Which of the following would cause the real exchange rate of the Canadian dollar to depreciate?
A)an increase in the Canadian government budget deficit
B)capital flight from Canada
C)the imposition of Canadian government import quotas
D)a decrease in the world interest rate

Question

Quizplus · Accepted Answer

Capital flight from Canada would lead to an increase in the supply of Canadian dollars in the foreign exchange market, causing the real exchange rate to depreciate.

Which of the Following Would Cause the Real Exchange Rate