ATECO Exchange Rate and Foreign Investment

An appreciation of the Australian dollar will most likely occur if there is

• a fall in domestic interest rates.

• an increase in demand for imports.

• a rise in the global price of iron ore.

• a large decrease in domestic investment expenditure.

Given the exchange rate of AUD 1 = EURO 0.65, what is the approximate cost of a 2500 EURO European holiday in AUD?

• $3846

• $3125

• $1625

• $6250

Which combination of factors is most likely to result in a decrease in Australia’s Trade Weighted Index?

• Decrease | Decrease

• Decrease | Increase

• Increase | Decrease

• Increase | Increase

An appreciation of the Australian dollar would be most beneficial for

• domestic importers of European cars.

• foreigners wanting to invest in Australia.

• domestic exporters of a price elastic commodity.

• domestic investors wanting to purchase Australian assets

If the trade weighted index appreciated whilst the Australian dollar depreciated against the Japanese Yen which one of the following options provides a valid explanation?

• A rise in Australia’s cash rate and an appreciation of the Yen

• A fall in Australia’s cash rate and a depreciation of the Yen

• A rise in Australia’s cash rate and a depreciation of the Yen

• A fall in Australia’s cash rate and an appreciation of the Yen

Australia’s total net foreign liability is

• public sector debt plus foreign ownership of Australian assets.

• total foreign investment in Australia plus repatriation of profits.

• foreign debt plus total foreign investment in Australia.

• Foreign liabilities minus foreign assets.

The main source of foreign investment in Australia is by

• China, USA and Japan.

• United Kingdom, China, and the Netherlands.

• United Kingdom, Japan and China

• USA, Belgium and United Kingdom.

A possible cause of an increase in foreign debt is:

• An upgrading of a country’s credit rating.

• Increased direct investment by multi-national corporations

• An increase in the international competitiveness of domestic industry.

• A rise in the current account deficit.

A likely short-term effect of the sale of a large Australian company, such as Qantas, to overseas buyers would be a rise in

• Foreign capital inflow and an appreciation of the Australian dollar.

• Foreign capital inflow and a depreciation of the Australian dollar.

• The current account deficit because Qantas’ profits will be sent overseas.

• Domestic interest rates as the sale would cause an increase in the demand for funds to pay for the purchase.

Which of the following is seen as a positive effect of foreign direct investment?

• An increase in liquidity of the financial sector

• An increase the level of foreign ownership of Australian industry

• Transfer of technology and skills to Australian industry

• An appreciation of the Australian dollar