(b) What is the J-Curve effect and how is it related to M-L condition? (c) In this part, you are to RELATE the M-L condition to the shape of the demand and supply of the currency, below. Suppose the...

Extracted text: (b) What is the J-Curve effect and how is it related to M-L condition? (c) In this part, you are to RELATE the M-L condition to the shape of the demand and supply of the currency, below. Suppose the foreign exchange market is represented by the following diagram where there are only two countries, Canada and Euro zone, trading goods and services with each other. 터CS/E 1.8 DE S€ 1.4 1.0 QO Q€ (D€): demand for euro by Canadians = stands for Canada's payments for its imports of goods and services, and (S€): supply of euro by Europeans = stands for Canada's receipt from its exports of goods and services. For simplicity, there are no capital/financial account transactions. Show that the M-L condition is satisfied in this diagram.