If the Bank of Canada pursues a contractionary monetary policy, interest rates in Canada will

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Pursuing a contractionary monetary policy means that the Bank of Canada is trying to reduce the money supply and slow down economic growth. This is achieved by increasing interest rates, which makes borrowing more expensive and reduces consumer and investment spending. As interest rates rise in Canada, it becomes more attractive for foreign investors to hold Canadian dollars, which leads to a capital inflow. This increased demand for Canadian dollars causes the value of the currency to appreciate.

If the Bank of Canada Pursues a Contractionary Monetary Policy