If foreign investment in Australian assets increased, we would expect the demand for Australian dollars to ________ and the dollar to ________.
A)decrease; depreciate
B)decrease; appreciate
C)increase; depreciate
D)increase; appreciate

Question

Quizplus · Accepted Answer

When there is an increase in foreign investment in Australian assets, there will be a higher demand for Australian dollars, leading to an increase in its value relative to other currencies. This means that the Australian dollar would appreciate. Therefore, option D (increase; appreciate) is the correct answer.

If Foreign Investment in Australian Assets Increased, We Would Expect