Question
Refer to the following table, in which Q d is the quantity of loonies demanded, P is the dollar price of loonies, Q s is
Refer to the following table, in which Qd is the quantity of loonies demanded, P is the dollar price of loonies, Qs is the quantity of loonies supplied in year 1, and Qs' is the quantity of loonies supplied in year 2. All quantities are in billions. Assume the exchange rate is fixed against the dollar at the equilibrium exchange rate that occurs in year 1. Also suppose that Canada and the United States are the only two countries in the world.
Qd | P | Qs | Qs' |
320 | 150 | 640 | 960 |
480 | 145 | 480 | 800 |
640 | 140 | 320 | 640 |
800 | 135 | 160 | 480 |
Instructions: Enter your answer as a whole number.
A. In year 2, what quantity of loonies would the government of Canada have to buy or sell to balance its capital and financial account with its current account? ____________ (Buy or Sell) ___________ billion loonies.
B. In what specific account would this purchase or sale show up in Canadas balance-of-payments statement? ______________________ (Canada's purchase of assets abroad or Foreign purchases of assets in Canada)
C. Would this transaction increase Canadas stock of official reserves or decrease its stock? _____________ (Increase or Decrease)
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