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 rateEr (Euro/$C)E3E2EnarD3E1D2D1Quantity of Domestic AssetsThe Canadian dollar value (Epar) placed by the Canadian government is said to berelative to the market value (E3).수One approach to close the gap between E3 and Epar is for the BOC to수The approach taken by the BOC wll: Ms and cause i-rates toAs a result of the i-rate change the internal mechanism:Gross Investment (I) will수AD (Aggregate Demand) willGDP willand Pievel (inflation) willAs a result of the i-rate change the external mechanism:The new i-rates will cause foreigners to수Canadian bonds.The change in demand for Canadian bonds will cause the demand for $C toAD (AggrDemand) willGDP willand Plevel (inflation) will

The foreign exchange market refers to the worldwide marketplace in which currencies are offered and…

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foreign exchange market

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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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