The Bank of Canada
A)alternates between a flexible, fixed, and crawling peg exchange rate policy depending on economic conditions.
B)has no influence on the exchange rate.
C)sells Canadian dollars to the United States in an attempt to depreciate the Canadian dollar and increase Canadian exports to the United States.
D)follows a flexible exchange rate policy, although the Bank's actions can impact the exchange rate.
E)buys Canadian dollars from the United States in an attempt to depreciate the Canadian dollar and increase Canadian exports to the United States.

Question

Quizplus · Accepted Answer

The Bank of Canada follows a flexible exchange rate policy, meaning that the exchange rate is determined by market forces, but the Bank can take actions that impact the exchange rate, such as changing interest rates or intervening in foreign exchange markets.