10.1 Draw a graph of the supply of and demand for the Canadian dollar by the U.S. market. Diagram the effect of each of the following on exchange rates. State in words whether the US Dollar appreciates or depreciates and whether the effect is long, medium, or short run, and explain your reasoning.

a. More rapid growth in Canada than in the United States. b. A rise in U.S. interest rates. c. Goods are more expensive in Canada than in the United States. d. A recession in the United States. e. Expectations of a future depreciation in the Canadian dollar.

10.10. Why do some economists claim that the most important feature of any exchange rate system is its credibility?