ECONOMICS- Interest Rate
In view of the Coronavirus epidemy, the Bank of Canada along with most advanced nations’ central banks has cut its policy interest rate by 1.5% to 0.25%.
(a) Explain the Bank of Canada’s intention and motive behind this policy.
(b) Employing the model of interest parity, discuss with the help of a diagram the expected impact of these interest cuts on the exchange rate (Canadian dollar).
(c) Now explain how the expected change in the Canadian dollar is hoped to affect Canada’s net exports (NX) and Canada’s GDP.