Suppose there is a rise in the world price of Canada's imports. If the Canadian demand for imports is inelastic, the demand for foreign exchange will and the Canadian dollar will .

Question

Quizplus · Accepted Answer

If the world price of Canada's imports rises and the demand for imports is inelastic, Canadians will still purchase a similar quantity of imports, leading to an increased demand for foreign exchange to pay for these more expensive imports. This increased demand for foreign exchange will cause the Canadian dollar to depreciate.

Suppose There Is a Rise in the World Price of Canada's