We can expect that an increase in Canadian interest rates caused by a monetary contraction would

Question

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An increase in Canadian interest rates caused by a monetary contraction would make Canadian bonds more attractive to foreign investors, leading to an increase in demand for the Canadian dollar and an increase in its external value. This would make imports cheaper and exports more expensive, leading to a decrease in Canadian exports. It may also lead to a decrease in Canada's current account balance as imports become cheaper, leading to an increase in imports and a decrease in exports. Monetary contraction can be carried out by the Bank of Canada, and it may also choose to take offsetting actions to mitigate the effects of the interest rate hike.

We Can Expect That an Increase in Canadian Interest Rates