If the exchange rate, defined as the Canadian dollar price of other currencies, were below its equilibrium level, then we would expect this to:
A) encourage exports of Canadian-made goods.
B) encourage foreigners to travel to Canada.
C) encourage imports into Canada.
D) discourage Canadian citizens from travelling abroad.

Question

Quizplus · Accepted Answer

If the exchange rate is below its equilibrium level, the Canadian dollar is undervalued, making imports cheaper and encouraging imports into Canada.

If the Exchange Rate, Defined as the Canadian Dollar Price