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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