Suppose that the latest Consumer Price Index (CPI)release shows a higher inflation rate in the Canadian than was expected. Everything else held constant, the release of the CPI report would immediately cause the demand for Canadian assets to ________ and the Canadian dollar would ________.

Question

Quizplus · Accepted Answer

A higher than expected inflation rate would lead investors to anticipate higher interest rates in the future to combat inflation. Higher interest rates make Canadian assets more attractive, increasing demand for them and causing the Canadian dollar to appreciate.

Suppose That the Latest Consumer Price Index (CPI)release Shows a Higher