Because depreciation of the real exchange rate of the dollar increases Canadian net exports,the demand curve for dollars in the foreign-currency exchange market is downward sloping.

Question

Quizplus · Accepted Answer

When the real exchange rate of the dollar depreciates, Canadian goods become relatively cheaper for foreign consumers, leading to an increase in Canadian net exports. This, in turn, increases the demand for Canadian dollars in the foreign exchange market, causing the demand curve to slope downwards.

Because Depreciation of the Real Exchange Rate of the Dollar