Question: Determining short - run exchange rates Consider two countries with friendly trade relations, Canada and Mexico. Suppose that the real interest rate in Canada decreases

Determining short-run exchange rates
Consider two countries with friendly trade relations, Canada and Mexico. Suppose that the real interest rate in Canada decreases relative to Mexico.
Show how the change in the real interest rate affects the equilibrium exchange rate by shifting one or both of the curves on the graph.
QUANTITY (Millions of pesos)
As a result of the change in the real interest rate, the Canadian dollar q, in value relative to the Mexican peso.
Please show changes in graph.
Determining short - run exchange rates Consider

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