AUD and internal stability? (1 Viewer)

[SGSII]

Hi guys,
How would appreciation of the Australian dollar affect internal stability?
Thanks

 

[Shazer2]

An appreciation of the dollar makes Australia's exports less competitive, therefore reducing demand. This leads to an oversupply and therefore reduces the price and inflation.

 

[SGSII]

Thanks!

 

[NWO]

Nooo.. An appreciation of the AUD will mmeans higher TOT = higher export prices = reduces CAD?? Cant u say that as well?

 

[Menomaths]

Hi guys,
How would appreciation of the Australian dollar affect internal stability?
Thanks

If one truly appreciates the Australian dollar, they will work hard to earn more of the Australian dollars. Earning more Australian dollars doesn't necessarily mean internal stability, as diseases can arise from various sources. But, having a lot of Australian dollars means you can go to doctors, therapists etc to amend your internal disorders thereby stabilizing your internalities.
Hope this helps.
Meno M.Eco

 

[Magical Kebab]

Nooo.. An appreciation of the AUD will mmeans higher TOT = higher export prices = reduces CAD?? Cant u say that as well?

thats external stability.
internal stability is inflation, Sahzer2's explanation sounds good

also not sure if ur right on that, appreciation of AUD will make our purchasing power increase so we import more, increasing the CAD

 

[Randox]

Inefficient industries see a decline IC. As such, they may shut down also leading to higher levels of unemployment (particularly structural). Also what Shazor 2 said.

 

[Renegader]

As far as I know, "internal stability" involves inflation, unemployment and economic growth. So the effects of an appreciation (an appreciation, according to the AD formula has a contractionary effect on the economy) on these:

Inflation - a reduction in imported (pay less = lower price) and cost push(cheaper to purchase inputs o/s) inflation
Economic growth - a reduction in economic growth (AD) through decreased competitiveness for exporters = less X as well as more imports flowing out of the economy as it's cheaper to purchase overseas and thus M will increase.
Unemployment - as a result of firms becoming less competitive, as labour is a derived demand, workers will lay off workers and thus increase unemployment

 

[Menomaths]

If one truly appreciates the Australian dollar, they will work hard to earn more of the Australian dollars. Earning more Australian dollars doesn't necessarily mean internal stability, as diseases can arise from various sources. But, having a lot of Australian dollars means you can go to doctors, therapists etc to amend your internal disorders thereby stabilizing your internalities.
Hope this helps.
Meno M.Eco

omfg hahahahahah

 

[elkedag]

Also structural change through Dutch disease - an appreciating currency will promote domestic businesses which have imports as a large part of their operations, and reduce the competitive advantage of export-competing firms such as manufacturing. Look at the 2013-14 stats on unemployment on manufacturing-heavy South Australia (1% above the national average), and also the recent change in the composition of Australian exports and contributors of GDP.