Down sloping and upsloping

Question

Describe why the Canadian demand for Mexican pesos is down sloping & the supply of pesos to Canadians is upsloping. Supposing a system of floating exchange rates among Mexico and Canada, denote whether each of the given would cause the Mexican peso to appreciate or depreciate:

a. Canada reduces tariffs on Mexican products unilaterally.

b. Mexico encounters cruel inflation.

c. Deteriorating political relations decrease Canadian tourism in Mexico.

d. Canada’s economy moves in a harsh recession.

e. The Bank of Canada embarks over a high interest rate monetary policy.

f. Mexican supplies become more fashionable to Canadians.

g. The Mexican government encourage Canadian firm to invest into Mexican oil fields.

h. The rate of productivity growth in Canada diminishes sharply.

Answer 1

For pesos the Canadian demand is down sloping: While the peso depreciates in value (relative to the dollar) Canadians determine that Mexican goods & services are less costly in dollar terms and purchase more of them, demanding a greater quantity of pesos in the procedure. The supply of pesos to Canada is up sloping: Since the peso appreciates in value (relative to the dollar), Canadian goods & services become cheaper to Mexicans in peso terms. Mexicans purchase more dollars to get more Canadian goods, supplying big quantity of pesos. The peso appreciates in (a), (f), (g), and (h) and depreciate in (b), (c), (d), & (e).