If the world real interest rate exceeds the Canadian real interest rate, what would Canadian savers most likely do?
A) Canadian savers would prefer to buy foreign assets.
B) Canadian savers would prefer to buy Canadian assets.
C) Canadian savers will prefer to wait until the two real interest rates are again equal.
D) Canadian savers will sell their foreign assets and buy Canadian assets instead.

Question

Quizplus · Accepted Answer

If the world real interest rate exceeds the Canadian real interest rate, Canadian savers would prefer to buy foreign assets because they can get a higher return on their savings compared to investing in Canadian assets. This shift in demand for foreign assets increases the value of the foreign currency, which leads to a decrease in the value of Canadian currency.

If the World Real Interest Rate Exceeds the Canadian Real