Other things the same, when a Canadian company imports cotton from Egypt, the open-economy macroeconomic model treats this transaction as a decrease in the quantity of dollars demanded in the Canadian foreign-currency exchange market.

Question

Quizplus · Accepted Answer

When a Canadian company imports cotton from Egypt, it needs to exchange Canadian dollars for Egyptian pounds to pay for the cotton. This increases the supply of Canadian dollars in the foreign-currency exchange market and decreases the demand for Egyptian pounds, leading to a decrease in the quantity of dollars demanded.

Other Things the Same, When a Canadian Company Imports Cotton