When the Bank of Canada lowers the overnight rate, the exchange rate ________, imports ________, and exports ________.

Question

Quizplus · Accepted Answer

When the Bank of Canada lowers the overnight rate, the interest rate in Canada decreases, which decreases the demand for Canadian dollars and leads to a depreciation of the currency. A weaker Canadian dollar makes imports more expensive and exports cheaper, which increases the demand for Canadian exports and decreases the demand for imports, leading to a decrease in imports and an increase in exports.

When the Bank of Canada Lowers the Overnight Rate, the Exchange