1- Explain how the appreciated/depreciated of CAD against the USD has affected demand for Canadian exports to the R.O.W and imports into Canada from the R.O.W. How about the impact on the Canadian GDP? Use bulleted points to answer if you prefer

2- Circle the correct answer for each of the following and then support your answer by explaining why. Comparative currency is value of USD.

a. When the CAD value is higher, R.O.W. buys more/less Canadian exports. Why?

b. When CAD value is higher than USD, the R.O.W. demands more/less CAD. Why?

c. When CAD value is higher Canadians demand/supply more CAD. Why?

d. When CAD value is higher, quantity demanded of CAD increases/decreases. Why?

e. When the value of the CAD is higher, Canadians buy more/less imports. Why?

3- In the Forex market i) draw the shifted curve(s), ii) indicate the change in price and quantity, iii) and fully label the graphs. Explain (don't just name them) at least two economic events that may have caused the changes in the currency markets.

a. Demand has increased for the CAD; however, supply has decreased.

4- In reference to the loanable funds markets, the Bank of Canada buys and sells bonds to influence money supply which in turn affects interest rates which in turn affects the demand for money. circle the correct answer and then draw and fully label the loanable funds market curve shifts in the graph to show what happens to the money supply.

5-During an inflationary gap the Bank of Canada will i) buy/sell bonds which will ii) increase/decrease the money supply which will iii) increase/decrease interest rates which in turn will iv) open/close an inflationary gap.

v) P N/C Q N/C (circle which is applicable)

During a recessionary gap the Bank of Canada will i) buy/sell bonds which will ii) increase/decrease the money supply which will iii) increase/decrease interest rates which in turn will iv) open/close the recessionary gap

v) P N/CQ N/C (circle which is applicable)

The table below lists events that cause foreign exchange (FX) fluctuations. The "Event" column lists the economic event. The "Increase/Decrease column indicates whether there is an increase or decrease in the event. "FX Rise/Fall" students are to indicate whether the CAD exchange rate rises or falls. "Demand" and "Supply" columns students are to indicate whether there is an increase () or decrease () in demand/supply for/of CADs caused by the event

Event Increase/Decrease Demand Supply FX

Interest rate differential Increase ? ? ?

Inflation differential Increase

Canadian rGDP differential Decrease

R.O.W. demandexports Increase

World resource prices Decrease

Speculators (expectations) Increase