If, in 2020, AU$1 = 1.5 euro, and in 2021, AU$1 = 2.0 euro, which of the following statements would be true? Question 2 Answer a. More Australian tourists will find it more expensive to travel to Europe. b. More Australian will stay home as visits to Europe become more expensive. c. Australian will import fewer products from Europe. d. Australians will export fewer products to Europe.
Question
If, in 2020, AU1 = 2.0 euro, which of the following statements would be true? Question 2 Answer
a. More Australian tourists will find it more expensive to travel to Europe.
b. More Australian will stay home as visits to Europe become more expensive.
c. Australian will import fewer products from Europe.
d. Australians will export fewer products to Europe.
Solution
The correct answer is:
c. Australians will import fewer products from Europe.
Here's why:
If the value of the Australian dollar (AU$) increases against the euro (from 1.5 to 2.0), it means that Australians can now buy more with the same amount of their currency. This makes European goods cheaper for Australians, not more expensive. Therefore, it's more likely that Australians will import more products from Europe, not fewer.
The other options (a, b, and d) are incorrect because they suggest that Europe has become more expensive for Australians, which is not the case if the value of the Australian dollar has increased.
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