If the Canadian nominal exchange rate does not change,but prices rise faster abroad than in Canada,then the Canadian real exchange rate
A)does not change.
B)rises.
C)declines.
D)None of the above is necessarily correct.

Question

Quizplus · Accepted Answer

The real exchange rate adjusts for differences in price levels between countries. If prices rise faster abroad than in Canada, the real exchange rate declines, making Canadian goods relatively cheaper.

If the Canadian Nominal Exchange Rate Does Not Change,but Prices