Answer to Question #45383 in Macroeconomics for Bob

Question

In 2003 to 2004, the Canadian dollar appreciated against the US dollar. Explain the effects of this appreciation on each of the following.

a. Canadian importers of goods from the US

b. Canadian firms that sell commodities to US buyers

c. American tourists who come to Canada

d. US investors who had purchased Canadian securities prior to this currency appreciation

Answer 1

In 2003 to 2004, the Canadian dollar appreciated against the US dollar.
a. Canadian importers of goods from the US were worse off, because they could buy less Canadian dollars.
b. Canadian firms that sell commodities to US buyers were worse off, because they could get less value after the goods are sold.
c. American tourists who come to Canada were also worse off, because they needed to use more dollars to buy Canadian dollars for the trip.
d. US investors who had purchased Canadian securities prior to this currency appreciation were better off, because they will receive more money in the end of the period in dollars.