QUESTION 3 What will happen when there is a decrease in the relative rate of productivity...
QUESTION 3
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What will happen when there is a decrease in the relative rate of productivity growth in Australia compared to other countries in the long run?
Production costs will fall relative to other countries and the AUD will appreciate against other currencies.
Production costs will rise relative to other countries and the AUD will depreciate against other currencies.
Production costs will rise relative to other countries and the AUD will appreciate against other currencies.
Production costs will fall relative to other countries and the AUD will depreciate against other currencies.
Exchange rates of AUD will be unaffected by changes in the relative rate of productivity growth in Australia.
Homework Answers
A decrease in the relative rate of productivity growth in Australia compared to other countries in the long run would mean that:
- Production costs will rise relative to other countries and the AUD will depreciate against other currencies. (higher prices would lead to depreciation of domestic currency)
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