All else equal,if Canada raises its interest rates,
A)the dollar depreciates.
B)the U.S. demand for Canadian dollars decreases.
C)the Canadian supply of Canadian dollars increases.
D)the Canadian dollar will depreciate.

Question

Quizplus · Accepted Answer

When Canada raises its interest rates, it becomes more attractive for investors to hold Canadian dollars in order to invest in Canadian assets that now offer higher returns. This increases the demand for Canadian dollars, not decreases it, making option B incorrect.

All Else Equal,if Canada Raises Its Interest Rates