If Canada were on a fixed exchange-rate system,an increase in the demand for the Canadian dollar would result in the dollar being undervalued.

Question

Quizplus · Accepted Answer

Under a fixed exchange-rate system, if demand for the Canadian dollar increases but the exchange rate is kept constant, the Canadian dollar would be considered undervalued because its market value (what people are willing to pay for it) is higher than its fixed exchange rate.

If Canada Were on a Fixed Exchange-Rate System,an Increase in the Demand