In 2003, a case of mad cow disease was discovered in Alberta leading many countries, including the United S?

Question

In 2003, a case of mad cow disease was discovered in Alberta leading many countries, including the United States, Japan, South Korea, and Australia, to ban imports of Canadian beef. Show the effect of this ban on the market for the Canadian dollar.

it will affect:

A-the supply( S-I )

B-the demand( NX )

Answer 1

B-the demand( NX )

Demand for Canadian dollar will fall - because ban will lead to less export thus less Canadian dollars are required to maintain export transactions.

NX will fall (Export-Import).

Y (GDP) will fall so S will fall too leading to left-shift of S curve - it will reduce S-I (and consequently NX since S-I=NX).

Answer 2

Ok, so foreigners will demand less Canadian beef.  Foreigners won't demand the Canadian dollar to buy the Canadian beef.  The demand for the Canadian dollar falls, thus the strength of the Canadian dollar will fall. By the way,  I don't eat beef due to mad cow.  We had a serious outbreak in England and that turned me off of beef.  This is irrational, but yet I stay away from beef.  Go figure?!