If the real exchange rate of the Canadian dollar falls, Canadian net exports will fall.

Question

Quizplus · Accepted Answer

If the real exchange rate of the Canadian dollar falls, it means that the Canadian dollar has depreciated in value, making exports cheaper and more competitive. This should increase Canadian net exports as foreign buyers find Canadian goods more affordable. Therefore, a fall in the real exchange rate of the Canadian dollar would likely lead to an increase in Canadian net exports, not a fall.

If the Real Exchange Rate of the Canadian Dollar Falls