Consider the exchange rate between the Canadian dollar and the British pound.Suppose Canadian income increases.How would the foreign exchange market for the British pound be affected?

Question

Quizplus · Accepted Answer

When Canadian income increases, Canadians are likely to buy more British goods, increasing the demand for the British pound. This leads to a depreciation of the Canadian dollar if exchange rates are allowed to float, as more Canadian dollars are needed to purchase the same amount of British pounds.

Consider the Exchange Rate Between the Canadian Dollar and the British