Quick Questions (1 Viewer)

[taggs-sasuke]

Hey, I have two quick questions.

1. Why is it when the Australian exchange rate decreases, Australian interest rates also decrease?

2. If the present rate of unemployment equals the natural rate of unemployment, why is it that cyclical unemployment must equal zero?

Thanks

 

[Justin123456789]

q2. well the natural rate of unemployment is when there is no cyclical unemployment, so obviously it has to be @ zero in order to have a natural rate of unemployment.

 

[wolfhunter2]

Hey, I have two quick questions.

1. Why is it when the Australian exchange rate decreases, Australian interest rates also decrease?

Thats not a set in stone fact, what you could argue is that the RBA would want to maintain stability in the domestic cash market. Thus intervening by decreasing interest rates and hindering the massive inflow of foreign capital that may occur. This has the advantage of also reducing our foreign liabilities, benefiting our future economic growth.

Hope that helps,