If exchange rates are floating,an expansionary fiscal 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

An expansionary fiscal policy typically increases interest rates, attracting foreign capital, which appreciates the currency and decreases net capital outflows.

If Exchange Rates Are Floating,an Expansionary Fiscal Policy in Canada