Homework Answers
In the given situation the value of the Canadian dollar decreases against the US dollar. That means either demand for the US dollar is more than that of supply or supply of Canadian dollar is more than that of demand.
So in the fixed exchange rate system, the Canadian govt should maintain the same rate. So it has to sell more US dollars by buying more Canadian dollars. The supply of the US dollar will get increased and supply of the Canadian dollar will get decreased. This will increase the value of the Canadian dollar and the fixed rate will be maintained.
So the answer is B. Selling US dollar by buying the Canadian dollar.
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Suppose the exchange rate between the Canadian dollar (CS) and the American dollar (USS) changes from C$1.340/US$ to C$1.325/USS, but the Canadian government wants to maintain a fixed exchange rate o...
30. Suppose that the spot rate on the Canadian dollar is C$1.40/USs. The risk-free nomin in...
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The value c Co. in American dollars, of the Canadian dollar is given by the graph...
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