How Will the Exchange Rate (Foreign Currency Per Dollar)respond to an Increase

question 102

Multiple Choice

How will the exchange rate (foreign currency per dollar) respond to an increase in preference for imported goods in Canada in the long run?

• A)Exchange rates will rise.
• B)Exchange rates will fall.
• C)Exchange rates will be unaffected by changes in the relative rate of productivity growth in Canada, both in the short run and in the long run.
• D)The exchange rate will be affected in the short run, but not in the long run.

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Definitions:

Undercapitalization

A situation in which a company does not have sufficient capital to conduct normal business operations and promote growth.