Suppose the Japanese demand for Canadian agricultural goods increased.Under a fixed exchange rate system, what would happen?

Question

Quizplus · Accepted Answer

Under a fixed exchange rate system, if the Japanese demand for Canadian agricultural goods increased, it would lead to an increase in the supply of Japanese yen in the foreign exchange market as Japanese importers exchange yen for Canadian dollars to pay for the Canadian goods. This does not directly affect the balance of trade, currency appreciation, or demand for Canadian dollars in the ways described by the other options.

Suppose the Japanese Demand for Canadian Agricultural Goods Increased