What is the effect of an increase in Canadian government deficit?
A) Canadian national saving increases.
B) The real exchange rate of the dollar increases.
C) Canadian net exports increase.
D) Canadian domestic investment increases.

Question

Quizplus · Accepted Answer

An increase in the Canadian government deficit will lead to an increase in the supply of Canadian dollars in the market. This increased supply of dollars will lead to a decrease in the value of the Canadian dollar in relation to other currencies. This decrease in value is reflected in an increase in the real exchange rate of the dollar.

What Is the Effect of an Increase in Canadian Government