A lower inflation rate in Canada relative to other countries causes the Canadian dollar to appreciate because

Question

Quizplus · Accepted Answer

A lower inflation rate in Canada would make Canadian products and services relatively cheaper compared to those from countries with higher inflation rates, leading to an increase in exports from Canada to the rest of the world (R.O.W.). As demand for Canadian dollars increases to purchase these exports, the Canadian dollar appreciates in value.

A Lower Inflation Rate in Canada Relative to Other Countries