If interest rates in Canada rise relative to interest rates in the US:
A) the US dollar will appreciate against the Canadian dollar.
B) Canadian citizens will buy more US financial assets.
C) the demand for US dollars on the Canadian foreign exchange market will increase.
D) the supply of US dollars on the Canadian foreign exchange market will increase.

Question

Quizplus · Accepted Answer

When interest rates in Canada rise relative to the US, Canadian financial assets become more attractive, leading to an increased supply of US dollars as investors exchange them for Canadian dollars to invest in Canada.

If Interest Rates in Canada Rise Relative to Interest Rates