Which of the following is correct?
A)A restrictive monetary policy will cause the dollar to appreciate and Canadian net exports to increase.
B)A restrictive monetary policy will cause the dollar to appreciate and Canadian net exports to decrease.
C)A restrictive monetary policy will cause the dollar to depreciate and Canadian net exports to increase.
D)A restrictive monetary policy will cause the dollar to depreciate and Canadian net exports to decrease.

Question

Quizplus · Accepted Answer

A restrictive monetary policy, which involves higher interest rates and tighter credit conditions, will make the dollar more attractive to investors, causing it to appreciate in value. This will make Canadian exports more expensive for foreign buyers and hence, decrease the demand for Canadian goods, leading to a decrease in net exports.

Which of the Following Is Correct