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Draw a diagram showing supply and demand in the market where the U.S. dollars (USD) are...

Draw a diagram showing supply and demand in the market where the U.S. dollars (USD) are exchanged for the Canadian dollars (CAD). Put CAD per USD on the vertical axis. The supply curve represents the quantity of USD offered in exchange for CAD. The demand curve represents the quantity of USD that people want to buy in exchange for CAD.

Suppose that initially, the two dollars are “at par,” that is, 1 USD = 1CAD. Next, suppose a housing construction boom in the United States raises the demand for imports of Canadian lumber.
Will that shift the supply curve, the demand curve, or both in your diagram?

Will the USD appreciate or depreciate?

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