Impact of $ Changes on the Economy

Question 1

Appreciation - Positive Impacts

Answer 1

Australian consumers have increased purchasing power

Decreases servicing costs, improving CAD

Question 2

Appreciation - Negative Impacts

Answer 2

Australian exports become more expensive, worsening CAD

Imports will be less expensive, worsening CAD

Question 3

Depreciation - Positives

Answer 3

Australian exports become cheaper, improving CAD

Increases value of income earned on foreign investments, improving CAD

Question 4

Depreciation - Negatives

Answer 4

Australian consumers have reduced purchasing power

Increases servicing costs, worsening CAD

Question 5

What is the valuation effect?

Answer 5

Where a change in the value of the currency causes an immediate change in the A$ value of foreign debt that is borrowed in foreign currencies or foreign assets held by Australians