FIGURE 34-3 Refer to Figure 34-3.An increase in demand or decrease in the supply of foreign exchange will

Question

Quizplus · Accepted Answer

An increase in demand or decrease in the supply of foreign exchange will cause the Canadian dollar to depreciate as there will be fewer buyers of Canadian dollars in the foreign exchange market, thereby lowering its value in comparison to other currencies. This will make it more expensive for Europeans to buy Canadian goods and encourage Canadians to buy fewer European goods due to their higher prices.