Please let me know how you would answer this question below, thanks.

8. In January 2001, the Canadian target for the overnight interest rate was 5.75%, falling to 2.5% in November 2004. During the same period, the marginal lending rate at the European Central Bank fell from 5.75% to 3%. a. Considering the change in interest rates over the period and using the loanable funds model, would you have expected funds to flow from Canada to Europe or from Europe to Canada over this period? b. The accompanying diagram shows the exchange rate between the euro and the Canadian dollar from January 1, 2001, through September 2008. Is the movement of the exchange rate over the period January 2001 to November 2004 consistent with the movement in funds predicted in part a? Exchange rate (euros per Canadian dollar) E0.9 0.8 0.7 0.6 0.5 20 2002 00 2004 005 20 20 2007 2008 Data from: U.S. Federal Reserve Bank of St. Louis