Currently the foreign exchange market is valuing the Canadian dollar at Eg while the Canadian government has placed a value of Epar on the Canadian dollar. Exchange rate Et (Euro/$C) E3 E2 Epar E1 D3 D2 D D1 Quantity of Domestic Assets The Canadian dollar value (Epar) placed by the Canadian government is said to be relative to the market value (E3). One approach to close the gap between Es and Epar is for the BOC to The approach taken by the BOC will M's and cause i-rates to As a result of the i-rate change the internal mechanism: Gross Investment (1) will AD (Aggregate Demand) willAs a result of the i-rate change the external mechanism: The new i-rates will cause foreigners to Canadian bonds. The change in demand for Canadian bonds will cause the demand for $C to AD (Aggregate Demand) will GDP will and Plevel (inflation) will