If Canada runs a balance of payments surplus and exchange rates are floating ?
Correct answer: C. the price of foreign goods will become cheaper to Canadians
- A. the value of other currencies will rise relative to the dollar
- B. the dollar will depreciate relative to other currencies
- C. the price of foreign goods will become cheaper to Canadians
- D. the price of foreign goods will rise for Canadians
Explanation
A balance-of-payments surplus increases demand for the Canadian dollar relative to foreign currencies, causing it to appreciate under floating rates. Appreciation makes foreign goods cheaper for Canadian buyers.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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