What are the effects of a decrease in Canadian interest rates?
A) a depreciation of the dollar and greater net exports
B) a depreciation of the dollar and smaller net exports
C) an appreciation of the dollar and greater net exports
D) an appreciation of the dollar and smaller net exports

Question

Quizplus · Accepted Answer

A decrease in Canadian interest rates typically leads to a depreciation of the Canadian dollar because lower interest rates make Canadian investments less attractive to foreign investors, leading to a decrease in demand for the Canadian dollar. A weaker Canadian dollar makes Canadian goods cheaper for foreign buyers, thus increasing net exports.

What Are the Effects of a Decrease in Canadian Interest