(a)
- Calculate the approximate change in Australia’s trade balance between August 2010 and August 2014. [2]
- Use a supply-and-demand diagram to illustrate how the movement in Australia’s trade balance over this period would be expected to affect the value of Australia’s exchange rate. [2]
- What additional information would be needed to measure the change in Australia’s current account on the balance of payments over this period? [2]
(b)[2]
Suggest a change in the prices of exports and imports that could explain the change in the Australian terms of trade between 2011 quarter 3 and 2014 quarter 2.
(c)[6]
Explain who in China would lose and who in China would benefit if China’s exchange rate were allowed to rise.
(d)[6]
Discuss whether lower interest rates in China or a rise in China’s exchange rate is more likely to help resolve Australia’s balance of payments problems.