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For each of the following situations, outline the effect on the price of the Canadian dollar in terms of US dollars and DRAW a demand and supply graph that illustrates the changes that occur in the foreign exchange market for the Canadian dollar AND explain why.
a. A contractionary monetary policy initiated by the Bank Of Canada raises Canadian interest rates.
b. Canada’s real output rises at a time when real output in the United States is falling.
c. Americans (but not Canadians) find Canada a more attractive place to make financial investments.
d. Given Canada’s aging population, more Canadian “snowbirds” travel to the United States each winter.
e. Due to a credit crisis that affects US financial institutions more than it does Canadian ones, Canada’s attractiveness as a destination for direct and portfolio investment increases.
f. The Bank of Canada initiates an expansionary monetary policy that reduces Canadian interest rates.
g. Canada is viewed as a less attractive place to make financial investments by Americans but not by Canadians.