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We are examining the market for the Canadian dollar relative to the Mexican peso. Suppose the inflation rate in Canada increases relative to Mexico's inflation rate. a. What will happen to the demand and supply of Canadian dollars? 10 points Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click the option twice to empty the box. ? Demand for Canadian dollars decreases. ? Demand for Canadian dollars increases. ? Supply of Canadian dollars increases. ? Supply of Canadian dollars decreases. b. The Canadian dollar will depreciate relative to the peso and the peso will appreciate relative to the Canadian dollar. c. The quantity of Canadian dollars traded in the market will increase, decrease, or remain the same

Sagot :

If inflation increases in Canada relative to Mexico, the demand for Canadian dollars would decrease and the supply of Canadian dollars would increase.

The Canadian dollar will depreciate relative to the peso and the peso will appreciate relative to the Canadian dollar.

The quantity of Canadian dollars traded in the market will decrease.

What is the effect of inflation on the value of a country's currency?

Inflation is when the general price levels in an economy increases. Inflation reduces the value of a country's currency. This means that there is an inverse relationship between the value of a country's currency and inflation rate.

Deprecation is when the value of a currency declines. Appreciation is when the value of a country's currency increases.

When inflation is higher in Canada than in Mexico, people would want to hold less of the Canadian dollars due to its decline in value. As a result, the  demand for the Canadian dollars would decrease. People would want to sell of the Canadian dollars they have and hold a currency that has less inflation. This would increase the supply of Canadian dollars.

To learn more about inflation, please check: https://brainly.com/question/29759159

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