For each of the following state a) if the demand or supply curve will shift left
ID: 1238694 • Letter: F
Question
For each of the following state a) if the demand or supply curve will shift left or right, (b) the effect on the exchange rate, and (c) if it is a long, medium, or short run effect based on the supply of and demand for the Canadian dollar by the U.S. market and explain your reasoning. Lets not waste each others time. Thank you.a. more rapid growth in Canada than in the U.S
b. a rise in U.S. interest rates
c. goods are more expensive in Canada than the united states
d. a recession in the United states
e. expectation of future depreciation in the Canadian dollar.
Explanation / Answer
d. a recession in the United states - demand curve will shift leftward. $ will depreciate. The ìdisruptiveîe§ects of a recession make dollar holdings more risky. Risky assets must o§er some extra compensation such that people willingly hold them as opposed to other, less risky assets. This extra compensation may be in the form of a bigger expected appreciation of the currency in which the asset is held. Given the expected future value of the exchange rate, a bigger expected appreciation is obtained by a more depreciated exchange rate today. Thus, a recession that is disruptive and makes dollar assets more risky will cause
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.