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The graph below shows the demand and supply of Canadian dollars where: D 1 is the demand by other countries for Canadian dollars to buy
The graph below shows the demand and supply of Canadian dollars where:
D is the demand by other countries for Canadian dollars to buy Canadian exports.
D is the demand by other countries for Canadian dollars to buy Canadian investments.
S is the supply of Canadian dollars by Canadians to buy imports from abroad.
S is the supply of Canadian dollars by Canadians to buy investments from abroad.
Assume there are no transfers, speculation, or arbitrage.
a Complete the table below.
Value of Canadian Dollar in US$ Exports of Goods and Services D Income Earned Abroad Foreign Investment in Canada D Total Demand for Canadian Dollars Import of Goods and Services S Foreign Income Paid Abroad Canadian Investment Abroad S Total Supply of Canadian Dollars
Suppose that Canada is operating with a flexible exchange rate system.
If you are entering any negative numbers be sure to include a negative sign in front of those number.
b What is the equilibrium value of the Canadian dollar? Round your answer to decimal places.
Canadian dollar: $
US
c What is the value of its balance of trade?
Balance of trade:$
d What is its current account balance?
Current account balance:$
e What is its capital account balance?
Capital account balance:$
f What is the overall balance of payments current and capital accounts
Total balance of payments:
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