4. Classify each of the following as more likely to be on the demand side or the

Question

4. Classify each of the following as more likely to be on the demand side or the supply side of the exchange rate market for Canadian dollars:
a. a U.S. firm selling in Canada
b. a Canadian tourist visiting the United States
c. a U.S. investor who seeks to invest in Canada
d. a Canadian firm selling in the United States
e. a U.S. tourist visiting Canada
f. a Canadian investor desiring to invest in the United States
g. a currency speculator who thinks that the Canadian dollar is going to strengthen.

Explanation / Answer

a. a U.S. firm selling in Canada (supply side as US firm will convert CAD earnings in USD)
b. a Canadian tourist visiting the United States (Supply side, as you will use USD when spending in US)
c. a U.S. investor who seeks to invest in Canada (Demand side, as US investor will need to exchange USD for CAD to invest in Canada)
d. a Canadian firm selling in the United States (Demand side, as Canada firm will convert USD earnings in CAD)
e. a U.S. tourist visiting Canada ( Demand side, as you will need CAD while spending in Canada)
f. a Canadian investor desiring to invest in the United States ( Supply side, as Canada investor will need to exchange CAD for USD to invest in United States)
g. a currency speculator who thinks that the Canadian dollar is going to strengthen. (Demand side, as CAD is likely to increase in value, one would demand more CAD to earn capital gains)

CAD= Canadian Dollar , while USD MEANS United States Dollars

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.