Which statement best describes the consequences that could occur if the Canadian real exchange rate appreciates relative to the euro?
A) Canadian exports to Europe and European exports to Canada both rise.
B) Canadian exports to Europe and European exports to Canada both fall.
C) Canadian exports to Europe rise, and European exports to Canada fall.
D) Canadian exports to Europe fall, and European exports to Canada rise.

Question

Quizplus · Accepted Answer

When the Canadian real exchange rate appreciates relative to the euro, Canadian goods become more expensive for Europeans, leading to a decrease in Canadian exports to Europe. Conversely, European goods become cheaper for Canadians, increasing European exports to Canada.

Which Statement Best Describes the Consequences That Could Occur If