From 1970 to 1998, the Canadian dollar depreciated against the German mark and appreciated against the Italian lira because Canada experienced more inflation than Germany but less inflation than Italy.

Question

Quizplus · Accepted Answer

This is because inflation has a direct impact on the value of a currency. When a country experiences higher inflation than another country, its currency tends to depreciate against the other country's currency. Therefore, since Canada experienced more inflation than Germany but less inflation than Italy during this period, the Canadian dollar depreciated against the German mark and appreciated against the Italian lira.

From 1970 to 1998, the Canadian Dollar Depreciated Against the German