Suppose the Bank of Canada raises its target for the overnight interest rate from 3% to 3.25%,while interest rates in other countries do not change.How will this policy action affect Canada's imports and exports?

Question

Quizplus · Accepted Answer

When the Bank of Canada raises its target for the overnight interest rate, it makes holding Canadian dollars more attractive to investors, leading to an appreciation of the Canadian dollar. This appreciation makes foreign goods cheaper for Canadians, thereby encouraging imports into Canada.

Suppose the Bank of Canada Raises Its Target for the Overnight