Asked by David Mckay on Jun 18, 2024
Verified
Assume that the inflation rate in Canada is 3% over the next four years while the rate in the U.S. is 4% for the same time period. Given this, the U.S. dollar will appreciate relative to the Canadian dollar.
Inflation Rate
The percentage increase in the price level of goods and services in an economy over a period of time, indicating how fast prices are rising.
Canadian Dollar
The official currency of Canada, symbolized as CAD and often considered a commodity currency due to Canada's significant natural resource exports.
U.S. Dollar
The official currency of the United States, widely used in international transactions and considered a dominant reserve currency worldwide.
- Analyze the impact of inflation on currency value and exchange rates.
Verified Answer
LR
Laura RovakJun 20, 2024
Final Answer :
False
Explanation :
Higher inflation in a country typically leads to the depreciation of its currency relative to others with lower inflation rates, as purchasing power in the higher inflation country decreases.
Learning Objectives
- Analyze the impact of inflation on currency value and exchange rates.