Assume that the inflation rate in Canada is 3% over the next four years while the rate in the U.S. is 4% for the same time period. Given this, the U.S. dollar will appreciate relative to the Canadian dollar.

Question

Quizplus · Accepted Answer

Higher inflation in a country typically leads to the depreciation of its currency relative to others with lower inflation rates, as purchasing power in the higher inflation country decreases.

Assume That the Inflation Rate in Canada Is 3% Over