Task Briefly summaries the main issues discussed in this article. Using the Demand and Supply model of exchange rate determination explain how the AUD-USD exchange rate is determined by the market forces. Using nominal exchange rate data from Reserve Bank of Australia and graphs (monthly data of last three years) analyze the movement in the AUD-USD exchange rate. What factors do you think contribute to the behavior of the exchange rate? Summaries the main driving factors behind the recent movement in AUD discussed in this article, including manufacturing PMIs, commodity prices and interest rates. Using the demand and supply framework discussed in part (a), explain how they impact the demand and/or supply in the AUD-USD market. Assume that you are an Australian firm exporting software products to the United States. Explain the impact of this recent drop in the AUD on your business. Speaking more generally, how will the depreciation of AUD affect Australian economy? Provide a detailed discussion. Suppose that the exchange rate stabilizes at US 70C per AUD. What actions could the Reserve Bank of Australia take in order to bring the exchange rate to US 73C per AUD, and what side effects might this action have on the Australian economy?
Subject Name: Economics
Level: Undergraduate
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