A decrease 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

A decrease in the real interest rate in Canada makes Canadian assets less attractive, leading to increased net capital outflows and causing the Canadian dollar to depreciate relative to other currencies.

A Decrease in the Real Interest Rate in Canada Will