Question
Draw a diagram showing supply and demand in the market where US USD) are exchanged for Canadian dollars (CAD). Put CAD per USD on the
"Draw a diagram showing supply and demand in the market where US USD) are exchanged for Canadian dollars (CAD). Put CAD per USD on the vertical axis. The supply curve represents the quantity of USD offered in exchange for CAD. The demand curve represents the quantity of USD that people want to buy in exchange for CAD. Suppose that initially the two dollars are "at par"that is, the exchange rate is 1 USD = 1 CAD. Next, suppose that a fall in world oil prices decreases the demand for Canadian oil exports. Will that shift the supply curve, the demand curve, or both in your diagram? Will the CAD appreciate or depreciate? Will the USD appreciate or depreciate? Bonus question: Find a chart of the CAD/USD exchange rate for recent years (http://www.oanda.com/currency/historical-rates/). Did the exchange rate behave as expected when global oil prices fell in the second half of 2014?"
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