Question

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2. The U.S dollar has been rising relative to the Canadian dollar for a couple years In only one sentence for each, note wha has been happening to the groups (specifically identify who you are referring to in your answer ) below in terms of economic interests (sales, spending, costs&etc.) during this process: ) US tourists going to Toronto, Canada d) US mailerof crackers that purchases all its crackers made in the US. However, this metailer's u.S. competitors impot crackers from Canada... Use the figures in the table below to answer the following questions on the line below left of the type of money Billions $1014 Credit Card Balances One year Certificate of Deposits Ten Year Treasury Notes Time deposts Checkable deposits 2190 3649 744 643 743 What is the value of M1? Show work here for answer

Answer 1

Solution

Given that the US Dollar is appreciating w.r.t to the Canadian dollar for a couple of years

a.US tourists going to Toronto,Canada

The US tourists going to Canada will benefit as the USD is appreciating w.r.t to the Canadian Dollar as they will now have more number of Canadian dollars to spend than before for the same amount of USD.In other words,the travelling costs for the US tourist going to Canada will reduce.

The Canada locals will also benefit because of increased number of US tourists to their country and also due to increased spending of the US tourists.

But the locals will feel the pain when they have to purchase the imported goods from the US.The prices of the goods imported from the US increase.

b.US Timber exporters to Canada

The US Timber exporters will see their sales to Canada reducing / going down because the US timber will become more costly for the Canadian importers

c. US auto manufacturers buying/sourcing parts from Canada

US auto makers will benefit from USD appreciation w.r.t Canadian Dollar as the parts imported from Canada will become much cheaper now.As they pass on their reduced raw material cost to the customers which will lead to increase in their sales in the US Market

d.US retailer of crackers that purchases all it's crackers made in the US.However this retailers US competitors import crackers from Canada

The US retailer will suffer but it's competitors will gain due to decrease in the purchase as they are imported from Canada.

So the sales of the US retailer decreases while the sales of it's retailers (who import from Canada) will increase.

M1 = 743 + 643 + 1014

= $2400 Billion

M1 is the most liquid money .It comprises of the money in the checkable deposits,currency,coin, traveller's cheques,negotiable order ,demand deposits

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