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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

Does an expectation of a stronger exchange rate in the future affect the exchange rate in the present? If so, how?

To determine

Whether an expectation of a stronger exchange rate in the future affects the exchange rate in the present is to be determined.

Explanation

If speculators believe that the Canadian dollar will rise in the future, then they will demand more to reap a profit in the future. This increase in demand will result in the appreciation of currency at present. For example, if people or investor sees the news that there will be an increase in the interest rate in future then the investors will start investing or demand for Canadian dollars will increase at present...

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