When interest rates rise in Canada (with the price level fixed), the value of the dollar ________, domestic goods become ________ expensive, and net exports ________.
A) falls; less; fall
B) falls; more; rise
C) rises; more; fall
D) rises; less; fall

Question

Quizplus · Accepted Answer

When interest rates rise in Canada, the value of the Canadian dollar typically increases as investors seek the higher returns available in Canada. This makes Canadian goods more expensive on the global market, leading to a decrease in net exports as foreign buyers find Canadian goods less attractive due to higher prices.

When Interest Rates Rise in Canada (With the Price Level