Explain how each of the following conditions will affect the value of the Canadian dollar, holding other things equal.

Suppose Canada and U.S. engage in a large volume of international capital flows but only a
small volume of international trade. Explain how each of the following conditions will affect the value of the Canadian dollar, holding other things equal. (Hint: Think about how factors affect exchange rate)
a. Canadian inflation has suddenly increased substantially, while U.S.’s inflation
remains low
b. Canadian interest rates have increased substantially, while U.S.’s interest rates remain
low
c. Combine all of the expected impacts from questions a and b to develop an overall
forecast