Refer to the figure below to answer the following questions. Figure 9.3.1 -In Figure 9.3.1, suppose the demand for dollars permanently decreases to D₂.To maintain the target, the Bank of Canada A)buys dollars. B)sells dollars. C)cannot permanently maintain the exchange rate target of 90 U.S.cents per Canadian dollar. D)must decrease the country's net exports. E)must increase the country's net exports.

Question

Quizplus · Accepted Answer

The correct answer is C because a permanent decrease in the demand for dollars will lead to a depreciation of the Canadian dollar, making it worth less than 90 U.S. cents.

Refer to the Figure Below to Answer the Following Questions