Suppose there is a rise in the world price of Canada's imports.If the Canadian demand for imports has a price elasticity less than 1 (inelastic),the demand for foreign exchange will ________ and the Canadian dollar will ________.

Question

Quizplus · Accepted Answer

When the price of Canada's imports increases and the demand for these imports is inelastic, Canadians will still buy roughly the same amount, leading to an increase in the demand for foreign currencies to pay for these imports. This increased demand for foreign currencies puts downward pressure on the Canadian dollar, causing it to depreciate.

Suppose There Is a Rise in the World Price of Canada's