Holding all else constant,easier monetary policy in Canada will _________ the demand for dollars in the foreign exchange market and _________ the equilibrium Mexican peso-dollar exchange rate.

Question

Quizplus · Accepted Answer

Easier monetary policy in Canada typically leads to lower interest rates, reducing the demand for Canadian dollars as investors seek higher returns elsewhere. This decrease in demand for Canadian dollars leads to a depreciation of the Canadian dollar relative to the Mexican peso, thus decreasing the equilibrium Mexican peso-dollar exchange rate.

Holding All Else Constant,easier Monetary Policy in Canada Will _________