(NOTE: I solved the majority of the problem up until letter C and it\'s explanat
ID: 1194671 • Letter: #
Question
(NOTE: I solved the majority of the problem up until letter C and it's explanation)
Suppose Americans suddenly develop a strong taste for Canadian whiskey.
What happens to the demand for Canadian dollars in the foreign exchange market?
What happens to the value of Canadian dollars in the foreign exchange market? What about U.S. dollars?
What happens to the quantity of net exports in Canada, other than whiskey, as a result of your answer in part b? What about the U.S.?
a.) _______increase__________
b.) Canadian dollars _______increase________
U.S. dollars _______decrease________
c.) Canadian net exports ______________
U.S. net exports ___________
Explanation:
Explanation / Answer
c) Since canadian dollar will appreciate because of rise in demand for whiskey, exports of other commodities will decrease because other commodities will get expensive.
US net exports will incease due to depreciation in US dollars.
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