Question

The COVID virus has had an impact on all facets of our economy. Please discuss the impact it has had on each of the variables below over the net 12 months. Explain if they will increase, decrease, or remain unchanged and the reasoning behind your decision.

1.The value of canada dollar in comparison to the US dollar.

2.The supply of money (M1)

3.The prime interest rate

Answer 1

1). The value of canada dollar in comparison to the US dollar

Exchange rate will remain almost unchanged as this is a global pandemic and all the countries are hit, so there are less chances that one countries losses its value as compared to other. May be canada dollar in comparison to the US dollar, there will be depreciation of currency value of money decreses.

2) The supply of money (M1)

Money suppy will be reduced because the transaction in economy will reduce. people are spending less or purchasing power is less there will be less demand for money and supply of money will reduced due to COVID virus pandemic.

3) The prime interest rate

Interest rate are reducing because central banks wants to revive the economy out of the slowdown and increase consumer spending. so interest rates will reduce And also leading rate have been reduced by the government so that individuals can survive in this Pandemic situation.