Consider two small open economies, Canada and Mexico, and the exchange rate is quoted as E C$/Peso .

Consider two small open economies, Canada and Mexico, and the exchange rate is quoted as EC$/Peso.  

1)Suppose Mexico experiences a slowdown in production technology, and many believe this technological slowdown will last for a long time.  

a)In the context of the asset approach to the exchange rate, what happens to the C$/Peso exchange rate in both short run and long run?  Explain in words and ONE foreign exchange market diagram

b)In the context of the monetary approach to the long-run exchange rate, what happens to the C$/Peso exchange rate in nominal terms? 

2)Instead of a technological slowdown in Mexico, suppose there is a temporary increase in money demand in both Canada and Mexico.

c)In the context of the asset approach to the exchange rate, what happens to the C$/Peso exchange rate in the short run?  Explain in words and ONE foreign exchange market diagram

pls help with these questions, i need explanation and diagrams.

and i have another question for part 1), what will happen if the production technology slow down? will it influence money supply or other things?

1 Running head: ECONOMICS EconomicsStudent’s NameInstitution 2 ECONOMICSEconomicsQuestion 1Exchange rate refers to the currency exchange value of one state over that of anotherstate. The...