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foreign exchange market

Economics: Private and Public Choice (MindTap Course List)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter19: International Finance And The Foreign Exchange Market
Section: Chapter Questions
Problem 1CQ
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Currently the foreign exchange market is valuing the Canadian dollar at Ez while the Canadian government has placed a value of Epar on the Canadian dollar. Exchange rate Er (Euro/$C) E3 E2 Enar D3 E1 D2 D1 Quantity of Domestic Assets The Canadian dollar value (Epar) placed by the Canadian government is said to be relative to the market value (E3). 수 One approach to close the gap between E3 and Epar is for the BOC to 수 The approach taken by the BOC wll : Ms and cause i-rates to As a result of the i-rate change the internal mechanism: Gross Investment (I) will 수 AD (Aggregate Demand) will GDP will and Pievel (inflation) will As a result of the i-rate change the external mechanism: The new i-rates will cause foreigners to 수 Canadian bonds. The change in demand for Canadian bonds will cause the demand for $C to AD (Aggr Demand) will GDP will and Plevel (inflation) will
Transcribed Image Text:Currently the foreign exchange market is valuing the Canadian dollar at Ez while the Canadian government has placed a value of Epar on the Canadian dollar. Exchange rate Er (Euro/$C) E3 E2 Enar D3 E1 D2 D1 Quantity of Domestic Assets The Canadian dollar value (Epar) placed by the Canadian government is said to be relative to the market value (E3). 수 One approach to close the gap between E3 and Epar is for the BOC to 수 The approach taken by the BOC wll : Ms and cause i-rates to As a result of the i-rate change the internal mechanism: Gross Investment (I) will 수 AD (Aggregate Demand) will GDP will and Pievel (inflation) will As a result of the i-rate change the external mechanism: The new i-rates will cause foreigners to 수 Canadian bonds. The change in demand for Canadian bonds will cause the demand for $C to AD (Aggr Demand) will GDP will and Plevel (inflation) will
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