Question

Assume that Canadian consumers increase their demand for Mexican financial assets How would the international supply of Canadian dollars, the value of the Mexican peso relative to the Canadian dollar, and Canadian net exports to Mexico change?

Answer 1

Answer:

The supply of Canadian dollars will increase, the value of the Mexican peso relative to the Canadian dollar will also increase and the Canadian net exports to Mexico will increase.

Explanation:

Generally, if a commodity demand increases as stated in the problem above, the supply will increase to balance the effects of demand change. As a result, there will an increase in the vale of the Mexican peso and the over export from the country that demands more will be higher than the country that supplies the financial assets.