Economics Flashcard on Demand and Supply Curves

Front

What does the demand curve for AUD represent?

Back

The quantity of AUD that foreign buyers are willing to buy

Answer explanation

The demand curve for AUD illustrates the quantity of AUD that foreign buyers are willing to buy at various price levels, reflecting their demand for the currency in the foreign exchange market.

Front

What effect does an increase in Australian exports have on the AUD demand curve?

Back

Demand shifts right

Answer explanation

An increase in Australian exports raises demand for AUD as foreign buyers need to purchase AUD to pay for these exports. This results in a rightward shift of the AUD demand curve.

Front

What does an expectation of future AUD appreciation do to the demand curve?

Back

Demand shifts right

Answer explanation

An expectation of future AUD appreciation increases demand for AUD now, as people want to buy it before it becomes more expensive. This causes the demand curve to shift right.

Front

Effect on AUD supply curve when Australian interest rates decrease?

Back

Supply shifts right

Answer explanation

A decrease in Australian interest rates makes investments in Australia less attractive, leading to an increase in AUD supply as investors seek higher returns elsewhere. Thus, the AUD supply curve shifts right.

Front

How does an increase in foreign investment in Australia affect the AUD demand curve?

Back

Demand shifts right

Answer explanation

An increase in foreign investment in Australia raises demand for AUD as investors need the currency to invest. This increased demand shifts the AUD demand curve to the right.

Front

What happens to the AUD demand curve with a decrease in foreign investment?

Back

Demand shifts left

Answer explanation

A decrease in foreign investment reduces the demand for AUD, as fewer investors need the currency to invest in Australia. This leads to a leftward shift in the AUD demand curve.

Front

How does higher inflation in Australia affect the AUD demand curve?

Back

Demand shifts left

Answer explanation

Higher inflation in Australia decreases the purchasing power of the AUD, leading to reduced demand for the currency. This causes the demand curve for AUD to shift left.

Front

What happens to the AUD supply curve with expectations of future AUD appreciation?

Back

Supply shifts left

Answer explanation

When there are expectations of future AUD appreciation, investors are less willing to supply AUD now, anticipating higher value later. This leads to a leftward shift in the AUD supply curve.

Front

What causes a movement along the demand or supply curve for AUD? Options: A change in the exchange rate itself, Changes in exports, Changes in interest rates, Changes in investment flows

Back

A change in the exchange rate itself

Answer explanation

A change in the exchange rate itself causes a movement along the demand or supply curve for AUD, as it directly affects the price of AUD in foreign currency, influencing demand and supply dynamics.

Front

What happens to the supply curve when there is a depreciation of AUD? Options: Movement down along the supply curve, Movement up along the supply curve, Shift to the right, Shift to the left

Back

Movement down along the supply curve

Answer explanation

When the AUD depreciates, it makes exports cheaper and imports more expensive. This typically leads to an increase in quantity supplied, resulting in a movement down along the supply curve, not a shift.