Question

For each of the following events would affect the euro-per-Canadian dollar equilibrium exchange rate. A. European saves desire to shift funds from euro denominated financial assests to Canadian dollar denominated financial assests. B. European firms switch from buying minerals from Canadian firms to purchasing them from Russian firms.

Answer 1

Answer:

Check the following explanation.

Explanation:

A. European saves desire to shift funds from euro denominated financial assests to Canadian dollar denominated financial assests-In that case, euro-per-Canadian dollar equilibrium exchange rate will appreciate as euro is more valuable than dollar-1Euro=1.48 Canadian Dollar.So as European wants to shift from euro to dollar value euro-per Canadian dollar will be raised.

B. European firms switch from buying minerals from Canadian firms to purchasing them from Russian firms-In that case euro-per-Canaian dollar will depreciate and onthe otherhand euro-per-Russian-ruble will appreciate as 1 Euro=72.29 Russian Ruble.