Australian Wine Exports to the Market of the USA Assignment

Australian Wine Exports to the Market of the USA - Assignment ExampleIn this market, when the supply of one property decreases, the demand for the other currency simultaneously falls. When the Australian exports of wine to the US market decrease, this indicates that US citizens are supplying little US dollars to buy less of Australian dollars in exchange which are required to buy a smaller quantity of exports. This, in turn, will mavin to a depreciation in the foreign exchange value of the Australian dollar. (Jackson, McIver, Wilson 2011)(2) A strong Australian dollar indicates a high value of the currency with respect to the other currencies of its partner commerce peoples. When the Government maintains a strong currency, it prevents the currency from evaluating. Under the Aggregate Expenditure ModelIf Australia maintains a strong currency, its trading partners will be discouraged to buy Australian exports. Therefore, the value of the countrys exports will fall. Thus in equatio n (1), X falls. Since X is an burning(prenominal) determinant in the Aggregate Expenditure of an economy, a decrease in X causes the AE of Australia to fall. The AE, in turn, determines the GDP of the country. With a decrease in AE, the GDP of the nation will decrease. A decrease in the GDP cannot be a healthy sign for an economy. Thus, if Australia maintains a strong currency this might prove to be a threat to the overall economy of the nation.In the short run, this will have a positive way out on the Balance of Payments (BOP). The advertisement iron out will make Australias regional wines more attractive to the US customers and they will buy more of this wine. Thus Australias export of wine rises, i.e X rises. In the short run, exports will increase in Australias Balance of Payments and the exchange value of the Australian dollar will appreciate.In the long run, the effect of an increase in investment will be ambiguous.