If there is a change in the exchange rate between Australian Dollar and Papua New Guinea Kina from A$1= PGK0.25 to A$1= PGK0.35.

Question

which of the following is true:
A. PNG's import from Australia is expensive.
B. PNG's export to Australia is expensive.
C. Australia's export to PNG is expensive.
D. Australia's import from PNG is expensive.

Answer 1

To analyze the impact of the change in the exchange rate from A$1 = PGK0.25 to A$1 = PGK0.35, we can break down the implications of this change:

1. When the exchange rate changes from A$1 = PGK0.25 to A$1 = PGK0.35, the value of the Australian dollar in terms of Papua New Guinea Kina has increased. This means that it takes more Kina to purchase the same amount of Australian dollars than before.

2. For Papua New Guinea (PNG), this means that:

   • Imports from Australia become more expensive for PNG consumers and businesses, as they need to spend more Kina to buy Australian goods.
   • Exports to Australia become cheaper for Australians, as the Australian dollar is stronger compared to the Kina, making it less expensive for Australians to buy PNG goods.

3. Conversely, for Australia:

   • Exports to PNG are more expensive for PNG consumers and businesses, as they now have to use more Kina to purchase Australian goods.
   • Imports from PNG are cheaper for Australians, as it becomes less expensive to buy PNG goods with the stronger Australian dollar.

From this analysis:

• A. PNG's import from Australia is expensive. (True)
• B. PNG's export to Australia is expensive. (False; they are cheaper)
• C. Australia's export to PNG is expensive. (True)
• D. Australia's import from PNG is expensive. (False; they are cheaper)

Therefore, the correct statements are:

• A. PNG's import from Australia is expensive.
• C. Australia's export to PNG is expensive.

However, if you need to pick only one option that directly relates to the question, A is the most straightforward answer regarding PNG's perspective.