Suppose that the latest Consumer Price Index (CPI) release shows a higher inflation rate than was expected. Everything else held constant, the release of the CPI report would immediately cause the demand for Canadian assets to ________ and the Canadian dollar would ________.

Question

Quizplus · Accepted Answer

A higher than expected inflation rate would lead to an increase in interest rates to combat inflation, making Canadian assets more attractive, thus increasing demand and causing the Canadian dollar to appreciate.

Suppose That the Latest Consumer Price Index (CPI) Release Shows