Changes in the Canadian nominal exchange rate in the past 20 years have been caused mainly by:
A) international interest rate differentials and commodity prices.
B) exchange rate policies followed by the Bank of Canada.
C) fiscal policies followed by the Government of Canada.
D) the political party in power in Ottawa.

Question

Quizplus · Accepted Answer

Changes in the Canadian nominal exchange rate over the past 20 years have been significantly influenced by international interest rate differentials and commodity prices. Interest rate differentials affect the attractiveness of holding assets denominated in different currencies, while Canada's economy, being heavily reliant on commodities, means that changes in commodity prices can directly impact the value of the Canadian dollar.

Changes in the Canadian Nominal Exchange Rate in the Past