An increase in the real interest rate in Canada will cause net capital outflows to ________ and cause the dollar to ________ relative to other currencies.
A) increase; appreciate
B) increase; depreciate
C) decrease; appreciate
D) decrease; depreciate

Question

Quizplus · Accepted Answer

An increase in the real interest rate in Canada makes Canadian assets more attractive to investors, leading to decreased net capital outflows and causing the Canadian dollar to appreciate relative to other currencies.

An Increase in the Real Interest Rate in Canada Will