Outline one problem associated with using a bilateral measurement of relative exchange rates?Not so much hard as it is specific, but what would you write? Correct answer? Even though it only requires you to to outline ONE, what are others?Cheers.
-
YOU can help the next generation of students in the community! Share your trial papers and notes on our Notes & Resources page
Hard Short Answer Question - HELP (1 Viewer)
- Thread starter Spoken12
- Start date
deswa1
Well-Known Member
- Joined
- Jul 12, 2011
- Messages
- 2,256
- Gender
- Male
- HSC
- 2012
Look at say the AUD/USD -> this only measures Australia and US etc. But if this exchange rate appreciates, we've got no clue if the AUD is becoming stronger or the USD is becoming weaker. Like it possible for the AUD to be appreciating against the USD but depreciating against every single other currency in the world so this is obviously a problem which is why they created the trade weighted index blah blah blah
you could say
bilateral e.r does not reflect the true value of the dollar.-because the aud may be weighted to another currency that isnt one of its major trading partners.
and also say the trade weighted index is better
a twi e.r measurement is better because it shows the 'true' value of the AUD by measuring the aud against a basket of australia's MAJOR trading partners, weighted according to its SIGNIFICANCE to australia's trade..
correct if wrong
bilateral e.r does not reflect the true value of the dollar.-because the aud may be weighted to another currency that isnt one of its major trading partners.
and also say the trade weighted index is better
a twi e.r measurement is better because it shows the 'true' value of the AUD by measuring the aud against a basket of australia's MAJOR trading partners, weighted according to its SIGNIFICANCE to australia's trade..
correct if wrong