Question

With Australia's current economic condition woth fiscal and monetary policy. What is the effectiveness of fiscal and monetary policies and their effect on the exchange rates?

Answer 1

As the effectiveness of fiscal policy it's affected the rate of interest, simultaneously investment spending affected by causing change in aggregate demand that leads to the changes in GDP..

On the other hand the monetary policy affect the money supply and as a change in money supply because of monetary policy leads to the changes in interest rate..

Fiscal and Monetary policy both affect the exchange rates in different ways. There are through income changes, price changes, and change in interest rates.

All of these factors decreases the exchange rates and need more foreign currencies to pay for certain goods. thus in a way it's affected the economic situation of a country..

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