Under a floating exchange rate system, other things equal, which of the following best leads to a depreciation in the value of the Canadian dollar?
A) a decrease in the Canadian money supply
B) a decrease in the Canadian interest rate
C) an increase in the national income of Canada's trade partners
D) rising inflation rates in Canada's trade partners

Question

Quizplus · Accepted Answer

A decrease in the Canadian interest rate makes Canadian assets less attractive to investors, leading to a decrease in demand for the Canadian dollar and causing its depreciation.

Under a Floating Exchange Rate System, Other Things Equal, Which