Suppose the Canadian dollar depreciates in the foreign exchange market.What is the effect on Canadian exports and imports?

Question

Quizplus · Accepted Answer

A depreciation of the Canadian dollar means that it now takes more Canadian dollars to buy foreign currencies, making Canadian goods cheaper for foreign buyers. This will lead to an increase in exports. At the same time, imports become more expensive for Canadians as they need to exchange more Canadian dollars for foreign currencies, leading to a decrease in imports. Therefore, exports become less expensive, and imports become more expensive, making D the correct answer.

Suppose the Canadian Dollar Depreciates in the Foreign Exchange Market