If the rate of inflation in Canada rises relative to the rate of inflation in foreign nations,what will happen to the amount of Canadian net exports and subsequently the exchange rate for the Canadian dollar?

Question

Quizplus · Accepted Answer

If the rate of inflation in Canada rises relative to foreign nations, Canadian goods and services become more expensive and less competitive. This will decrease the demand for Canadian exports, leading to a decrease in net exports. As a result, the demand for Canadian dollars will decrease, leading to a decrease in the value of the Canadian dollar.

If the Rate of Inflation in Canada Rises Relative to the Rate