If exchange rates are floating,a contractionary monetary policy in Canada will cause the dollar to ________ relative to other currencies and cause net capital outflows to ________.
A) appreciate; increase
B) appreciate; decrease
C) depreciate; increase
D) depreciate; decrease

Question

Quizplus · Accepted Answer

A contractionary monetary policy in Canada would lead to higher interest rates, attracting foreign capital, causing the Canadian dollar to appreciate and net capital outflows to decrease.

If Exchange Rates Are Floating,a Contractionary Monetary Policy in Canada