Question 1: What happens in the foreign exchange market when there is a Canadian export transaction?
Question 2: What happens in the foreign exchange market when there is a Canadian import transaction?
Question 3: Explain how a nation might persistently import more goods than it exports and still maintain equilibrium in its balance of payments.
Question 4: What is the difference between a fixed exchange rate system and a flexible (floating) exchange rate system?
Question 5: Explain how the dollar price of an imported good may change even though the foreign production cost of that product remains unchanged.
Question 6: List and explain the major determinants of the demand for, and supply of, the money of a foreign nation.
Question 7: What is meant by currency appreciation?
Question 8: Describe the three major disadvantages of flexible exchange rates.
Question 9: Explain how the exchange rate gets determined in a flexible exchange rate system.
Question 10: How are flexible exchange rates used to eliminate a balance of payments deficit or surplus?
Question 11: How does a fixed exchange rate system work? How can a nation maintain its fixed exchange rate?