If Canadian interest rates rise, the value of the Canadian dollar ________ and net exports ________.

Question

Quizplus · Accepted Answer

When Canadian interest rates rise, it makes holding Canadian dollars relatively more attractive, driving up the demand for the Canadian dollar and causing its value to appreciate. This in turn makes Canadian exports more expensive, decreasing net exports. Therefore, the value of the Canadian dollar appreciates and net exports decrease.

If Canadian Interest Rates Rise, the Value of the Canadian