Suppose Canada's exchange rate with the U.S.dollar increases from 1.14 to 1.22.Which of the following is likely to happen?
A)More Canadians will cross the border to shop in the U.S.
B)It is less expensive for Canadians to shop online from U.S.retailers.
C)Fewer Canadians will cross the border to shop in the U.S.
D)The Canadian dollar value of Canada's imports from the U.S.will fall.
E)The Canadian dollar value of Canada's exports to the U.S.will fall.

Question

Quizplus · Accepted Answer

When the exchange rate of a currency increases, it means that it takes more of that currency to buy one unit of another currency. In this case, it takes more Canadian dollars to buy one U.S. dollar, making U.S. goods more expensive for Canadians. As a result, fewer Canadians are likely to cross the border to shop in the U.S. and may instead choose to buy goods domestically or from other countries where the exchange rate is more favorable. The other options are incorrect as they suggest that the increase in the exchange rate would make U.S. goods more attractive to Canadians, which is the opposite of what would happen.

Suppose Canada's Exchange Rate with the U