When does a currency appreciate or depreciate in value? How do the laws of supply and demand shape floating interest rates and how does a country’s currency increase its supply and availability? Does stronger economic performance lead to a currency appreciating or depreciating in value and explain your answer? What is purchasing power parity theory and how do domestic inflation rates impact exchange rates?

Under a floating exchange rate regime, following an expansion in the money supply, the change in the value of domestic currency is most likely to: A.increase demand for imports. B.increase demand for exports. C.lower the real product. D. initiate foreign capital inflow.

Relationship between exchange rate movements and interest rates.

A. Canada produces natural resources (coal, natural gas, and others), the demand for which has increased rapidly as China and other emerging economies expand. i. Explain how growth in the demand for Canada's natural resources would affect the demand for Canadian dollars in the foreign exchange market. Explain how the supply of Canadian dollars would change. ii. iii. Explain how the value of the Canadian dollar would change. iv. Illustrate your answer with a graphical analysis. 1