impact on Australia’s Balance of Payments of the decline in the Trade Weighted Index
Any help is good help!
Thanks guys

 

[SharkeyBoy]

I'll answer the first one:
The exchange rate (ER) can move in the opposite direction to the TWI because the ER is only a comparison between two countries. If one country that is being compared to Australia suffers a massive depreciation, but the general trend in the global economy is an appreciation, the ER and TWI will move in opposite directions. Hope it helps.

 

[SGSII]

Ooh Thank you!
Ive also got another one:
Explain the relationship between net income in the current account and the capital and financial account

 

[Traveller0901]

Ooh Thank you!
Ive also got another one:
Explain the relationship between net income in the current account and the capital and financial account

The net income deficit within the current account is caused from the public & private sectors borrowing overseas from the k & financial account perpetuating the cad.