Currency Appreciation Impacts Trade Steps:

• A rising Australian dollar (AUD) appreciates, making Australian goods costlier abroad in foreign currencies.
• This raises export prices, reducing foreign demand for Australian cars and potentially increasing unemployment.
• Conversely, a stronger AUD lowers the cost of imports in AUD terms, making foreign goods and parts cheaper for Australians.
• Foreign competitor cars, as imports, thus become less expensive, harming local industry competitiveness.

Why C is correct:

• Imports become cheaper with AUD appreciation, per the exchange rate definition: stronger domestic currency buys more foreign currency, reducing import prices in local terms.

Why the others are wrong:

• A: Export prices rise, cutting foreign demand and raising unemployment in export sectors like cars.
• B: Australian car exports cost more to overseas buyers, directly following appreciation's effect on export competitiveness.
• D: Foreign cars are imports, so their AUD prices fall, intensifying competition for Australian producers.

Final answer: C