If the Brazilian demand for Canadian exports rises at the same time that Canadian productivity rises relative to Brazilian productivity, then, in the long run, ________, everything else held constant.

Question

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When demand for Canadian exports rises in Brazil, this leads to an increase in demand for Canadian dollars to purchase those exports. At the same time, Canadian productivity is rising relative to Brazilian productivity, which means that Canadians are becoming more productive and efficient in producing goods and services. This can lead to an increase in the supply of Canadian dollars. According to the basic supply and demand framework, when the supply of a currency increases while demand remains constant, this leads to a depreciation of the currency. Therefore, if the Brazilian demand for Canadian exports rises at the same time that Canadian productivity rises relative to Brazilian productivity, the Brazilian real will depreciate relative to the Canadian dollar in the long run, everything else held constant.

If the Brazilian Demand for Canadian Exports Rises at the Same