The Canada-U.S.nominal exchange and Canadian-dollar effective exchange rate are expected to move together because
A)most of Canada's trade is with the U.S.
B)the trade deficit between the U.S.and Canada is not significant.
C)the U.S.dollar and Canadian dollar are closely related to each other.
D)the trade deficits between Canada and its trading partners are not significant.

Question

Quizplus · Accepted Answer

Most of Canada's trade is with the U.S., so any changes in the value of the U.S. dollar will have a significant impact on the Canadian dollar. As a result, the nominal exchange rate between the two currencies and the Canadian-dollar effective exchange rate are expected to move together.