Reference no: EM132273048

Consider the following five statements:

i). There is conclusive evidence that an increase in national output growth and income will result in an immediate and sustained appreciation of the exchange rate.

ii). There is no relationship between interest rates and exchange rate, because interest rates reflect the current yield on financial assets, whereas exchange rates are the relative prices of different currencies.

iii). All else being constant, it is to be expected that a currency will appreciate if there is an increase in real rates of return, relative to those in other countries.

iv). Movements in commodity prices within Australia typically provide a reasonable indicator of AUD/USD exchange rate movements.

v). As Australia maintains a fixed exchange rate, tied to the USD, there is no need for the Reserve Bank to intervene in the FX market.

How many of these statements are true and how many are false?

Select one:

a. 3 statements are true and 2 are false

b. 2 statements are true and 3 are false

c. 4 statements are true and 1 is false

d. 1 statement is true and 4 are false