If Canada and the United Kingdom are both on flexible exchange-rate systems,what would happen if the United Kingdom experiences rapid inflation,while prices remain steady in Canada?

Question

Quizplus · Accepted Answer

If the United Kingdom experiences rapid inflation, its currency (British pound) will become less valuable compared to other currencies on the market. This would lead to a decrease in demand for the pound, causing its exchange rate to depreciate. In contrast, since prices remain steady in Canada, the demand for the Canadian dollar would remain the same, and the exchange rate between the two currencies would change in favor of the Canadian dollar.

If Canada and the United Kingdom Are Both on Flexible