Using the FOREX exchange rate market, applied to home country of Canada,

(a) analyze the situation in which a government imposes a fixed exchange rate. Also, where the capital tends to move? Consider each of situations: the government imposes a fixed exchange rate which is undervalued; the government imposes a fixed exchange rate which is overvalued.

(b) determine what that government should do in order to solve the capital movement as you found above in the situation with undervalued currency. Explain with words + graphs.