Consider two nations canada and the mexico with the, Financial Management

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Consider two nations canada and the mexico with the

Consider two nations Canada and the Mexico with the following variables:

YCA = 1.21 millions CA . yCA = 855,000 CA ; MCA = 315,000 CA ; YMX= 685,000 Pe . yMX= 549,000 Pe ; MMX = 110,000 Pe.

? Find the value of kCA and kMX ( fraction of nominal income held as money)

? Determine the equilibrium spot exchange rate between the two nations

? Now determine the spot exchange rate if you decrease the Mexican money supply by 10%. What can we conclude?

? Now determine the spot rate if you simultaneously increase the Mexican money supply by 10% and decrease the Canadian Money supply by 5%. What can you conclude?

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Financial Management: Consider two nations canada and the mexico with the

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