4 Suppose Canada has a merchandise trade deficit and Mexico has a merchandise trade surplus. The two

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4 Suppose Canada has a merchandise trade deficit and Mexico has a merchandise trade surplus. The two countries have a flexible exchange rate system; so the Mexican peso appreciates and the Canadian dollar depreciates. However, soon after the depreciation of the Canadian dollar, Canada’s trade deficit grows instead of shrinks. Why might this occur?

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Microeconomics

ISBN: 9780324785494

9th Edition

Authors: Roger A. Arnold

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