ATAR Notes: Forum
VCE Stuff => VCE Business Studies => VCE Subjects + Help => VCE Economics => Topic started by: Elayg6 on October 27, 2018, 05:20:54 pm
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Can someone explain the concept of TWI and what influences it?
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The TWI is the AUD weighted against a group of other currencies (Primarily our major trading partners)...
It is influenced by the macroeconomic factors in the Australian economy, (the things affecting AD/AS) as well as the state of the economy among our trading partners.
Someone plz confirm this. I suck at Eco...
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To add to this if twi is appreciating then that means 1 AUD buys more currencies of our trade partners e.g. A high dollar means I can sell more coal to china at a higher price or buy more phones from china at a lower price... where as expected china has greatest weight in twi
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Yeah. I'd also focus more on what the changed to our TWI rate means for our economy rather than what can cause our TWI rate to change.
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A twi is actually more accurate as the strength of aud against other currencies relates to the strength of it's economy (You need aud to invest or buy goods from australia)... however if you looked at aud/USD over previous five years you may say Australia is doing bad but it's probably just us going gangbusters where the twi more accurately reflects position of country where it is weighted against a basket of major trade partners e.g. us China Japan great Britain and europe
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Probably won't need to know this but the currencies that are included are here: https://www.rba.gov.au/statistics/frequency/twi/twi-20171130.html, it popped up on multiple choice in one of my SACs and I wouldn't count on VCAA being nice so I'd remember at least what the top 3 are. Also, this has probably been said already but the TWI is affected pretty much only by demand and supply, which is pretty much the terms of trade in this case. When Australians import goods and services, we need to convert our currency to the currency of the seller, which increases the supply of AUD on the foreign exchange and therefore depreciates the dollar. When Australians export goods and services, foreign buyers need to convert their currency into AUD which increases demand for it and appreciates the dollar. When imports or exports slow, the opposite effects will happen.
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Some broad questions that i still dont get!!!!
What are the limitations of the TWI?
If the AUD appreciates, what happens to the TWI?
If the Renminbi increases in trade significance, how does this affect the TWI?
Help please!