Course: Introductory Macroeconomics Topic: The foreign exchange markets Base scenario The Original Price Exchange rate Price in US$ product 1C$=1US$ or C$ Canadian Exporter wheat 350 C$ per tonne 1C$=1US$ Canadian Importer apples 2 US$ per kg 1C$=1US$ Canadian Consumers apples 3 US$ per kg 1C$=1US$ Note: The exporters sell their products in the United States (therefore, the price must be in US$), and the importers buy their products from the United States (therefore, the price must be in C$). Scenario #1: More expensive C$ The Original Price Exchange rate Price in US$ product 1C$ = 1.20 US$ or C$ Canadian Exporter wheat 350 C$ per tonne Canadian Importer apples 2 US$ per kg Canadian Consumers apples 3 US$ per kg Note: The exporters sell their products in the United States (therefore, the price must be in US$), and the importers buy their products from the United States (therefore, the price must be in C$) The EFFECTS: Change in Exports: Change in Imports: The Balance of Payments: Scenario #2: Cheaper C$ The Original Price Exchange rate Price in US$ product 1C$ = 0.90 US$ or C$ Canadian Exporter wheat 350 C$ per tonne Canadian Importer apples 2 per kg Canadian Consumers apples 3 per kg Note: The exporters sell their products in the United States (therefore, the price must be in US$), and the importers buy their products from the United States (therefore, the price must be in C$) The EFFECTS: Change in Exports: Change in Imports: The Balance of Payments