1. Suppose our foreign currency is the British pound. What kinds of transactions give rise to a...

Question:

1. Suppose our foreign currency is the British pound. What kinds of transactions give rise to a demand for British pounds?
2. Suppose the Canadian dollar price of a Canadian export [wheat] decreases. Foreign demand for the export is elastic.
(a) What will happen to Canadian export earnings?
(b) Which curve in the demand and supply for foreign exchange diagram shifts?
(c) What happens to the [$ per pound]?
3. Suppose Canada's inflation rate is less than Britain's inflation rate. Explain what is likely to happen to the bilateral defined as the number of Canadian dollars per British pound?
4. in terms of [+] items and [-] items in the balance of payments, which items give rise to a demand for foreign exchange?
5. Assume that the Official Settlements Balance [OSB] is zero. If there is a surplus on the current account,
(a) What is the position on the financial capital account?
(b) What is the difference between GDP and GNP in terms of balance of payments entries?
(c) If national savings is negative, is the balance on the financial capital account in surplus or deficit?
Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...