China has fixed the exchange rate between the yuan and the Canadian dollar.Therefore,a recession in China _____ Canadian _____ to China more than if the exchange rate floated.

Question

Quizplus · Accepted Answer

In a fixed exchange rate system, the value of a currency is tied to another currency or a basket of currencies. Therefore, a recession in China would decrease the demand for Canadian goods in China, leading to a reduction in Canadian exports to China. However, since the exchange rate is fixed, the Canadian dollar would still maintain the same value in relation to the yuan, which means Chinese imports to Canada would not become more expensive. Hence, a recession in China reduces Canadian exports to China more than if the exchange rate floated.

China Has Fixed the Exchange Rate Between the Yuan and the Canadian