If the Canadian real exchange rate appreciates, what will most likely happen?
A) Exports increase and imports decrease.
B) Exports decrease and imports increase.
C) Exports and imports both increase.
D) Exports and imports both decrease.

Question

Quizplus · Accepted Answer

When the Canadian real exchange rate appreciates, Canadian goods become more expensive to foreigners, leading to a decrease in exports. Conversely, foreign goods become cheaper to Canadians, leading to an increase in imports.

If the Canadian Real Exchange Rate Appreciates, What Will Most