Assume that Canada decides to peg its currency (the Canadian dollar) to the U.S. dollar and that

Question:

Assume that Canada decides to peg its currency (the Canadian dollar) to the U.S. dollar and that the will remain fixed. Assume that Canada commonly obtains its imports from the U.S. and Mexico. The U.S. commonly obtains its imports from Canada and Mexico. Mexico commonly obtains its imports from the U.S. and Canada. The traded products are always invoiced in the exporting country's currency. Assume that the Mexican peso appreciates substantially against the U.S. dollar during the next year.
a. What is the likely effect (if any) of the peso's movement on the volume of Canada's exports to Mexico? Explain.
b. What is the likely effect (if any) of the peso's movement on the volume of Canada's exports to the U.S.? Explain.
Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...