Holding all else constant,an increase in preferences by Americans for Canadian goods will _________ the demand for Canadian dollars in the foreign exchange market and _________ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Question

Quizplus · Accepted Answer

An increase in preferences for Canadian goods will lead to an increase in demand for Canadian dollars in the foreign exchange market, as more Americans will need to purchase Canadian dollars in order to buy those goods. This increase in demand will then lead to an increase in the equilibrium U.S. dollar-Canadian dollar exchange rate, as the value of the Canadian dollar will rise relative to the U.S. dollar.

Holding All Else Constant,an Increase in Preferences by Americans for Canadian