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 depreciate relative to the Canadian dollar.

Question

Quizplus · Accepted Answer

Higher inflation rates in a country tend to decrease the value of its currency relative to currencies of countries with lower inflation rates, because purchasing power decreases with higher inflation.

Assume That the Inflation Rate in Canada Is 3% Over