4. Assume that Canada and Kenya are trading partners. a. If the real interest rate in Canada decreases, what will happen to the financial accounts for both Canada and the Kenya. b. Assume instead that Canada experience significant inflation compared to Kenya. Draw the foreign exchange market for the Canadian currency and show what happens to the demand for Canadian dollars. Be sure to identify if the Canadian dollar will appreciate or depreciate?

4. Assume that Canada and Kenya are trading partners. a. If the real interest rate in Canada decreases, what will happen to the financial accounts for both Canada and the Kenya. b. Assume instead that Canada experience significant inflation compared to Kenya. Draw the foreign exchange market for the Canadian currency and show what happens to the demand for Canadian dollars. Be sure to identify if the Canadian dollar will appreciate or depreciate?

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter32: A Macroeconomic Theory Of The Open Economy

Section: Chapter Questions

Problem 8PA

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