Consider the monetary transmission mechanism.In an open economy,such as Canada's,a decrease in the money supply leads to a rise in the interest rate.This is followed by

Question

Quizplus · Accepted Answer

A decrease in the money supply leads to a rise in the interest rate, which in turn attracts foreign financial capital inflows. This causes an appreciation of the Canadian dollar as demand for it increases. Therefore, the best choice is D, an inflow of financial capital and an appreciation of the Canadian dollar.

Consider the Monetary Transmission Mechanism