If the Australian dollar depreciates against the US dollar, holding other factors constant, which one of the followings may likely happen?

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Question: If the Australian dollar depreciates against the US dollar, holding other factors constant, which one of the followings may likely happen?

Option a. All of these
- This choice asserts that every listed effect occurs. To evaluate it, we must verify each of the other statements. If any one statement among b, c, or d is incorrect, then option a cannot be correct.

Option b. US goods cost more in Australia.
- When the Australian dollar depreciates relative to the US dollar, Australian buyers need more Australian dollars to purchase the same amount of US goods (or, equivalently, each US good becomes more expensive when priced in AUD). This is a standard consequence of a depreciation of the domestic currency against a foreign currency: imports priced in the foreign currency become costlier for residents using the depreciating currency. Therefore, US goods would cost more in Australia in AUD terms.

Option c. US exports are less competitive in Australia
- Competitiveness for exports depends on relative prices and demand. If the AUD weakens against the USD, US goods become more expensive in AUD terms, making them less attractive to Australian buyers and potentially reducing demand for US exports in Australia. This aligns with the idea that a depreciation of AUD can reduce the price competitiveness of foreign (US) goods in Australia, assuming other factors constant.

Option d. US travellers are finding it less expensive to travel to Australia
- This statement would imply that travel costs for US travelers decrease. However, with the AUD depreciating, prices in AUD rise relative to USD, making travel to Australia more expensive for US travelers (since they would pay more USD for the same AUD-denominated expenses). Thus, this option is incorrect under the stated condition.

Putting the pieces together, option a would require all of b, c, and d to be true. Since d is not true, a cannot be correct. The analysis shows that b is true and c is true, whereas d is false. The question asks which may likely happen, so the correct interpretation is that both b and c are plausible consequences, while d is not. The reasoning above highlights why each option stands as it does and why the umbrella choice (a) does not hold because it includes a false statement (d).

If the Australian dollar depreciates against the US dollar, holding other factors constant, which one of the followings may likely happen?Single choice

Similar Questions

Which of the following events may result in the Appreciation of AUD against the U.S.dollar?

Based on the answer to your previous question, this means that in the long run the British pound is [ Select ] appreciating maintaining a constant exchange rate depreciating vis-à-vis the US dollar in real terms.

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