Given a system of floating exchange rates,if Canada's labor productivity rises relative to the labor productivity of its trading partners:
A) Canadian imports will fall and the dollar will appreciate
B) Canadian imports will fall and the dollar will depreciate
C) Canadian imports will rise and the dollar will appreciate
D) Canadian imports will rise and the dollar will depreciate

Question

Quizplus · Accepted Answer

When Canada's labor productivity rises relative to its trading partners, Canadian goods become relatively cheaper to produce. This makes Canadian exports more competitive in the global market, leading to an increase in exports. As a result, the demand for Canadian dollars increases, causing the dollar to appreciate in value.

Given a System of Floating Exchange Rates,if Canada's Labor Productivity